TMI Blog1994 (2) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to refer to the various terms of the will at this stage since the said questions stand settled by earlier decisions of this court as confirmed by the Supreme Court. Suffice it to say, the object of the trust was charitable. For 20 years after the will came into effect, 40 per cent. of the profits of the property was to be enjoyed by the two tavazies of the tarwad and only 60 per cent. was to be utilised for charitable purposes. But after the expiry of 20 years, the entire 100 per cent. of the income was to be utilised for the purpose of charity. Under section 4(3)(i) of the Indian Income-tax Act, 1922, 60 per cent. of the income set apart for charity was being exempted by the authorities under the Act. This was being done until the amendment brought to section 4(3)(i) of the Act by the addition of a proviso thereto. By the addition of this proviso which came into force with effect from April 1, 1952, according to the Income-tax Department, the position changed and the Department took the view that the trust was hit by the proviso and hence was not entitled to exemption. The matter ultimately came to this court by way of a reference and this court in the decision in CIT v. Krishn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But on appeal to the Tribunal, the Tribunal denied the claim. On a reference of the question to this court in Income-tax References Nos. 95 of 1974 and 40 of 1976 at the instance of the assessee, the correctness of the decision in CIT v. P. Krishna Warrier [1972] 84 ITR 119 (Ker) was questioned. The income-tax reference came up before a Division Bench presided over by Justice P. Govindan Nair himself (as he then was), who had rendered the decision in CIT v. P. Krishna Warrier [1972] 84 ITR 119 (Ker) sitting along with Mr. Justice M. U. Issac. By order dated December 15, 1976, the learned Chief Justice thought that the decision in CIT v. P. Krishna Warrier [1972] 84 ITR 119 (Ker) required reconsideration in view of the fact that the effect of certain vital aspects did not appear to have been properly appreciated while rendering that decision. Meanwhile assessments for the assessment years 1965-66 to 1970-71 also were completed ultimately following the decision in CIT v. P. Krishna Warrier [1972] 84 ITR 119 (Ker). At the instance of the assessee questions were referred to this court in respect of those assessment years as well. They were all dealt with along with Income-tax Referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asala was treated as a business activity of the trust and that the assessee was not entitled to full exemption. On appeal by the assessee, the Appellate Assistant Commissioner had held that although the business of Aryavaidyasala was a property held under trust, the income allotted for the development and running of Aryavaidyasala was outside the field of exemption provided under section 11 of the Income-tax Act and that the assessee was entitled only to exemption on income utilised for Aryavaidyasala hospital, Aryavaidyasala and Aryavaidya Padasala and was not entitled to full exemption as claimed. This decision of the Appellate Assistant Commissioner was modified by the Tribunal which applied the decision in P. Krishna Warrier v. CIT [1981] 127 ITR 192 (Ker) [FB] and remitted the matters to the assessing authority by holding that the effect of the decision in P. Krishna Warrier v. CIT [1981] 127 ITR 192 (Ker) [FB] was that the entire income of the trust derived from the properties held in trust Including Aryavaidyasala would be exempt if the other requirements of section 11 of the Act are found satisfied. The assessee sought a reference questioning the condition imposed by the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age to consider the scope of the questions referred to this court and the answers given by the Full Bench in the decision in P. Krishna Warrier v. CIT [1981] 127 ITR 192. Relating to the assessment years 1965-66 to 1970-71 one of the questions referred to this court as question (H) was the following : " H. Is not the assessee entitled to full exemption from tax of its income as pleaded and earmarked or spent for Aryavaidyasala, Aryavaidya Hospital and Aryavaidya Padasala for all the six years (1965-66 to 1970-71) ?" Question H was answered by the Full Bench thus : "We answer the question in the affirmative, that is, in favour of the assessee and against the Department." It is the contention of the assessee that in the light of this answer holding that the assessee is entitled to full exemption from tax of its income as pleaded and earmarked or spent for Aryavaidyasala, Aryavaidya Hospital and Aryavaidya Padasala, there is no question of any further enquiry under section 11 of the Act or of the assessee being compelled to comply with the requirements of section 11 of the Act. This submission is controverted by learned counsel for the Department by pointing out that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of reference to the Full Bench dated December 15, 1976, Govindan Nair, Chief Justice, had referred to section 11(4) of the Act and had posed the question with reference to the said provision. It is in the context of this that the Full Bench had answered question No. H referred to above in the affirmative, in favour of the assessee. Thus the effect of the answer was that the assessee was entitled to full exemption from tax of its income as pleaded and earmarked or spent for Aryavaidyasala, Aryavaidya Hospital and Aryavaidya Padasala. Learned counsel for the Revenue pointed out that section 11(1)(a) makes it clear that what is exempt is 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, and in the case of a trust which had been created before the commencement of the Act of 1961 to the extent to which such income is applied to such purposes in India, and where any such income is finally set apart for such purposes in India to the extent to which the income is so set apart is not in excess of 25 per cent. of the income from such property. He also submits that tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this court. We are normally bound by the decision of the Full Bench of this court and if the words are clear and the answer is clear there is no question of our undertaking an interpretative exercise in that regard. Only if there is any absence of clarity can a question of understanding the scope of the answer arise and only in such a context the proposition canvassed for by learned counsel for the Revenue may arise at all. We, therefore, propose to consider in a little detail the nature of the answer given by the Full Bench and how it was understood by the parties themselves. We have already noticed that section 11 was very much in the mind of the Full Bench while the answer to question H was rendered by the Full Bench. That apart, it could be seen from the special leave petition filed by the Department before the Supreme Court challenging the said Full Bench decision that the Department also understood the scope of the said decision as is now canvassed by the assessee. In the said application for special leave which is marked as exhibit R-1 in the counter to Original Petition No. 5756 of 1983 which is also being dealt with by us in this judgment, the Department itself took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of this nature would operate as res judicata even as regards proceedings for assessment for subsequent years under the Income-tax Act. The principle of res judicata would apply to proceedings under the Act regarding questions relating to assessment which do not vary with the income every year but depend on the nature of the property or questions on which the rights of parties to be taxed are based. This principle is laid down in the decision in T. M. M. Sankaralinga Nadar and Bros. v. CIT [1929] 4 ITC 226 ; AIR 1930 Mad 209 [FB] and the decision of this court in CIT v. S. Murugappa Chettiar [1992] 197 ITR 575. The question whether the assessee is entitled to exemption as regards the income derived by it for the purpose of carrying out the directions of the author of the trust and as set apart by him in the deed creating the trust is not a question the answer to which can vary from assessment year to assessment year. In that view, it is clear that the answer given by the Full Bench that the income earmarked in the will is entitled to full exemption from tax would preclude the Department from going behind the said finding for the subsequent assessment years so as to postulate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment moved the applications under section 256(1) of the Act seeking a reference of the following questions as arising out of the order refusing rectification or amendment of the order under section 260(1) of the Act : " i. Whether, on the facts and in the circumstances of the case the Tribunal is right in law in holding that 'there is, therefore, no mistake apparent from the record, which requires to be rectified' ? ii. Whether, on the facts and in the circumstances of the case, the Tribunal is right in understanding the judgment of the High Court to have declared that 'no portion of the income . . . . is assessable' ?" By order dated October 20, 1984, the Tribunal dismissed the applications under section 256(1) of the Act. Learned counsel for the Revenue challenges the reasoning of the Tribunal that when the application for rectification is dismissed the effect is that the original order of the Tribunal remains untouched and a reference if any can arise only out of the original order and not from the order declining to rectify the original order. According to learned counsel, it is not correct to say that a reference would not arise out of proceedings for rectification. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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