TMI Blog2008 (2) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... not appreciating the) case of Delhi Stock Exchange Association Ltd. v. CIT [1997] 139 CTR (SC) 455 : [1997] 225 ITR 235 (SC) in right perspective in accordance with law and thereby has erroneously held that the ratio of the said judgment is not applicable to the case of the assessee with regard to prospective operation of the amendment to the Articles of Association of the assessee. (3) That the learned CIT(A) has erred on facts and circumstances of the case and in law by not appreciating the ratio of judgment of Hon'ble Supreme Court in the case of CIT v. Kamla Town Trust [1996] 130 CTR (SC) 112 : [1996] 217 ITR 699 (SC) in right perspective in accordance with law and thereby has erroneously held that the ratio of the said judgment is not applicable to the case of the assessee with regard to prospective operation of the amendment to the Articles of Association of the assessee." 4. The learned Departmental Representative has stated at the Bar that he does not seek to press the additional ground of appeal No. 1. The additional ground of appeal No. 1 in all these appeals is thus rejected as not pressed. The additional grounds of appeal Nos. 2 and 3 are, in fact, an elaboration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders (cl. 114). It is thus clear that there is specific provision for division of profit provided in your Articles of Association of the company. Hon'ble Supreme Court in an important judgment in the case of CIT v. Indian Sugar Mills Association 1974 CTR (SC) 278 : [1974] 97 ITR 486 (SC) on this point has observed that 'where the relevant rules and regulations of an association or an institution permit distribution of profit of the association or institution amongst its members, an element of private gain is introduced which is inconsistent with the object of general public utility'. While perusing cls. 106 to 114 of your Article of Association in the light of Hon'ble Supreme Court decision, discussed supra, it is totally clear that there is a clear motive of private gain in formation of SICOP and as such you are not engaged in advancement of any other object of general public utility. When an institution is not created for charitable purpose, it cannot claim exemption under s. 11 of the IT Act, 1961. In the case Delhi Stock Exchange Association Ltd. v. CIT [1997] 139 CTR (SC) 455 : [1997] 225 ITR 235 (SC) it has clearly been held that so long as there is provision of distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation; that a copy of the minutes along with the amended copy of Memorandum and Articles of Association were being enclosed; that moreover, there could be said to be private gain when private persons were involved as shareholders of the company, whereas when the Government was involved as shareholder, no element of private gain could be said to be present; that the judgment in the case of CIT v. Indian Sugar Mills Association 1974 CTR (SC) 278 : [1974] 97 ITR 486 (SC) was also not applicable because in the case of the assessee trust, it was the Government of Jammu Kashmir which was holding the entire share capital; and that, the Tribunal Hyderabad Bench, in the case of A.P. Industrial Infrastructure Corporation Ltd. had not followed this judgment. 8. The assessee, in fact, contended that it had deleted from its Articles of Association, the clauses relating to declaration of dividend, retrospectively. 9. The AO, however, rejected this contention of the assessee, holding that such contention was totally misleading and illegal; that the trustees of a trust have no power to amend the Articles of Association of the trust; that rather, even the founder of the trust has no power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that Sakthi Charities and Delhi Stock Exchange Association Ltd. did not apply to the case of the assessee; that Kamla Town Trust had been misread by the AO; that in Sakthi Charities, the amendment was supposed to be made by the Court, whereas in the case of the assessee, since it was incorporated under the Companies Act, 1956. its Memorandum of Association and Articles of Association were required to be registered before the RoC, which was the authority designated under the Company Law. for such matters; that the assessee trust had not altered or rectified its Memorandum of Association, and had, in effect not altered/rectified its objects; that rather, it had altered its Articles of Association, thereby altering or rectifying its rules to fulfil its objects; that in Kamla Town Trust, the trust deed had not been amended by the Court retrospectively; that however, the assessee trust had deleted from its Articles of Association the enabling clauses regarding the declaration of dividends, retrospectively; that as per Kamla Town Trust, when such rectified trust deed is pressed into service before the IT authorities in the assessment proceedings, the AO would have to interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years under consideration, was issued after the Articles of Association to the assessee were amended; that the AO had erred in not considering the instruction as it existed in its actual amended form, when it was pressed into service by the assessee; that Delhi Stock Exchange Association Ltd. was not applicable to the case of the assessee; and that in that case, the clause prohibiting the declaration of dividend had been inserted w.e.f. 1973 and not retrospectively whereas in the case of the assessee, such amendment was retrospective. 12. Aggrieved, the Department is in appeal before us. Before us, the Department has filed detailed written submissions, which had been duly supported by the oral arguments made by the learned Departmental Representative. These contentions are to the effect that the learned CIT(A) has erred in observing that the decision in Delhi Stock Exchange Association Ltd. was distinguishable and thus not applicable to the case of the assessee; that in observing so, the learned CIT(A) has erred in stating that in Delhi Stock Exchange Association Ltd., the clauses prohibiting declaration of dividends were inserted w.e.f. 1973 and not retrospectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Kamla Town Trust was erroneous; that the Hon'ble Supreme Court: had rather held that by virtue of the rectification of 1955, the new clause was substituted for the old one and that such rectification was operative only prospectively with effect from the date on which it was brought about; that the case of the assessee was not different; that there was no reason why the rectification/amendment in the Articles of Association of the present assessee to be taken retrospectively; that the Hon'ble Supreme Court had held that it was in the way of casual mistake had occurred in the original trust deed, that amendment therein was permissible; that in that case, the assessee trust did acquire the status of a trust wholly for charitable and religious purpose only after the amendment to the trust deed in May, 1988 and that whether such rectified trust deed was pressed into service before the IT authorities in the assessment proceedings, concerning the relevant assessment year, the ITO would have to intrepret such rectified instruction of finding out its correct legal effect; that this would not be applicable for assessment year previous to the year relevant to the year in which the amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its Articles of Association by virtue of s. 31 of the Companies Act; that the amendment in the Articles of Association of the assessee trust has to be considered with retrospective effect, since such amendment has been made specifically retrospectively applicable; that in Jagdamba Charity Trust v. CIT [1980] 18 CTR (Del) 317 : [1981] 128 ITR 377 (Del), in similar circumstances, the retrospectivity of the amendment was upheld; that the objectionable clause of the Articles of Association was not deleted by virtue of the amendment in question was never implemented and no dividend was ever declared; that, therefore, the years under consideration were in accordance with the amended Articles of Association; that the amendments being fully retrospective, the AO could not. hold that in the years under consideration, the assessee trust was down by the terms of old Articles of Association. The learned counsel for the assessee has thus requested that the appeals of the Department in this regard be dismissed. 15. We have heard the parties and have perused the material on record with regard to this issue. The learned CIT(A) has, first of all, held that Shakthi Charities is not applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Association. In this regard, first of all, in Kamla Town Trust, it has been, inter alia, held that the AO will have to take instrument as it exists in its actually amended form when it is pressed into service for framing the assessment concerning the relevant assessment year if the said rectified instrument holds the field. It nowhere holds that an amendment which cannot be carried out retrospectively is also to be taken into consideration by the AO. In the present case, the assessee has remained unable to make out a case with regard to the retrospectivity of the amendment in question. Therefore, the learned CIT(A) has clearly misread Kamla Town Trust. 17. Apropos agreement of the learned CIT(A) with the assessee's contention that the notice under s. 143(2) of the Act for the years under consideration was issued after the Articles of Association were amended, this evidently is a wrong observation. First of all, the direction of the Tribunal was for the AO to confine himself to the issue relating to the exemption under s. 11 of the Act and not to make addition on issues which had attained finality in the set aside assessments. This difference shows that the notices under s. 143(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese six years and deleted the additions/disallowances by stating that most of the issues are already covered by his order or by the order of Tribunal and for the later year the entire additions/disallowances had been deleted covering each ground one by one. The appellate trust is also correct in stating that CIT(A), Bhatinda further held that he finds no utility of similar exercise in most/all points of the later assessment years for which the combined appellate order is framed. The learned AO while giving effect to the order of CIT(A), Bhatinda was not correct in giving full effect since he has not deleted from the income of the appellant trust the additions/disallowances otherwise deleted by the CIT(A), Bhatinda. The then CIT(A), Amritsar in his appellate order passed against the order of AO giving effect to the order of CIT(A), Bhatinda has also held that when whole of the income of appellant trust is exempt under s. 11 the purposes of object of the appellant is served and there is no need for specific disallowances to be mentioned in the order giving effect to the order of CIT(A). This aspect has been ignored by the AO while passing the assessment orders which are in appeals be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal before the Tribunal was only on the issue regarding exemption under s. 11 of the Act and the AO's orders giving effect to the order of the CIT(A), Bhatinda, were confirmed by the learned CIT(A), Amritsar, vide order dt. 13th Nov., 2003, there was no occasion for the Department to file appeal against the order of the learned CIT(A); and that this matter was agitated by the assessee before the Tribunal. 24. The learned counsel for the assessee, on the other hand, has placed heavy reliance on the CIT(A)'s order in this regard. 25. Here, we find the Tribunal had, inter alia, held that while deciding the appeals, the CIT(A) had deleted certain additions on merit, and the Department, had not filed appeals on the points of deletion of the additions and that, therefore, the order of the CIT(A) with regard to the additions deleted on merits, had become final. 26. Obviously, the aforesaid directions of the Tribunal were with regard to the CIT(A)'s orders which were appealed against before the Tribunal and not with regard to any subsequent order. Therefore, no further relief in this regard could have been granted to the assessee. The learned CIT(A), evidently, has erred in goin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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