9911796707
TMI Blog1971 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... and prescriptions would not enable the petitioner to seek and obtain relief in tax for the assessment year in question. What happened in the instant case was that, on March 1, 1963, the board of trustees resolved to accumulate the income of the trust for a period of 10 years from 1961 to 1970 so as to make it into a sizable fund for the sole purpose of being utilised in major projects of a charitable nature. It is not seriously disputed that the objects of the trust are to benefit a charity as defined under the Act. After the board so resolved to accumulate the income, the petitioner gave a notice in Form 10 of the Income-tax Rules, 1962, to the Income-tax Officer, Salaries Circle, Madras, on March 14, 1963, notifying the text of the resolution of the board. On March 26, 1963, the petitioner wrote to the Commissioner of Income-tax stating that the amount kept with the trust was invested in the Madras Industrial Investment Corporation Ltd., and sought for a clarification that if the income of the trust derived from the investment in the Madras Industrial Corporation Ltd. would satisfy the requirements of law and in particular section 11 of the Income-tax Act, 1961. The Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer. During the pendency of the above writ petitions, the Appellate Assistant Commissioner disposed of the said appeals concurring with the original authority that the petitioner was not entitled to the privilege, concession or benefit under section 11 of the Income-tax Act, 1961. As the original order has become practically merged with the appellate order, W.Ps. Nos. 535, 536 and 537 of 1969 have been filed and writs of certiorari are asked to quash the order of the appellate authority on the grounds to be set out herein. Incidentally it may be stated that, under a circular issued by the Government of India, as rule 17 of the Income-tax Rules, 1962, and the form prescribed thereunder came at a time which made it not convenient to the assessee to gain statutory advantage or concession under section 11, the first requirement that investment of trusts funds should be made before the expiry of one month commencing from the end of each relevant previous year was reversed (revised) and time for such investment was extended till 30th September, 1962. The contention of the learned counsel for the petitioner is that section 11 of the Income-tax Act, 1961 (hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made in 1952. Incidentally, it may be mentioned that only in 1939 it was made clear that such concession in the matter of levy of income-tax can be gained by a charitable institution, provided that the objects of that institution serve the community of the public at large. Therefore, the acid test to gain a privilege is that not only the institution should be charitable institution but also the charities should be for the public benefit. In 1952 certain changes were effected. For the first time, an exemption was sought to be given to income even if it is not applied to religious or charitable purposes in the accounting year, but it is accumulated for application for such purposes subsequently. The other limbs of the section are unnecessary for our discussion. The result is that in 1952 there was a possibility of charitable institutions accumulating their income for application for religious and charitable purposes. This came up for severe comment in what is ordinarily known as Tyagi's Report. They were called upon to report on direct tax administration and make suggestions to amend the law. In Commissioner of Income-tax v. Walchand Diamond Jubilee Trust the court noticed that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. The first one is that he should inform in writing to the Income-tax Officer concerned in the prescribed manner and specify therein the purpose for which the income is accumulated or set apart and the period for which the income is to be accumulated or set apart, which in no case exceed ten years. The second one is that the accumulated income is invested in approved securities. Section 11(2)(a) speaks of notice in writing being given to the Income-tax Officer in the prescribed manner. Rule 17 is one of the rules framed under the rule-making power of the delegated authority under section 295 of the Act. Rule 17 says that the notice should be given to the Income-tax Officer under sub-section (2) of section 11 in Form No. 10. Form No. 10 deals with more than one situation. No doubt, the earlier part of Form No. 10 satisfies the statutory mandate in section 11(2)(a). But, paragraphs 2, 3 and 4 appear to be an appendage prescribed by the rule-making authority independent of any prescription or guidance from the statute itself in the matter of investment of income from charitable funds. Paragraph 2 says that a person in management of the charities should invest the accumulated inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight and spirit of the parent or enabling statute. It cannot be postulated that the right of delegation can be unlimited in its scope. As the device of subordinate legislation or delegated legislation is adopted since the parent body has not the time to apply its mind to all meticulous details connected with its due implementation, the mechanics of delegation is thought of as an ancillary measure. It is for the parent legislature, which is essentially vested with the legislative function, to lay down the law, the policy and the standard which they want to maintain in the application and enforcement of the legislative enactment. It, therefore, follows that an ancillary channel, at any rate like delegation, cannot abridge rights or privileges granted by the statute itself. All rules or forms which are creatures of such rules, prescribed for the purpose of effectuating the policy of the statute, must be read in the light of the statutory provisions in the main enactment under which they are made and, therefore, such rules or forms cannot contradict or create an irreconcilable position resulting in an anomalous situation. The primary and the only object of the Income-tax Act is to tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with the statutory prescription. We are now concerned with the case of accumulation of income. The minutes disclosed that there was a resolution of the board to accumulate such income for ten years. If it is discovered at any time by the revenue that the assessee did not accumulate the same for the sole and whole purpose of utilising the income for charitable purposes, then the arms of law are long enough to reach such misapplication of the funds so as to bring to book the assessee in default and treat his total income as well in accordance with the provisions of the Act. As the main object is to refrain from taking apart of the total income of a particular assessee, that cannot be thwarted by the subordinate legislation by introducing a rule of time to obtain that statutory right or privilege. Even so, it cannot be said that such a concession depends upon the discretion of the Income-tax Officer as is contemplated in paragraph 4 of Form 10. In Sales Tax Officer, Ponkunnam v. K. I. Abraham, the Supreme Court was considering a similar situation. Under the Central Sales Tax Act, an assessee gains certain tax concession if he furnishes what are usually known as "C" Forms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed by the rule-making authority. It is not in dispute before me that the Income-tax Act read as a whole prescribes various time factors and time limits, to wit, the time within which the return has to be filed, the time within which the advance tax has to be paid, etc., and, if the very same Parliament, while creating for the first time a concession which amounts to a relief in tax and which in turn tantamounts to a quasi-right, did not circumscribe the situation by imposing a time-limit to enable the assessee to gain the privilege, then it follows that it is a deliberate act of theirs and such intendment cannot be whittled down by the rule-making authority in the form made by it for the purpose. Reference may also be made to the decision in Solar Works v. E. S. I. Corporation, Madras, wherein the learned judges constituting a Division Bench said that, where an Act itself does not provide limitation with reference to a particular matter and the delegation of power to make rules is conferred by a section of the Act which does not expressly or impliedly relate to the power to prescribe time, the authority to which the power is delegated cannot make rule prescribing limitation. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industrial Investment Corporation Ltd. as a body in which an investment made can be catalogued as approved security. It appears to me that all steps were taken within the time to invest the trust funds in an institution which for all purposes must be taken to be a public institution and which cannot be lightly brushed aside as not a public institution. Even otherwise, it cannot be said that in the instant case there was an unreasonable delay in the matter of investment of the trust funds in approved securities as well. But, this is a matter for the revenue to consider and it is expected that they would be reasonable. The result is that W. Ps. Nos. 3443 to 3445 of 1967 are dismissed as they have become infructuous. Rules nisi in W. Ps. Nos. 436 and 535 to 537 of 1969 are made absolute and the writ petitions are allowed. There will be no order as to costs in any of the writ petitions. At the hearing of the petitions, the learned counsel for the revenue represented that he should be permitted to appear for the Income-tax Officer, the original authority, who passed the impugned order, as the appellate authority who is the only authority in W. Ps. Nos. 535 to 537 of 1969, may not be c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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