TMI Blog1996 (9) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal was correct in law in holding that the sale of standing trees had been completed during the previous year relevant to the assessment year 1978-79 ? 4. Whether the Tribunal was justified in holding that the sales of Rs. 51,27,500 was rightly included in the total income of the corporation for the assessment year 1978-79 vis-a-vis the method of accounting followed by the assessee in this regard to show the sales as and when items were lifted on payment of instalments ?" At the outset Mr. Rastogi, learned counsel for the assessee stated that questions Nos. 3 and 4 aforesaid were covered by two decisions of the Supreme Court in Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 and in State Bank of Travancore v. CIT [1986] 158 ITR 102 against the assessee. Accordingly, both questions Nos. 3 and 4 are answered in the affirmative in favour of the Revenue and against the assessee. On question No. 2, Mr. Rastogi brought to our notice the decisions of this court in Taxation Cases Nos. 117 and 118 of 1984 in the case of CIT v. Bihar State Forest Development Corporation Limited [1997] 224 ITR 766 filed by the Revenue for the same assessment years. This decision is dated June 25, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is covered by a decision of the Supreme Court in V. Venugopala Varma Rajah's case [1970] 76 ITR 460. In that case the Supreme Court has asked for a supplementary reference from the Appellate Tribunal about the import of the expression "clear felling". In the supplementary statement the Appellate Tribunal observed that the import of the expression "Clear felling" is that : "all trees except casuarina are to be felled at a height not exceeding six inches from the ground, the barks being left intact on the stump and adhering to it all round the stump without being torn off or otherwise changed." Before the Supreme Court, the question was if the High Court was correct in holding that the income derived from clear felling of trees was subject to income-tax. The Supreme Court held as under : " On the finding in the present case it is clear that the trees were not removed with roots. The stumps of the trees were allowed to remain in the land so that the trees may regenerate. If a person sells merely leaves or fruit of the trees or even branches of the trees it would be difficult (subject to the special exemption under section 4(3)(viii) of the Indian Income-tax Act, 1922) to hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant and afforest in general forest lands, waste lands or other lands under the company or lands not belonging to the company on such terms and conditions which the company may decide. " It was the contention of the assessee that the assessee was not liable to tax as, according to the assessee, it was not carrying any commercial activity and that it was a charitable organisation and thus exempt under section 11 of the Act. It appears that no such contention was raised before the Inspecting Assistant Commissioner of Income-tax. It was for the first time, this contention was raised before the Commissioner of Income-tax (Appeals) who negatived the same. The Commissioner of Income-tax (Appeals) also observed that the assessee itself had filed voluntary returns showing taxable income. The Commissioner of Income-tax (Appeals) was of the view that the total effect of reading the memorandum of association showed that the assessee carried on business activities which were incidental to the carrying out of the objectives of the assessee-company. On appeal by the assessee, the Appellate Tribunal held as under : " Yet another contention raised on behalf of the assessee is that the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income---- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India ; . . (4) For the purposes of this section 'property held under trust' includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the Income-tax Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment ; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes. 12A. The provisions of section 11 and section 12 shall not apply in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn obtained by the assessee for its members. This commission was credited separately in a building account and out of this amount the assessee constructed a building. The Tribunal held that the primary purpose for which the assessee was established was to promote commerce and trade in art silk, silk yarn and cloth as set out in clause (a) and the other objects in clauses (b) to (e) were merely subsidiary objects ; that the primary purpose was plainly advancement of an object of general public utility and did not involve the carrying on of any activity for profit within the meaning of section 2(15) of the Income-tax Act, 1961, because whatever activity was carried on by the assessee in fulfilment of the primary purpose was for advancement of an object of general public utility and not for profit ; and that, therefore, the assessee's income was exempt from tax under section 11(1). " That is not the position in the present case before us. In the Andhra Pradesh State Road Transport Corporation's case [1986] 159 ITR 1 (SC), the court has held that : "....the activity of the assessee was not carried on with the object of making profit ... and that the amount left over after utilisa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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