COMMISSIONER OF INCOME-TAX VS BHILAI MAHILA SAMAJ, 1999 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 232 (1996)

Income-tax---

----Charitable trust---Exemption---Trust for looking after family members of employees who due to accident expired or became invalid---Section 13(1)(bb) not applicable---Question regarding invoking R. 17 read with S.11 cannot be raised for first time in reference---Trust entitled to exemption---Indian Income Tax Act, 1961, Ss. 11 & 13---Indian Income Tax Rules, 1962, R.17.

The assessee was a trust formed with the object of looking after the family members of the employees of the Bhilai Steel Plant, who owing to accident had expired or had been rendered invalid. The assessment was completed on a total income of Rs.90,990 applying the provisions of section 13(1(bb) of the Income Tax Act, 1961. The Appellate Assistant Commissioner allowed the appeal of the assessee holding that it was a charitable trust and that section 13(1)(bb) was not applicable to the case of the assessee and that the assessee was entitled to exemption under section 11 of the Act. The Tribunal upheld the order of the Appellate Assistant Commissioner. On a reference:

Held, that both the Appellate Assistant Commissioner and the Tribunal had held that the charitable trust was engaged in the activity of helping the poor and the destitute. The persons who were employed by the trust were benefited by the trust. They were carrying on activities for their own benefit and it had no intention of carrying on any business. The entire activity was for the benefit of the persons who were engaged in the business activity carried on by the trust. Hence, the assessee was entitled to exemption under section 11 of the Act.

Held also, that the question regarding invoking of rule 17 of the Income Tax Rules, 1962 read with section 11 of the Act could not be raised for the first time in the reference.

Abhay Sapre for the Commissioner

B.L. Nema for the Assessee

JUDGMENT

This is an Income-tax reference at the instance of the Revenue under section 256(1) of the Income Tax Act, 1961. The following question of law have been referred by the Tribunal for answer by this Court:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee-trust is entitled to claim of exemption under section 11 when declaration was filed in contravention of rule 17 ?

(2) Whether, on the facts and in the circumstances of the case,

the Tribunal was right in holding that the provisions of section 13(1((bb) are not applicable to the assessee's case?"

The assessee, Bhilai Mahila Samaj, is a trust formed with the object of looking after the family members of the employees of the Bhilai Steel Plant who owing to accident have either expired or have been rendered invalid. The original assessment for the year under consideration was completed on a total income of Rs.90,990. On appeal before the Appellate Assistant Commissioner, it was held that the assessee was charitable trust and hence entitled to exemption under section 11 of the Act. Thereafter, the Income-tax Officer initiated proceedings under section 147(b) of the Act applying the provisions of section 13(1)(bb) of the Act, and brought to charge the said amount of Rs.90,990. The Appellate Assistant Commissioner allowed to the assessee's appeal holding that the provisions of section 134(1)(bb) of the Act are not applicable. The Department moved the Tribunal and the Tribunal held that the issue involved was not res integral because it was already decided in favour of the assessee, vide its order, dated January 19, 1985, for the assessment year 1979-80. Therefore, the Revenue approached the Tribunal for making a reference to this Court and hence the aforesaid questions of law have been referred by the Tribunal for answer by this court. We have heard learned counsel for the parties and perused the record.

A finding of fact has been recorded by the Appellate Assistant Commissioner as well as the Tribunal that the income of the trust is used for the welfare of the affected families of the Bhilai Steel Plant and, therefore, section 13(1)(bb) of the Act is not applicable. Both the authorities, i.e., the Appellate Assistant Commissioner as well as the Tribunal, have held that in fact the charitable trust is engaged in the activity of helping the poor and destitute. It has also been observed that the persons who are employed by the trust are benefited by the trust. In fact, they are carrying on activities for their own benefit and it has no intention of carrying on any business. Hence, it was held that the entire process is. for the benefit of persons who are engaged in the business activity carried on by the trust. Therefore, the Appellate Assistant Commissioner set aside the order of the Assessing Officer and the same was affirmed by the Tribunal.

So for as question No.2 is concerned, it has rightly been decided by the Tribunal and we do not find any reason to interfere with the same. So far as the first question regarding invoking of rule 17 read with section 1 I of the Act is concerned, it may be observed that this argument was nowhere raised by the Revenue either before the Assessing Officer or the Appellate Assistant Commissioner or before the Tribunal. Therefore, now for the first time in this reference, this question cannot be raised. Hence, this question is also answered against the Revenue and in favour of the assessee.

In the result, both the questions are answered in favour of the assessee and against the Revenue.

M.B.A./1669/FC ??????????????????????????????????????????????????????????????????????????????? Reference answered.