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TMI Blog2010 (10) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act can be construed to have been incorporated for the very same purpose or to be construed restricting the scope of Section 11(4) of the Income Tax Act. (ii)When the Tribunal reverses the findings of the lower authorities to hold that a joint reading of Section 11(1), 11(4) and 11(4)(a) would mean to give exemption of the income from the business of the Trust irrespective of the nature of the business, if the income derived from the business is applied to the objects and purposes of the Trust in the light of the fact by the Tribunal holding that there is no finding regarding the application of the income derived from the business can the Tribunal allow the appeal of the assessee instead of remanding the same for want of finding as to the applicability of the income." 3.Facts in brief:- 3.1.A Trust was started in the year 1924, by name "The Willington". The said Trust acquired a property bearing Door No.1/4, Marshalls Road, Egmore, Chennai 600 008. Thereafter, a resolution was passed by the Trust on 27.02.1971 to constitute a Charitable Trust in the name of "The Willington Charitable Trust". The assessee's Trust Deed mentioned the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemptions sought for by the assessee under Section 11 of the Act has held that in as much as the income has been derived by commercial activities such as, letting the building as marriage halls and auditoriums, apart from using the same for rental purposes and running a ladies hostel, such commercial activities cannot be termed as incidental to the objects of the Trust. Secondly, the Assessing Officer has held that the second condition required under Section 11(4)(A) of the Act of maintaining separate books of accounts is not satisfied. It was held by the Assessing Officer that the assessee is maintaining the books of accounts relating to the activities of letting out the auditoriums owned by it and it has been crediting the income of rent from Indian Bank and interest on fixed deposits etc., in the said account. The assessee has kept separate accounts only in respect of other activity of running the hostel for ladies and therefore, it has to be held that the second condition that the assessee should maintain separate books of accounts in respect of its income assessable under head "Business" is not satisfied. The Assessing Officer has also found that the assessee has filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable in nature, the property has been held in Trust by the assessee, there is sufficient compliance of the books of accounts and the business income derived by the property held in Trust is surely incidental to the objects more so when the same is utilised for the above said purposes. Hence by holding so the Tribunal has allowed all the appeals filed by the assessee and dismissed the appeals filed by the Revenue. The Revenue has filed the present appeals, challenging the said orders of the Tribunal by raising the above referred substantial questions of law. 7.Heard Shri.Patty B.Jeganathan, learned counsel appearing for the appellant/revenue and Shri.V.Ramachandran, learned senior counsel for Mrs.Dr.Anita Sumanth appearing for the respondent/assessee and perused the written arguments filed by the counsels. 8.Submissions of the Revenue: 8.1.Shri.Patty B.Jeganathan, learned counsel appearing for the revenue submitted that when it is not in dispute that the income of the institutions derived by commercial activities such as running marriage halls, auditoriums and receiving rent is augmented by commercial activities. The said business cannot be held to be incidental to the attainme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, which the Assessing Officer has rightly found as not complied with. The learned counsel without prejudice to his above submissions has stated that in as much as the Assessing Officer has not gone into the breakup figure of various heads of accounts given by the assessee, considering the scope of Section 11(4)(A) of the Act as well as Section 11(4) of the Act, the appeals will have to be allowed by remanding the cases to the Assessing Officer to decide the eligibility of the assessee to get the actual income exempted under Section 11(4) of the Act. The learned counsel has relied upon the judgment of the Honourable Division Bench in DIRECTOR OF INCOME-TAX (EXEMPTIONS) v. AVM CHARITIES [[2010] 323 ITR 27] in support of the above said contention. 9.Submissions of the assessee: 9.1.Shri.V.Ramachandran, learned senior counsel appearing for the assessee submitted that the property has been held in Trust by the assessee after its purchase and an order to that effect has been passed by this Honourable High Court in C.S.No.76 of 1973 in and by the order dated 08.03.1973. The assessee has been registered as a Charitable Trust under Section 12(A)(a) of the Act. There is no disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpliance of section 11(4)(A) of the Act. 9.5.In so far as the non compliance of the conditions stipulated under section 11(4)(A) of the Act by maintaining books of accounts for the income derived from the business is concerned, the learned senior counsel submitted that the Commissioner of Income Tax (Appeals) and the Tribunal have given clear factual findings that the same has been complied with through three separate accounts maintained by the assessee. Similarly, for the contention of the revenue that in as much as the authorities have mainly concentrated on the entitlement of the exemption under Section 11(4)(A) of the Act and consequently the quantum of the exemption has not been gone into, the learned senior counsel submitted that the assessee has produced all those particulars in the written arguments submitted and in support of the same, he has also produced the relevant records before this Court. The learned senior counsel also submitted that the judgment in DIRECTOR OF INCOME-TAX (EXEMPTIONS) v. AVM CHARITIES [[2010] 323 ITR 27] is distinguishable on facts, since there is no finding regarding the compliance of the conditions mentioned under section 11(4)(A) of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Honourable Apex Court referred above has also been followed by the Division Bench of this Court in COMMISSIONER OF INCOME-TAX v. SRI RAO BAGHADUR ADK DHARMARAJA EDUCATIONAL CHARITY TRUST [[2008] 300 ITR 365] and COMMISSIONER OF INCOME-TAX v. JANAKIAMMAL AYYANDAR TRUST [[2005] 277 ITR 274] and also by a recent judgment of this Court in COMMISSIONER OF INCOME-TAX v. SRI NARAYANA GURUVIAH CHETTY'S ESTATE and CHARITIES [[2010] 326 ITR 662]. The Honourable Apex Court in ASSISTANT COMMISSIONER OF INCOME-TAX v. THANTHI TRUST [2001 247 ITR 785 ] has observed as follows: "The substituted sub-section (4A) states that the income derived from a business held under trust wholly for charitable or religious purposes shall not be included in the total income of the previous year of the trust or institution if "the business is incidental to the attainment of the objective of the trust or, as the case may be, institution" and separate books of account are maintained in respect of such business. Clearly, the scope of sub-section (4A) is more beneficial to a trust or institution than was the scope of sub-section (4A) as originally enacted. In fact, it seems to us that the substituted sub-sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d down under Article 141 of the Constitution of the India. Such a judgment cannot be ignored or bypassed on the ground that relevant provisions have not been brought out or certain issues have not been urged. In a system which has a hierarchy of judicial forums it is incumbent on the lower forums to follow the dictum of the higher forum. In SUNDARJAS KANYALAL BHATHIJA v. COLLECTOR, THANE [AIR 1990 SC 261], the Honourable Supreme Court has observed as follows: "17.It would be difficult for us to appreciate the judgment of the High Court. One must remember that pursuit of the law, however glamourous it is, has its own limitation on the Bench. In a multi-judge court, the Judges are bound by precedents and procedure. They could use their discretion only when there is no declared principle to be found, no rule and no authority. The judicial decorum and legal propriety demand that where a learned single Judge or a Division bench does not agree with the decision of a Bench of co-ordinate jurisdiction, the matter shall be referred to a larger Bench. It is a subversion of judicial process not to follow this procedure." 10.7.Similarly in SUGANTHI SURESH KUMAR v. JAGDEESHAN [AIR 2002 SC 681 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness which can be by way of utilization of a property held in trust is not used towards the object of the trust then no exemption can be sought for such income. 11.3.It is a well established principle of law that provisions contained in enactment should be read together by making an harmonious construction. Therefore, we are of the view that section 11(4) and 11(4)(A) of the Income Tax Act will have to be read together. Further by holding that section 11(4)(A) would over ride section 11(4) would make the very provision contained under section 11(4) otiose and redundant. While making a construction, the Court will have to see the intention behind the provision and should avoid an interpretation which would defeat the very provision itself. 11.4.JUSTICE G.P.SINGH IN PRINCIPLES OF STATUTORY INTERPRETATION, 12th EDITION AT P.298 SAYS THUS: "... a statute must be read as a whole as words are to be understood in their context. Extension of this rule of context permits reference to other statues in pari materia i.e. statutes dealing with the same subject-matter or forming part of the same system." 11.5.The said observations of the Justice G.P.Singh was quoted with approval by a rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] has observed as follows: "19.But this does not end the controversy. The power to adjudicate money claim is to the Labour Court "as may be specified in this behalf by the appropriate Government". Every word used by the legislature carries meaning and therefore effort has to be made to give meaning to each and every word used by it. A construction brushing aside words in a statute is not a sound principle of construction. The court avoids a construction, if reasonably permissible on the language, which renders an expression or part of the statute devoid of any meaning or application. 20.The legislature never wastes its words or says anything in vain and a construction rejecting the words of a statute is not resorted to, excepting for compelling reasons. There does not exist any reason, much less compelling reason to adopt a construction, which renders the words "as may be specified in this behalf" used in Section 33-C(2) of the Act as redundant. These words have to be given full meaning. These words in no uncertain terms indicate that there has to be specification by the appropriate Government that a particular court shall have jurisdiction to decide money claim under Section 33- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in respect of his income assessable under the said business cannot be countenanced. Hence, the same is also rejected. 13.Whether orders of Remand are required:- 13.1.However, substantial arguments have been made by the learned counsel appearing for the revenue as well as the assessee regarding the entitlement of the assessee's actual income towards exemptions. The learned counsel for the revenue submitted that in as much as the Assessing Officer and the other authorities have not gone into and made any break up of the separate heads of accounts maintained and utilised towards the objectives of the Trust, the matter will have to be remanded to the Assessing Officer to decide the same. Per contra, the learned senior counsel appearing for the assessee submitted that the records produced would show that the assessee has placed the entire material before the authorities which were found to be satisfactory and therefore no order of remand is required. 13.2.We find considerable force in the submissions made by the learned counsel appearing for the revenue that the authorities have substantially dealt with the issue of exemption sought for by the assessee under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of income in specified assets, utilization of income etc. Therefore it is the duty of the Assessing Officer to find out that the income is wholly and exclusively applied to the object of the trust. In other words if the Assessing Officer finds that the income as shown in the return is not actually utilized for a charitable purpose as claimed by the assessee then the exemption claimed for the said income goes. It would also mean that in such a case the profit making is the real object and therefore the doctrine of "feeding the charity" would have no application what so ever. 13.5.In SOLE TRUSTEE, LOKA SHIKSHANA TRUST's case [1975] 101 ITR 234, 256 (SC), the Honourable Apex Court has held as follows: "If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity. The learned judge also added that the restrictive condition 'that the purpose should not involve the carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ception from the operation of the statute it must establish that it comes within the exception." 13.8.We are also of the opinion that even though the assessee has produced the relevant records before us, we cannot embark upon the jurisdiction and role of the Assessing Officer by considering the same while exercising the power under Section 260(A) of the Income Tax Act. Further, we are of the opinion that no prejudice would be caused to the assessee by remanding the matter to the Assessing Officer to find out the actual entitlement of exemption by considering the materials placed before him. Therefore, we deem it fit to remand all the matters to the file of the Assessing Officer to go through the returns filed by the assessee for the relevant years and then consider the question of exemption under Section 11 of the Act, in the light of the observations made above. 14.Accordingly, the substantial questions of law raised are answered in favour of the revenue. However in view of our reasoning that a business income if utilized towards the achievement of the object of the assesse trust the same would be incidental to the achievement of the object, we deem it fit to remand the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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