TMI Blog1996 (7) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... section 13(2)(h) and 13(3) of the Act are applicable to the instant case ? Is not the decision of this Tribunal in I. T. A. No. 2/(Coch) of 1980 in the case of Sree Narayana Chandrika Trust, Irinjalakuda, in favour of the assessee ? Is not the reasoning of the Appellate Tribunal to hold so illegal and unjustified ? (2) Was the Appellate Tribunal justified in holding that the assessee appellant is not entitled to the exemption under section 11 of the Income-tax Act, 1961, in the instant case ? (3) Was the Appellate Tribunal right in holding that in the case of the assessee a partner in the firm there is investment of funds by the assessee in a concern within the meaning of section 13(2)(h) and section 13(3) of the Income-tax Act, 1961 ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn. The assessee challenged this basic power of reopening. In regard thereto the Income-tax Officer held that the provisions of section 13(1)(c)(ii) and section 13(2)(h) read with section 13(3) are applicable, taking out the case for exemption under section 11 of the Act. It is further held that the situation came to light only during the assessment proceedings for the assessment year 1976-77. It was further held that the audit report filed in Form No. 10B did not also contain correct information as required therein, especially mention of close relationship of the partners of the two firms was conspicuous by its absence in the audit report. On facts, the Income-tax Officer observed that the accounts revealed that the trust had not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of us (Kamat J.) was a partner in I. T. R. No. 161 of 1991 decided on May 29, 1996 (CIT v. Chandrika Educational Trust [1997] 224 ITR 449) in the case of the same assessee-Chandrika Educational Trust---with regard to the assessment year 1974-75 dealing with the situation of reopening and consequent reassessment and in regard thereto, the question to be answered was as to whether the reopening and consequent reassessment could be justifiable. Certain facts appear with regard to the same assessee to show that even for the assessment year 1976-77, a wrong assessment was required to be opened on the ground of escapement of assessment in view of application of the provisions of section 13(1)(c)(ii) and section 13(2)(h) read with section 13(3). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for charitable or religious purposes and to the extent to which such income is applied to such purposes in India, such income is not to be included in the total income of the previous year under the benefit offered by section 11 of the Act. This is not the be all and end all of the situation because the statutory provisions of section 11 of the Act are required to be understood in the context of situations of exception provided under section 13(1) of the Act. In fact the said statutory provision (section 13) enumerates situations in regard to which it can be said that those situations would take out the items of income covered thereby from the benefit provided by section 11 of the Act. Illustratively section 13(1)(c) provides one such si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid provision, if reproduced, is as follows : " if any funds of the trust or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, 1971) in any concern in which any person referred to in sub-section (3) has a substantial interest. " It would be seen that the benefit of section 11 of the Act would not be available to a situation which is deemed to have been statutorily stated to be used or applied for the benefit of such person, if the income continues to remain invested for any period during the previous year in question in any concern in which any person referred to in section 13(3) has a substantial interest. Therefore, the provisions of section 13(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing connections with the trust as specified by the provisions of section 13, there is no doubt that there cannot be any contemplation of a claim for deduction of the benefit under section 11 of the Act. In our judgment, the claim for benefit under section 11 of the Act has to be understood and appreciated in the meaningful way from the provisions of the above sections and in that process only that income cannot be included in the total income of the previous year of the trust in question who is the assessee, if that income has any kind of connection with the charitable and religious purposes in regard to its use. If it is found that the income is allowed to be with the partnership in the process of the enterprise activity, then surely the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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