TMI Blog2001 (3) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to this court under section 256(1) in the above Income-tax Reference No. 78 of 1998. Hence, both the above matters are tagged together. Briefly, the facts giving rise to the above dispute are as follows : The assessee is a company under section 5 of the Indian Companies Act. The Regional Director of the Department of Company Affairs, Government of India, vide order dated June 12, 1970, granted a licence to the petitioners under section 25 of the Companies Act, 1956, on the ground that the assessee intended to apply its profits in promoting its objects. By the said order, payment of dividend to its members was prohibited. The Department of Revenue also notified the petitioner-assessee as Council of Scientific and Industrial Research for the purposes of section 35(1)(ii) of the Income-tax Act, 1961. Accordingly, the assessee was recognised as a scientific research institution by the Central Board of Direct Taxes right from its inception. This recognition continued till March 31, 1981. In order to implement its objectives, the assessee decided to construct the Trade Centre, the Commerce Centre and the IDBI Centre. The assessee decided to borrow loans from the LIC. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 1990-91. As stated above, we are concerned, in this case, with two assessment years, viz., 1989-90 and 1990- 91. For the assessment year 1989-90, the assessee filed its return of income showing a business loss of ₹ 914.42 lakhs. The assessment was completed under section 143(3) when the assessee s income was assessed at ₹ 10,71,18,176. In doing so, the Assessing Officer held that the transaction of lease was, in effect, sale of premises. He treated the difference between the advance rent received and the total cost of construction as income from sale of buildings under the head Profits and gains from business . In respect of the sinking fund, the Assessing Officer treated it as taxable income. The interest income from investments was also treated as income of the assessee. Being aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) in which the assessee claimed exemption under section 11 of the Act on the ground that the activities of the assessee came under the purview of the general public utility as defined under section 2(15) of the Income-tax Act. The assessee also claimed that the transaction was in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer fees to the assessee. Therefore, according to the Tribunal, the above transaction was one of sale of leasehold right of use of space. In this connection, we find merit in the contention advanced on behalf of the assessee to the effect that there is no such concept in law. The judgment of the Tribunal is not clear in stating the above proposition. Secondly, this was not the case of the Department at any point of time. We need not go further on this point because learned counsel for the Department fairly states that he may not be able to support the above proposition particularly, when it was not the case of the Department at any point of time. In the circumstances, we remit the matter back to the Tribunal with a specific direction to reconsider the above point in the light of the contentions of the parties in the assessment proceedings. Learned counsel for the assessee, however, urged that the entire matter should be remitted back to the Tribunal. This has been opposed by learned counsel for the Department. In the present case, as stated above, the assessee was refused recognition as a scientific research institution from April 1, 1981. Thereafter, the assessee sought recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the section did not show that in order to get registration under section 12A, there is necessity of first establishing as to how the assessee would be able to claim exemption under section 11 or section 12. That there is nothing in the section to suggest that an institution of a religious nature is precluded from getting registration under section 12A. That, the question of exemptions under section 11 and section 12 would come only when the exemptions are claimed at the time when the assessee is assessed to tax. That at the stage of registration to consider whether the said assessee would be entitled to the benefits under section 11 and section 12 would be prejudging the issue before the grant of certificate. That, at the stage of grant of certificate under section 12A the only enquiry which could be made would be whether the society has actually made an application in time and whether the accounts of the society are maintained in the manner as suggested by section 12A and beyond that the scope of the enquiry would not go. That, the only purpose for which the registration was required was for establishing its identity as an institution for being able to claim the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able or not. That, at that stage, the Commissioner is not required to examine the application of income. Hence, in the present matter, the Tribunal was certainly entitled to ascertain whether there was a proper application of income for charitable purposes during the assessment years 1989-90 and 1990-91. To sum up, we are of the view that the Tribunal should have considered the miscellaneous application filed by the assessee in the context of the contention raised by the assessee that there is no legal concept propounded by the Tribunal, viz., sale of leasehold rights of the use of space. We are also of the view that, in the present case, the Commissioner did grant registration under section 12A of the Act. However, such registration will not prevent the Tribunal from ascertaining whether there was proper application of income during the assessment years 1989-90 and 1990-91 and whether the assessee was entitled to avail of the benefit under sections 11, 12 and 12A of the Income-tax Act. We are keeping the contentions on both sides open on the above points. Writ Petition No. 2490 of 2000 disposed of accordingly with no order as to costs. We are not disposing of the present ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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