KHEMRAJ NEMICHAND SHRISHRIMAL CHARITABLE TRUST VS COMMISSIONER OF INCOME-TAX
1999 P T D 3981
[231 I T R 43]
[Madhya Pradesh High Court (India)]
Before A. K. Mathur, C.J. and Dipak Misra, J
KHEMRAJ NEMICHAND SHRISHRIMAL CHARITABLE TRUST
Versus
COMMISSIONER OF INCOME-TAX
Miscellaneous Civil Case No.238 of 1994, decided on 27/08/1997.
Income-tax---
----Charitable purposes --Charitable trust---Donation given to trust -for specific purpose of organising a rally of agriculturists---Not spent for a charitable purpose---Not entitled to exemption---Indian Income Tax Act, 1961; S.11.
The assessee was a charitable trust which enjoyed the benefit of exemption under section 11 of the Income Tax Act, 1961. It had received Rs.1,50,000 as donation in the accounting year relevant to the assessment year 1982-83. The Income-tax Officer held that this amount was not entitled to exemption. The Tribunal found that the donations amounting to Rs.1,50,000 sent by K.M. Oil Industries or by Ganesh Twine Mills, were sent with specific directions to be spent on organising "Kisan-Rally" and not for the purpose of organising and utilising the corpus for the trust itself. Therefore, the Tribunal upheld the order of the Income-tax Officer. On a reference:
Held, that since the amounts of Rs.1,50,000 had been given to the trust. specifically for organising the rally by agriculturists at Delhi, it would have to be treated to be income of the institution and had to be taxed accordingly.
B. L. Nema for the Assessee.
Abhay Sapre for the Commissioner.
JUDGMENT
A. K. MATHUR, C. J.---This is a reference under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the assessee and the following two questions of law have been ' referred by the Tribunal for answer of this Court, which read as under:
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs:1,50,000 received by the assessee is ' income' of the trust?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs.1,50,000 spent towards 'Kisan-Rally' is not in nature of amount spent towards charitable purpose?"
The brief facts giving rise to this reference are: that the assessee is a charitable trust and enjoys benefits under sections 11 to 13 of the Act, as a charitable institution. The assessee had filed a return for deficit of Rs.3,774.50 for the assessment year 1982-83. The original assessment under section 143(3) of the Act was done on September 27, 1985, wherein the Assessing Officer had considered that the amount of Rs.1,50,000 paid towards "Kisan-Rally" and other miscellaneous donations amounting to Rs.17,627 was not for charitable purposes and treated the same as "taxable income". On appeal by the assessee, the Commissioner of Income-tax, Jabalpur, by his order under section 263(sic) of the Act affirmed the order passed by the Assessing Officer stating therein that the entire income of the assessee-trust was taxable. The Assessing Officer, by his order dated July 28, 1989, did not accept the stand of the assessee that the receipt of Rs.1,50,000 from K. N. Oil Industries and its branch Ganesh Twine Mill is a corpus donation and it is not income in the hands of the assessee-trust. He accordingly assessed the income at Rs.2,27,500 treating all receipts as income. The Commissioner of Income-tax (Appeals), by his. order dated June 26,????? 1990, upheld the orders of the Assessing Officer and dismissed the appeal. The assessee, thereafter, approached the Tribunal and the Tribunal held that Rs.1,50,000 received by the trust is its income and the grounds that? low the sums received were "corpus donation" or "clearing account" were not accepted. The Tribunal further held that the sum of Rs.1,50,000 paid to the Congress party for holding a "Kisan-Rally" did not result into creation of a corpus. It was held that Rs.1,50,000 was income, which had to be applied and accordingly was taxed. Thereafter, the Tribunal was approached for making a reference before this Court and accordingly the aforesaid two questions have been referred by the Tribunal for answer of this Court
We have considered the rival submissions of the parties and perused the record. The Tribunal, after. considering the matter, has found that in fact this sum was given to the assessee-trust by K. N. Oil Industries with the specific directions that the money should be utilised for agricultural development purposes, such as, organisation of seminars to enlighten the agriculturists as regards modern techniques of agricultural operations or some sort of programme by which the agriculturists in general are benefited to overcome their existing problems. This letter was written on January 20, 1981, by K. N.-Oil Industries, while sending the aforesaid money to the trust. Thereafter, on February 22, 1981, the trustees wrote back to K. N. Oil Industries for sending a substantial contribution for the purpose of agricultural development and in that it was clearly mentioned that one rally t of the agriculturists from ail over M. P. will be reaching Delhi, where similar rallies from almost all other states of the country will assemble and meet the Prime Minister, Union Agricultural Minister and other officials to apprise them of their various difficulties being faced by them in their day-to?day agricultural operations. Therefore, this amount was sent for organising such rallies. There is another communication, dated March 7, 1981, by K. N. Oil Industries that a sum of Rs.1,00,000 is being transferred to the account of the trust from their head office for implementation of agricultural development purposes and then again a sum of Rs.75,000 was transferred to that account from the branch of K. N. Oil Industries, namely, Ganesh Twine Mills, Raipur, out of -which a sum of Rs.50,000 was to be utilised for agricultural development and the remaining Rs.25,000 be utilised for general charitable/religious purposes, as it deemed fit. Therefore, from these communications, the Tribunal infered that in fact the amount in question was not sent to the charitable trust, but it was basically meant for organising a "Kisan-Rally" by the Congress (1) party at Delhi. From the manner in which the amount of donations had been sent to this institution, which is claimed to be a charitable institution, it is nowhere stated as to what kind of charity they are organising. But the donations, which had been sent by K. N. Oil Industries or by Ganesh Twine Mills, were sent with specific directions to be spent on organising "Kisan-Rally" and not for the purpose of organising and utilising the corpus for the trust itself. Therefore, the Tribunal found that this has to be treated as income and accordingly it upheld the order of the Commissioner of Income-tax.
After considering the matter, we are of the opinion that the view taken by the Tribunal appears to be fully justified in the present situation. We could have appreciated that the money would have been sent by these two units, i.e., K. N. Oil Industries and Ganesh Twine Mills, to the charitable institution without any direction, entrusting that the trust will utilise the same for the welfare or charities for which the trust is created, but that is not the case here. In the present case, the amount in question was sent with specific directions that the amount in question should be utilised for agricultural development and especially for organising the rally at Delhi, which was being organised by the Congress (1) party. Therefore, this donation sent by K. N. Oil Industries or Ganesh Twine Mills cannot be treated to be exempted and it will have to be treated to be an income of the institution and has to be taxed accordingly.
In this view of the matter, we are of the opinion that the view taken by the Tribunal is justified. Hence, we answer the two questions against the
assessee and in favour of the Revenue.?
M.B.A./3166/FC???????????????????????????????????????????????????????????????????????????????? Reference answered.