TMI Blog1998 (10) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, reliance was placed on the order of the Tribunal dated 14-11-1991 in the assessee's own case for the Asstt. year 1986-87 in ITA No. 1694/Mds/90 wherein it was held that the whole amount of U.S. $2,50,000 equivalent to Rs. 30,17,706 should be taken as corpus donation. It was further held therein that the claim of exemption under section 11 and the application of section 13 of the Income-tax Act, 1961 do not arise. Though the Tribunal has taken notice of its order dated 14-11-1991, it erred in confirming the action of the Assessing Officer in holding that section 13(1)(c) read with section 13(3)(b) is attracted. This is a mistake apparent from record. So, this Tribunal, following its earlier order dated 14-11-1991 should hold that section 13(1)(c) read with section 13(3)(b) is not attracted and delete the disallowance of Rs. 7,900. 3. The learned Departmental Representative relied on the orders of the lower authorities as well as the order of the Tribunal dated 31-10-1994. 4. We have considered the rival submissions and perused the copy of the order of the Tribunal dated 14-11-91 which has been filed before us. In para 7 of its order dated 14-11-1991, the Tribunal cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is rejected hereby. REFERENCE TO THE HON'ABLE THE PRESIDENT UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As we differ in opinion on the point in adjudication in this case after due deliberations between us, we refer to the Hon'ble the President of the Income-tax Appellate Tribunal for hearing by one or more of the other Members of the Tribunal to be constituted by him as Third Member, the below mentioned Point of Difference: "Whether on the facts and in the circumstances of the case, the Tribunal has committed for the reasons particularly detailed in para-4 of the proposed order of the Vice-President or not committed for the reasons particularly detailed in para-2 of the dissenting order of the Judicial Member mistake apparent from record deserving rectification under section 254(2) of the Income-tax Act, 1961 in its appellate order dated 31-10-1994 which rejected the assessee's appeal on the impugned issue, holding THAT: when the Tribunal has maintained for the immediately preceding assessment year 1986-87 that the whole amount of US $ 2.5 lakhs equivalent to Rs. 30,17,706 received from Adnan Khashoggi, a foreign donor, as donation in its receipts and payment accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Misc. Petition pertains to the assessment year 1987-88. However, for a proper understanding of the dispute involved in this case it is necessary to refer to the assessment year 1986-87 for which the Tribunal (Madras Bench-C) passed its order in ITA. No. 1694/Mds/90, dt. 14-11-1991 in the second appeal filed by the assessee for that year. In that order, the Tribunal considered the question whether the Assessing Officer was right in denying the exemption claimed under section 11 by the assessee. The Assessing Officer found that the sole income of the assessee-society for the year consisted of donation of U.S. $ 2,50,000 (Rs. 30,17,706 given by Mr. Adnan Khashoggi, a Saudi Arabian. Out of this, Rs. 6,509 was spent on items like bank charges, travelling expenses, audit fees etc. Rs. 2,71,683 was spent on the visit of the donor to India. In the statement showing the computation of total income the assessee deducted the expenses incurred on the foreign donor upto 31-12-1985 of Rs. 2,71,683 and also the balance expenses paid on 31-12-1986 of Rs. 7,900 aggregating to Rs. 2,79,583 from the gross amount of donation of Rs. 30,17,706. The net amount was taken at Rs. 27,38,123. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise. 6. The departmental representative submitted that copies of the letters dt. 3-8-1989 and 4-8-1991 from Mr. Adnan Khashoggi were not produced before the Assessing Officer as well as the CIT(A) earlier. He prayed that the appeal may be decided on merits. 7. We have considered the rival submissions. This appeal was partly heard on 4-7-1991. At that time the assessee's counsel submitted that Mr. Adnan Khashoggi had given a donation of U.S. $ 2,50,000 by a cheque on Bank of Credit and Commerce International (Overseas) Ltd., dated 9-12-1985. We asked the assessee's counsel for the evidence to show that the said cheque was given as a donation to the assessee. On 23-9-1991 the assessee filed photostat copies of the letters dt. 3-8-1989 and 4-8-1991 in support of his contention that it was a donation from Mr. Adnan Khashoggi to the assessee. He had drawn out attention to the letter dt. 4-8-1991 to show that the donation was intended as a corpus donation. He also referred to the receipt dt. 12-8-1991 issued by the assessee. During the assessment proceedings and the appeal proceedings before the lower authorities, neither of them required the assessee to produce any documentar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in respect of visit of a foreign donor to India. It is seen that originally the assessee had declared the entire amount of 2,50,000 U.S. $ (equivalent to Rs. 30,17,706) received from Mr. Adnan Khashoggi as donation in its receipts and payments account. Subsequently, the assessee chose to claim that the actual amount of donation should be taken only as a sum of Rs. 27,38,123 being the balance sum after meeting the hotel expenses of the donor in India. In ITA No. 1694/Mds/90 for the Assessment Year 1986-87 in the case of the same assessee, Madras 'C' Bench of the Tribunal has held that the whole amount of 2,50,000 U.S. $ (equivalent to Rs. 30,17,706) should be taken as corpus donation. When such is the case, the assessee cannot treat the portion of it, viz., Rs. 27,38,123 as donation and the expenses of Rs. 7,900 spent on the donor will definitely fall within the purview of Section 13(1)(c) read with Section 13(3)(b) of the Income-tax Act, since this expenditure is not used by the assessee for charitable purpose. The assessee's appeal on this ground is, therefore, rejected". Aggrieved by the abovesaid order relating to the assessment year 1987-88 the assessee filed a M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in accordance with law. According to him, the interpretation given by the learned J.M. is neither proper nor justified. He further contended that identical issue came up for consideration before the Tribunal in ITA. 1694/Mds/90 and the Tribunal in its order dt. 14-11-1991 for the assessment year 1986-87 had discussed the entire issue in detail wherein the substantial donation of US $ 2,50,000 was involved and the Tribunal decided the issue in favour of the assessee by passing a reasoned order. He further contended that the department has accepted the said decision of the Tribunal dt. 14-11-1991 for assessment year 1986-87 and appeal effect has been given to that order of the Tribunal vide the order passed on 27-12-1991 by the Asstt. Director of Income-tax (Exemptions) -I, Madras. Incidentally the Tribunal has discussed the disputed amount of Rs. 7,900 falling in the assessment year under consideration, viz., 1987-88. He contended that the authorized representative for the assessee cited the said decision of the Tribunal dt. 14-11-1991 before the single Member Bench, but the Single Member Bench neither considered the arguments advanced in that decision nor distinguished it. The Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars. The Tribunal in its order dt.14-11-1991 has incidentally mentioned regarding the amount of Rs. 7,900 relating to assessment year 1986-87 also. But the appeal pertaining to that assessment year was not pending for disposal before the Tribunal and therefore the issue was rightly left undecided in the order dt. 14-11-1991. It is also a fact that the Single Member Bench in its order dt. 31-10-1994 has neither distinguished the above order nor referred the matter to the Hon'ble President, IT AT., for constituting a Special Bench. Therefore, the Single Member Bench had not acted in accordance with the legal proposition pronounced by the jurisdictional High Court in the case of L.G. Ramamurthy. It is also a fact that the decision of the Tribunal dt. 14-11-1991 has also not been discussed and the same has not been dealt with. The Allahabad High Court in the case of Laxmi Electronic Corpn. Ltd. has held as under: "The Revenue contended that it had raised a preliminary objection as to the maintainability of the appeal on ground of limitation which the Tribunal has failed to deal with in its judgment. The assessee contended that it had raised several contentions, but the Tribunal dealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly." From the above it is clear that even assuming without admitting that the gross receipt of US$2,50,000 is to be taken as corpus donation, it does not come within the purview of the definition of "income" of the trust. The provisions of section 13(1)(c) read with section 13(3)(b) can apply only in respect of "income" of the trust as such and not to any amount which falls outside the purview of the definition of "income". In this view of the matter also it is clear that the questions of claiming exemption under section 11 and the application of section 13 do not arise in respect of the disputed amount. I, therefore, agree with the reasoning and view taken by the Vice-President (AM). But I do not agree with the learned J.M. on facts as well as on law for the reasons mentioned above. 9. Now the matter will be placed before the Division Bench for pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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