COMMISSIONER OF INCOME-TAX VS GULRAJ EDUCATIONAL TRUST
1991 P T D 175
[Delhi High Court (India)]
Before R.N. Pyne C.J. and D.P. Wadhwa, J
COMMISSIONER OF INCOME-TAX
versus
GULRAJ EDUCATIONAL TRUST
Income-tax Cases Nos. 109, 110 and 111 of 1987 and 68, 69 and 70 of 1988, decided on 20/12/1988.
Income-tax---
----Reference---Charitable trust---Exemption whether allowable though there was infringement of the provisions of S. 13 Indian Income-tax Act, 1961 is question of law:
Held, that whether the Tribunal was justified in allowing exemption under section 11 of the Indian Income-tax Act, 1961, to a charitable trust though there was infringement of the provisions of section 13 of the Act, was a question of law fit to be referred.
C.I.T. v. Insaniyat Trust (1988) 173 ITR 248 (Guj.) ref.
B. Gupta and R.C. Pandey for the Commissioner.
C.S. Aggarwal and Anill Sharma for the Assessee.
JUDGMENT
D.P. WADHWA, J.--By these six different petitions, the Commissioner of Income-tax, Delhi VI, New Delhi, wants this Court to direct the Income-tax Appellate Tribunal (for short "the Appellate Tribunal") to state the case and refer it to this Court for its decision. Since the contentions are common in all these petitions, these are being disposed of by a common order.
The question of law stated to be arising out of the order of the Appellate Tribunal and sought to be referred is as under:
"Whether, on the facts and in the circumstances of the case as well as in law, the Tribunal was justified in allowing exemption under section 11 of the Income-tax Act though there were infringements of section 13(1)(a) of the Act?"
The petitioner is a trust registered under section 12-A of the Income-tax Act, 1961(for short "the Act"). The trust was created prior to the commencement of the Act. The Income-tax Officer made assessments in respect of all these years on varying amounts of total income, though, as noted above, the contentions raised were the same. The Income-tax Officer denied exemption to the petitioner under section 11 of the Act because of infringement of certain provisions of section 13 of the Act. The assessee appealed to the Appellate Assistant Commissioner Income-tax. This appeal was allowed as the learned Appellate Assistant Commissioner was of the view that the relevant provisions of section 13 were inapplicable as the trust was created or established prior to the commencement of the Act. Then, the Revenue appealed to the Appellate Tribunal. The Appellate Tribunal upheld the order of the Appellate Assistant Commissioner. The Revenue then filed an application under section 256(1) of the Act seeking to refer the aforementioned question of law for the decision of this Court. This was also rejected by the Appellate Tribunal.
The Income-tax Officer found that the assessee made deposits and investments in concerns in which persons specified in subsection (3) of section 13 of the Act were substantially interested. He also found that neither the interest was adequate nor the deposits were secured as required under section 13(2)(a)of the Act. The contention of the assessee that the provisions of section 13(2)(a) and section 13(2)(h) of the Act were not applicable as the deposits and investments were made prior to June 1, 1970, was not found acceptable. The assessee had relied upon the second proviso to clause (c) of section 13(1) of the Act. Under this proviso, benefit derived by persons referred to under subsection (3) of section 13 prior to June 1, 1970, in the case of charitable trusts created before the commencement of the Act was saved from denying exemption under section 11 of the Act.
It cannot be disputed that a question of law does arise in the present case though the Appellate Tribunal was of the view that since it was possible to have two interpretations on the second proviso to section 13(1)(c)(ii) of the Act, it should be interpreted in favour of the assessee. Reference was also made to the decisions of the Calcutta and Bombay Appellate Tribunals.
It was submitted before us by Mr. Gupta, learned Counsel for the Revenue that the Gujerat High Court in CIT v. Insaniyat Trust (1988) 173 ITR 248 had taken a view different from the one taken by the Appellate Tribunal in the present case.
Mr. Aggarwal, learned counsel for the assessee, stated that the proposed question did not arise out of the order of the Appellate Tribunal. He said there was no finding that there was any infringement of section 13(1)(a) of the Act. He appears to be right in his submission but then it does appear to us that there was a mistake in setting out the question. The High Court has power to recast or amend the question so as to bring out the real controversy between the parties. In fact, this can be done even at the time of deciding the reference.
It is not necessary to set out the details of the controversy at this stage. It does, however, appear to us that a question of law arises out of the order of the Appellate Tribunal. The question can be set out as under:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in allowing exemption under section 11 of the Income-tax Act, 1961, though there was infringement of the provisions of section 13 of the Act?"
We would, therefore, require the Appellate Tribunal to state the case and refer it to this Court for decision.
Z.S./772/TOrder accordingly.