TMI Blog1986 (9) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ed jurisdiction under section 263 of the Incometax Act ? " Brief facts of the case are that the Commissioner of Income-tax passed an order under section 263 of the Act on April 2, 1979, and another on September 15, 1979, for the two assessment years, namely, 1971-72 and 1975-76, respectively. The settlor of Anupam Charitable Trust (hereinafter referred to as " the Trust ") acquired sole selling agency from M/s. Godawari Sugar Mills Ltd. and deposited security to the tune of Rs. 50,000. The settlors were to receive commission on the sale of sugar at 1.1/8%. The settlors then created a trust on November 3, 1964, by executing a trust deed and the right to receive the commission from the sole selling agency and the security of Rs. 50,000 was created for charitable purpose within the meaning of section 2(15) of the Act. No return was filed under section 139(1) of the Act for the assessment year 1971-72 by the assessee-trust as it thought that the entire income accruing to it was exempt under section 11 of the Act. The Income-tax Officer then served a notice under section 148 of the Act on the assessee. In response to the above notice, the assessee filed its return of income on Februar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in profit-earning activities. It was further submitted that the Tribunal committed an error in assuming without there being any evidence on record, that the assessee-trust received income by way of agency commission on sale of sugar manufactured by M/s. Godawari Sugar Mills Ltd. in specified area. It was further argued by Shri Surolia that the learned Tribunal committed an error of law in holding that the activities of the assessee-trust in diverting back income received by it and then granting it by way of loans to the donees fulfilled any charitable object of the trust. It was further submitted that the Commissioner of Income-tax had rightly held that the Income-tax Officer did not make any inquiry as to whether the sole selling agency had been renewed by M/s. Godawari Sugar Mills Ltd. in favour of the trust after April 30, 1966. The sole selling agency came to be terminated on May 1, 1969, and, as such, the same was not available to the assessee in the previous years. It was thus submitted that the income received by the assessee, having been derived from selling agency, could not be said to be property held in trust as settled by the authors of the trust. The Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as become the sole selling agent and continued to receive the commission income and there was no fundamental change in the character of commission income so far as the applicability of section 11 of the Act is concerned. Shri Mehta further contended that it was nobody's case that the assessee showed income which did not belong to it. In no case, can it be said that the commission income that was declared by the assessee in the returns was not income of the trust. It has already been held in Surat Art Silk Cloth Manufacturers Association's case [1980] 121 ITR I (SC), that if the profit-making activity is subservient to the charitable objects of general public utility, then the exemption has to be allowed under section 11 of the Act. There is no dispute in the present cases about the application of the income. The profit-making activity was meant for achieving the charitable object of general public utility and such profit-making activity was not an end but only a means to achieve the charitable object of general public utility. It was thus contended that the Tribunal committed no error of law and no question of law arises from the order of the Income-tax Appellate Tribunal, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than five years, the Commissioner of Income-tax was not justified in concluding that the assessee could not have received any commission income thereafter and that the property that was settled by the settlors with the trust had extinguished during the years under appeal. The right to receive the commission income is purely a matter of agreement. In a given agreement, which prohibited anything may be modified at any subsequent stage by agreement of the parties (sic). In short, any agreement can be modified and revised by a subsequent agreement. Simply because there was a provision for not continuing the sole selling agency for more than five years in the agreement deed dated September 3, 1964, the Commissioner of Income-tax was not right in concluding that the question of receiving the commission income during the years under appeal would not have arisen in terms of the agreement deed dated September 3, 1964. There would have been an error had the Commissioner of Income-tax brought any material on record that after May, 1969, no agreement was made with the principal for the continuance of commission income. In the absence of any material showing the contrary, the Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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