TMI Blog1984 (10) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee declared its method of accounting as mercantile. The ITO observed that as per the original return and the assessee's audited accounts there was infringement of section 13(1) (c) (ii), read with section 13(3), of the Income-tax Act, 1961 ('the Act') as the income/property of the trust was used or applied for the benefit of 'excluded' persons. 3. The assessee filed a revised return before the ITO claiming to change its method of accounting from 'mercantile' to 'cash' but the ITO rejected this claim on the ground that the accounts for the previous year ending on 30-6-1977 had already been closed and adjusted and the assessee could not change the method of accounting by filing a revised return much after the close of the accounting year. The ITO accordingly held that the entire income of the trust amounting to Rs. 3,51,446 was taxable. The assessee carried the matter to the Commissioner (Appeals) and stated that donations of Rs. 2.70 lakhs were 'receivable' from three companies as follows : Rs. (i) A. R. Chadha Co. (India) (P.) Ltd. 2,50,000 (ii) Atma Ram Construction (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma Ram Sanatan Dharam College account clearly showed that the donations had not only been received but also passed on to the said college. The learned departmental representative emphasized that the assessee-trust, the donors and the recipient 'SanatanDharamCollegefund account' all belong to the same group, namely A. R. Chadha group. The donors had shown in their account donations to the assessee-trust while the recipient, namely 'Atma Ram Sanatan Dharam College' had been credited an amount of Rs. 3,63,421 and the trust had carried a credit balance of Rs. 4,19,595 of the said college in its account books on 30-6-1977 and in subsequent years the said amount had been passed on to the said college. It was, therefore, urged that the Commissioner (Appeals) was wrong in applying the ratio of Shoorji Vallabhads Co.'s case where the managing agency commission had been split between two parties. The said ratio had no relevance to the facts of the present case nor had the ratio of Ondal Investments Co. Ltd. v. CIT [1979] 116 ITR 143 (Cal.) or CIT v. Kalooram Govindram [1965] 57 ITR 630 (SC). In Ondal Investments Co. Ltd.'s case the amounts received as salami for sub-lease of mineral and mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flown to the college in subsequent year, then it would be a strong ground for holding that the donations were not paper entries. We, therefore, restore the matter to the file of the ITO to examine all the relevant accounts uptodate and then come to a finding whether the donations of Rs. 2.70 lakhs were received by the assessee-trust and were the income of the assessee-trust or not, we find that in case of Atma Ram Construction (P.) Ltd., the donation of Rs. 10,000 is covered by rent of Rs. 12,000 credited to the said party's account and, therefore, the donation in question has been realised. All this shows that the accounts need proper examination. 7. In the result, the matter is restored to the file of the ITO. The revenue's appeal is deemed to be allowed. Per Shri S. P. Kapur, Judicial Member - Since I do not agree with the reasoning and conclusion arrived at by my learned brother, the Accountant Member, in this case, I jot down hereunder my own reasoning and conclusions on the subject matter involved in the present appeal, by the revenue. 2. In paragraph 3 of assessment order dated30-3-1981, made in the case of the assessee in relation of assessment year under appeal, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance remains the receivable donations which under no provisions of the Act or by any stretch of imagination can be treated as income and since the receivable donations cannot be taken as income, provisions of section 13(3) do not come into play. Section 2(24) of the Act defines the word 'income', and sub-clause (iia) which is relevant for our purpose, reads as under : "(24) 'income' includes - (i) and (ii) ** ** ** (iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes, not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution. Explanation : For the purposes of this sub-clauses, 'trust' includes any other legal obligation;" From the above definition it follows that 'contributions received' by a trust has to be taken as income and not income 'receivable'. In this view of the matter also and on this reasoning, as the ground of the revenue taken before us stands, 'donations receivable' cannot be treated as income quo the assessee for the purposes of its charge to income-tax under provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in the assessee trust's account books debiting the donors with the amount of donations and crediting the amounts to the account ofAtmaRamSanatanDharamCollegedid not amount to receipt of donations, when assessee was following mercantile system of accounting ? 2. Whether, on the facts and in the circumstances of the case, Tribunal was bound to follow its own earlier order for assessment year 1977-78 ? 3. Whether, on the facts and in the circumstances of the case, Rs. 2.70 lakhs was assessable as income in the hands of the assessee-trust for assessment year under appeal ?" 2. When the parties were heard on the earlier occasion, it was seen that the learned Accountant Member had only set aside the orders of the Commissioner (Appeals) and the ITO and restored the matter to the file of the ITO for further investigation and for decision thereafter according to law. It was felt that if the Third Member took the view that the entries in the books amounted to receipt of donations, and, consequently, the Tribunal need not follow its earlier order and that the amount of Rs. 2,70,000 was taxable as the assessee-trust's income, there will not be majority of view within the meaning of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Judicial Member is not correct. 5. Shri J. Sen, the learned counsel for the assessee, has, on the other hand, relied on the order of the learned Judicial Member. Placing reliance on the decisions of theBombayand Madras High Courts in the cases of H. 30 ITR 618 and V. N. R. Meenakshi Ammal v. Agrl. ITO [1971] A. Shah Co. v. CIT [1956] 82 ITR 676, respectively, he submits that though the principle of res judicata as such is not applicable to income-tax proceedings, the Tribunal should be very slow in departing from its findings given in the earlier years. He has laid great emphasis on the observations of the ITO in the assessment order to the effect that the facts in the year were identical with those of the earlier year. According to him this fact has been admitted by the department before the Tribunal also as is seen from the department's grounds of appeal before the Tribunal. Further placing reliance on the decision of the Supreme Court in the case of Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1. Shri Sen has argued that the finding that facts for this year and the earlier year were identical having been admitted by the ITO and having not been challenged before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g credit balance of Rs. 6,050 in favour of Atma Ram Construction (P.) Ltd., is of no consequence. 7. Having considered the rival contentions carefully, I am of the view that it can now be taken as, more or less, a settled law that even though the principle of res judicata as such, is not applicable to tax proceedings, the Tribunal should not, ordinarily, depart from its findings given in an earlier year without cogent reasons. In appropriate cases, the matter might as well be referred to a larger Bench for decision in case a Division Bench feels that the order passed by the earlier Bench requires reconsideration. This, however, does not mean that the mistake, if any, occurred in the appreciation of facts or law in the earlier order of the Tribunal; even if noticed by the Bench which has to decide the subsequent year's appeals, should be allowed to perpetuate. This, to my mind, only means that the Bench deciding the subsequent year's appeal should not take a contrary view in a routine manner. It should apply its mind carefully and be very slow in departing from the view earlier taken. The ITO proceeding on the assumption that the facts in the year are identical with those of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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