TMI Blog1979 (7) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... f any portion of its income for the assessment year 1965-66 ? " At the instance of the Commissioner, the following question has been referred : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalty of Rs. 20,000 levied under section 221 of the Income-tax Act for the assessment year 1965-66 ? " We shall first take up for consideration the questions referred at the instance of the assessee. The assessee is a company registered under s. 25 of the Companies Act, 1956. The previous year under consideration ended on 31st March, 1965. The assessee derived income from a transport business which was held under trust. In addition, the assessee was a partner in two firms, viz., Messrs. Gounder Company, Pollachi, and Messrs. Anamallais Retreading Corporation, Coimbatore. The assessee derived also income from dividend and interest on securities. It filed a return for the assessment year 1965-66, showing " nil " income on the basis that the entire income of the year was exempt under s. 11 of the I.T. Act, 1961. The ITO determined the total income at Rs. 3,27,931 and the break-up of this amount is as follows : Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws " 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 ; and, where any such income is accumulated for application to such purposes in India, to the extent to which the income so accumulated is not in excess of twenty-five per cent. of the income from the property or rupees ten thousand, whichever is higher." It is with reference to the second part of the clause dealing with the accumulation that the AAC gave relief to the assessee to the extent of Rs. 81,982. We are now concerned with finding out whether the assessee has applied the income derived from property held under trust, to charitable purposes in India, so as to be entitled to the exemption in respect of the balance also. The application of the income in the present case to charitable purposes during the relevant previous year is sought to be supported by reference to various facts. There was a resolution passed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 002.18 ------------------------ 3,05,523.18 ------------------------ In the submission of the learned counsel, to the extent of Rs. 3,00,000 there has been an application or setting apart. It is not in dispute that the application must be during the relevant previous year. The sum of Rs. 3,00,000 was transferred to the donation fund only by the said resolution after the close of the previous year. Anything done subsequent to the year of account cannot be taken to be application of the income during the relevant, previous year so as to satisfy the requirements of s. 11(1)(a). Further, the sum of Rs. 3,00,000 remained only as a transfer entry in the assessee's own books and there has been no divestiture on the part of the assessee with reference to this sum in favour of any one else. In the circumstances, this resolution also cannot be of any assistance to the assessee's contention. The next contention was that the assessee had in its books a folio for Nachimuthu Polytechnic and that in the account of the assessee several entries have been made showing the payments made to the polytechnic. It is not in dispute that the amounts debited to the Nachimuthu Polytechnic in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added to it. Merely adding this sum to such a reserve in the account cannot be taken as any application of the income for any charitable purpose, or setting apart for any charitable purpose. The result is that the first question referred to us has to be answered in the affirmative and in favour of the revenue. The second question would not arise, because, even on its own language, it would arise for consideration only if the answer to the first question is in the negative. We may also point out that the second question is not intelligible and in a way intriguing, and neither side was in a position to throw light on the purport of the said question. It is not possible, and at any rate, it is unnecessary to answer such a question. We now turn to the reference made at the instance of the Commissioner. The assessee was liable to pay a sum of Rs. 2,09,386 on or before 10th March, 1970, for the assessment year 1965-66. The assessee was permitted to pay the amount by 30th of June, 1970, or on the date of the disposal of the appeal, whichever was earlier. As the amount was not paid, the ITO imposed a penalty of Rs. 20,000 on 15th December, 1970, which was reduced on appeal to Rs. 6,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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