TMI Blog1992 (10) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 for assessment year 1985-86 and on 29-7-1986 for assessment year 1986-87. For assessment year 1985-86 the assessment was completed under section 143(1) on 24-1-1987 accepting the returned income. For assessment year 1986-87 also, assessment order was passed under section 143(1) on 24-9-1987 accepting the returned income. Demand notices were sent on 30-9-1987 charging tax at the maximum marginal rate. Then the assessee filed applications under section 143(2)(a) on 27-10-1987 in Form No. 16A contending that the provisions of section 161(1A) are not applicable and further contending that the income of the Trust has to be taxed only at ordinary rates and not at maximum marginal rates. It would appear that the contentions put forward on behalf of the assessee in its applications filed under section 143(2)(a) dated 27-10-1987 were accepted by the Income-tax Officer and he ordered firstly that the assessee is a Charitable Trust and that its beneficiaries are public at large and therefore, the provisions of section 160(1)(iv) are not applicable. He ordered that ordinary A.O.P. rates should be applied. Thus he ordered that the sum of Rs. 23,870 determined for assessment year 1985-86 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation suggested by the Commissioner is adopted, then Charitable Trust cannot carry on any business undertaking, except at the peril of being assessed at maximum marginal rate, which in fact is not the intention of the Legislature. Support was sought to be obtained for the assessee's argument from the Board's Circular No. 387 dated 6-7-1984 which stated that a new sub-section (1A) in section 161 was inserted to cover only the Private Trust having profits and gains of business and maximum marginal rate does not apply to business profits of a Charitable Trust which are otherwise chargeable to tax. Hence a stand was taken that the business profits of a Charitable Trust are not chargeable at the mximum marginal rate and the proviso under sub-section (2) to section 164 applies only to any income not being the income from business of a Charitable Trust. The assessee trust requested the learned Commissioner to drop the proceedings initiated under section 263 of the Income-tax Act. The objection raised and the request for dropping the revisionary proceedings initiated by him under section 263 were all rejected by the Commissioner. 4. While rejecting the objection and request of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The income of the Trust is business income and it has to be assessed to tax as income of the A.O.P. as there was contravention of provisions of section 11(5) as well as provisions of section 13(1)(d) and, therefore, it should be assessed at the maximum marginal rate. Thus he set aside the assessment orders passed by the Income-tax Officer under section 143(3) read with section 143(2)(a) both for assessment years 1985-86 and 1986-87 and directed him to redo the same in accordance with law. 5. Now in the case of the second Trust, which is the assessee in the later three appeals of this series, let us examine the facts relating to assessment years 1986-87, 1987-88 and 1988-89. In this case also, the assessee is a Public Charitable Trust and the assessment years involved are 1986-87, 1987-88 and 1988-89. The income-tax returns were filed for these years on 29-7-86, 7-7-87 and 20-7-88 respectively. Assessments were completed under section 143(1). While completing the assessment for 1986-87, the income-tax Officer charged income-tax at maximum marginal rate. The Trustees filed objection petition in Form No. 6A objecting to the levy of tax at the maximum marginal rate. The Income-tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me up in second appeals before this Tribunal and thus the matters stand for our consideration. 6. We have heard Shri K. L. Rathi, learned advocate for the assessee and Shri S. C. Jaini, the learned Departmental Representative. Shri K. L. Rathi contended the following. Proviso to section 164(2) does not cover business income. Section 13(1)(d) provision (iii) says that every business fund need not be kept invested in approved securities under section 11(5). To show the real intention of a proviso in an enactment, our attention is drawn by Shri K. L. Rathi to the Supreme Court's decision in CIT v. Madurai Mills Co. Ltd. [1973] 89 ITR 45 in which the intention of an enactment as per the headnote obtaining at page 46 of the reported decision is given as follows : " It is well settled that considerations stemming from legislative history must not be allowed to override the plain words of a statute. A proviso cannot be construed as enlarging the scope of an enactment when it can be fairly and properly construed without attributing to it that effect. Further, if the language of the enacting part of the statute is plain and unambiguous and does not contain the provisions which are said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that one of the crucial argument advanced by Shri K. L. Rathi should be accepted as correct and on that ground it should be held that the provisions of section 13(1)(d) were not in fact contravened by the assessee firm for not either depositing the business income or funds of the assessee trusts in approved securities under section 11(5). Immediately we may refer to the provisions of section 13(1)(d) proviso (iii) which is as follows : " 13(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof-- (d) in the case of a trust for charitable or religious institution any income thereof, if for any period during the previous year-- Prov. (iii) any funds representing the profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year. " Under the said provision any fund of the trust or institution invested or deposited before 1st March 1983 otherwise than in one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after 30th day of Nove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct interpretation of proviso (iii) to section 13(1)(d), it would appear that business profit or gain which was derived in the assessment year commencing on 1-4-84 or for subsequent assessment year were not invested in the specified modes of investment under sub-section (5) of section 11. For that reason, it cannot be said that there was a contravention of section 13(l)(d). That means even if the business funds or profits and gains derived from business were not deposited in any of the specified modes prescribed under sub-section (5) of section 11 there cannot be contravention of section 13(1)(d) and this the main ground on which the learned Commissioner of Income-tax felt that the case of the assessee falls under proviso to section 164(2) does not appear to be correct. On the other hand, even in the absence of the assessee trusts in these cases before us falling to deposit their business funds as well as profits and gains derived by them in their business in one or more of the modes specified in sub-section (5) of section 11 it should be taken that there was no contravention of section 13(1)(d) and for that reason the assessee did not get exemption under section 11 then, in our con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 30,464 Rs. 17,488 In the case of the second assessee, the following particulars are furnished : Asst. Year Previous Year Extent of Income Income ended on funds invested derived withdrawn 1986-87 12-11-85 Rs. 1,63,804 Rs. 31,133 Rs. 15,010 1987-88 1-11-86 Rs. 1,82,079 Rs. 29,443 Rs. 11,168 1988-89 22-10-87 Rs. 2,03,337 Rs. 32,703 Rs. 11,445 As can be seen from the above tables, either business funds or the profits and gains from business which were alleged not to have been deposited in the specified modes prescribed under sub-section (5) of section 11 were all derived in the assessment year commencing from 1-4-84 or subsequent assessment years. Therefore, the proviso (iii) to section 13(1)(d) clearly applies to all the funds which were stated to have been not deposited in forms or modes specified under sub-section (5) of section 11. For all the above reasons we have to hold that these cases of two assessees were not governed by the proviso to section 164(2) but they were governed by section 164(2) only i.e. by the main sub-section itself and not of the proviso. Therefore, we are of the opinion that the action of the Income-tax Officer in applying ordinary rates applic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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