TMI Blog1979 (11) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... and connected papers were lost during enemy action in Burmah. Consequently, the two grandsons of the original founder executed a deed declaration of trust dated 20th February, 1969, for the purposes, which it is not in dispute, are charitable. On 1st March, 1963, the trustees resolved that the income of the trust should be accumulated, for a period of 10 years commencing from 13th April, 1961, for utilisation in the maintenance of temples, conduct of festivals, establishment of hostels, giving medical aid to the poor and starting or aiding educational institutions, including granting of scholarships to deserving students. The establishment of an orphanage was also referred to as one of the objects in the resolution. A sum of Rs. 93,000, being 100% of the income of the trust earned during the year ended 13th April, 1963, was invested in Govt. securities and an application was made to the ITO to exempt the income of the trust from tax by giving notice in Form No. 10, in pursuance of the said resolution. The ITO granted the necessary permission, and in accordance with it, the assessee-trust invested a sum of Rs. 7,31,017.97 in Govt., securities. The total income earned from 12th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 12th April, 1969. The balance to make up the sum of Rs. 8,00,000 has been drawn from the advance made to, Emcete Sons (P.) Ltd., which as on 12th April, 1969, stood at Rs. 11,50,170.41 and which after the withdrawal stood at Rs. 10,87,541.23 as on 12th April, 1970. The sum of Rs. 1,64,210.03 was the excess of income over expenditure earned during the period from 13th April, 1969, to 13th April, 1970. It would be usual to find a profit and loss appropriation account in the case of companies in order to disclose as to how the profit earned by the company has been dealt with. In the case of companies, the amount would ordinarily be appropriated for, (a) making a provision for taxation, (b) making a provision for dividends, and (c) the balance, if any, would be taken to the balance-sheet. In the present case, as the trust is exempt from taxation and as the trust had also applied to the ITO for accumulation of the income over the period contemplated by the provisions of the Act, the total amount of the surplus of the income over expenditure, viz., Rs. 1,64,210.03, was taken over to the capital fund. We are now concerned with the assessment year 1970-71, for which the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the fund for charitable purposes. The AAC rejected this contention. There were two other contentions. It is not necessary for us to go into them here. The result was that the assesses had to file an appeal before the Appellate Tribunal on the assessment so sustained. There was a difference of opinion between the Accountant Member and the judicial Member constituting the Bench. The Accountant Member was of the opinion that the assessee was eligible for exemption even when it purchased property for the purposes of the charitable trust. The judicial Member was of the contrary opinion. In his view, no portion of the income derived by the assessee from the property held in trust during the relevant year had been utilised in the purchase of the property and, therefore, the assessee was not eligible for exemption under s. 11. This difference of opinion was referred to a third member as required by the provisions of the Act. The said member, who was then the Vice President of the Tribunal, agreed with the Accountant Member and held that the assessee was eligible for the exemption. The result was that the assessee's case for exemption was accepted by the majority of the members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the income was to be accumulated and the period for which the income was to be accumulated, the period not exceeding ten years, and (2) the money so accumulated being invested in Govt. securities. In the present case, as already seen, the assessee had given a notice to the ITO for the accumulation of the income for a period of ten years. The year under consideration falls within the said period of ten years. The second condition that had to be complied with by the assessee was investment in Govt. securities. It was not the case of the assessee that it had invested the money accumulated in Govt. securities. Thus, the assessee had not complied with the twin conditions of s. 11(2). The assessee had thus to fall back upon s. 11(1)(a). Under that provision, the assessee had to apply the income for charitable purposes in India. It could without attracting tax liability accumulate to the extent of twenty-five, per cent. thereof or Rs. 10,000, whichever was higher. The case of the assessee was that it had applied the income for charitable purposes by investing the trust funds in purchasing the property known as " Rama Vilas ". Right through, before all the authorities including the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee could accumulate twenty-five per cent. of the income of the trust. The learned judges held that a combined reading of s. 11(1) and (2), showed that s. 11(2), while enlarging the scope of the exemption, removed the restriction imposed by s.11(1)(a) but that it did not take away the exemption allowed by s.11(1)(a), so that so long as the assessee had not accumulated more than 25% of the income, it could get the exemption under s. 11(1)(a). In the present case, it is not suggested that the assessee had invested any money in Government securities or that there is only a shortfall, which is less than 25% so as to apply that decision. Thus, as these two decisions are not applicable, the matter has to be considered only in the light of a proper construction of s. 11(1)(a). If the contention, which found favour with the accountant member and also with the third member, is to be accepted, then in no case can a charitable trust be taxed. The trust has to only go on purchasing properties year after year stating that it is doing so for charitable purposes, so that it is out of the reach of the I.T. authorities. A contention like this has only to be stated to be rejected. It is so o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the face and show that the asset was acquired in realisation of an outstanding due. Further, in a case where the assessee claims an exemption, the burden is on him to establish the claim. He cannot be said to have discharged his burden by merely relying on some rule of presumption for which there is no warrant in law. Further acquisition of property per se does not serve the purpose of application. Even assuming that there is any scope for the play of any rule of presumption, in the context of this case, such a presumption is of no avail. Mr. C. Ramakrishna, the learned counsel appearing for the assessee before us, strenuously contended that a sum, of Rs. 1,50,000 had been utilised for the purchase of the agricultural land and that this at least must be taken into account in finding out whether the income of the trust was utilised for charitable purposes. This contention had not been taken at any earlier stage. The only explanation given by the assessee for not complying with the condition of s. 11(2) was that it had purchased a property known as " Rama Vilas ". This acquisition has now been found to be irrelevant in the context of the provisions of the statute. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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