9911796707
TMI Blog1989 (3) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption under sec. 11 in respect of all the items on the ground that the income was not spent for charitable purpose and that the Trust property or income was used for the benefit of persons mentioned in sec. 13(3). The Commissioner confirmed it in respect of all except three items on the ground that conditions under section 11 were not satisfied and those u/s 13 were violated. 4. The investigation by the IAC which resulted in the assessment proceeded in three stages i.e. (1) examination of the return, which led to (2) a visit to the assessee's premises and property which further led to (3) a "detailed investigation". 5. While making the assessment the IAC noticed that the assessee had received large donations towards its corpus. The IAC remarked that "the department was accepting the version of the assessee at its face value since the beginning till last year". He has noted that during the year the family members of the Sarabhai group wanted to transfer antique pieces of the Calico Museum in the possession of the Calico Mills to the premises of the assessee and that some one had obtained a stay order from the Gujarat High Court against that transfer. He has further noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 11 of the Income-tax Act." In para 22, he has stated : " Be that as it may, on the basis of the facts brought on record I hold that the Sarabhai Foundation did not do any charity nor its Trustees had any intentions (as against the pretension) to do the same." 7. Therefore, we have to consider mainly the IAC's order for appreciation of the evidence. Before doing that, however, it is necessary to ascertain whether the assessee is a Public Charitable Trust. That depends only on the objects of the Trust. The IAC, in para 21 of the order, has set out the objects as per the Trust Deed, viz.-- (a) Relief of the poor (b) Education (c) Medical Relief, and (d) advancement and promotion of any other object of general public utility including promotion of science, art and literature. These objects satisfy the requirement of sec. 2(15) and, therefore, it has to be held that the assessee is a charitable trust. 8. The assessee's counsel made the following submissions : 1. There was an understanding with the department that the assessee was entitled to exemption under sec. 11 as contained in the letter dated 29-7-86 from the assessee's counsel to the Commissioner and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under sec. 80G are very relevant. This Tribunal, Ahmedabad Bench 'B', vide its order in the case of Ambalal Sarabhai Trust No. 19 [IT Appeal Nos. 708, 1271 and 1739 (Ahd.) of 1983 dated 23-10-1984] has held that the above factors would operate as res judicata. Further the Delhi High Court in the case of CIT v. Shree Ram Memorial Foundation [1986] 158 ITR 3 has rejected the application under sec. 256(2) on the ground that the assessee had been recognised as a charity for several years. The above decisions support our view that the assessee is a public charitable trust. Moreover the Ford Foundation had given a substantial grant of $ 38,700 to the assessee under their letter dated 13th September, 1983 which is before the IAC's visit. It shows their recognition and appreciation of the assessee as a public charitable trust. 10. The learned Standing Counsel argued that in this connection it has to be seen whether the income had been spent for charitable purpose and if not then the trust would not be a charitable trust. We do not agree with him. As stated above, the question whether a trust is a charitable trust or not has to be decided only on the basis of the objects specified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been stated that it was not necessary that charitable institutions to which the Foundation gave donations must necessarily be enjoying the tax exemption status. 14. Regarding the donations to the individuals the IAC has not doubted that they were needy persons. Therefore, the disallowance of Rs. 689 is cancelled. Regarding the donation to the Bhagat Memorial Trust it was necessary that it should be a charitable trust. Therefore, on this point the matter is restored to the IAC to ascertain this fact and allow the payment if the trust is proved to be a charitable trust. 15. Another disallowance of this kind is an amount of Rs. 6,041 out of which Rs. 3,850 is by way of financial help to four individuals. These four persons were in the employment of the Sarabhai family as their personal servants. In our view this disallowance has been rightly made. It almost amounts to making personal charity at the cost of the Foundation. If the members of the Sarabhai family wanted to make such a charity they could have done it from their own resources but to make it at the cost of the Foundation and claim it as a deduction is not permissible. The special qualification for this charity wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cational institutions to send their students to this garden but the IAC has dismissed this as an after thought because enquiries had been made regarding the access of the public to this garden. Regarding the assessee's claim that this garden was for the benefit of students, the IAC has observed that educational institutions were not consulted regarding their requirements in respect of the families of the plants according to the syllabus of the standards of teaching classes. He has noted that the persons who were consulted for this purpose were not "connected with the educational requirements of a Botanical student ". Regarding the non-accessibility of this garden to the public, the IAC has noted the evidence of one Ramdas, the gardener, who, according to him, had stated that no outsider was allowed to go in the garden and that Shri Gautam Sarabhai, one of the trustees, came to the garden for morning and evening walk. He has also recorded that the employees of the Sarabhai Foundation working in the garden admitted that since two years of joining the services of the Foundation they had not seen any outsider in the premises of the Foundation. The statement of the Durvan, Narayan Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement of Maganbhai Sumabhai who has stated the same thing. The IAC has relied upon the statement of Ramdas but he has not taken into account the statement of Maganbhai Sumabhai and has merely taken into account one answer of Ramdas without taking into account the next answer. Moreover these statements were recorded in December, 1984 and these two persons were working there only for the last two months and could not make any statement regarding the period relevant to the assessment year 1981-82 which is before us. 22. The learned Standing Counsel submitted that although the assessee had spent Rs. 83,470 on this Botanical garden during the relevant period all that we had was a bare submission by the assessee that they were making it ready for being opened to the Public. He submitted that there was nothing to show as to what in fact was being done. In this connection he invited our attention to the circular by the assessee to various educational institutions stating that those who wished to avail of the Botanical garden at Sarabhai Foundation on Saturdays between 10 and 12 AM should contact Shri A. M. Patel and Shri D. S. Mehta and giving their telephone numbers. He pointed out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain that because, in that case, we have to know what the situation was before the suggestions were made. It is sufficient that the assessee invited the suggestions from these experts and ultimately there is in fact a Botanical garden. Therefore, the process of bringing it into existence during the aforesaid period of 4 years has to be inferred. The IAC's observation that if students of botany were to be benefited, educational institutions and professors of botany would have been consulted has no substance. It is sufficient that ultimately a botanical garden is grown and the knowledge of botany is not necessarily confined to professors of botany. The IAC's observation that for benefiting the students the families of plants would have to be grown according to the syllabus is a narrow, bookish and absurd approach. The knowledge of botany need not be divided according to the syllabus of students. A person intending to grow a botanical garden may grow it in is own way and then people interested in the study of botany can visit the garden to their benefit. A student of botany is not necessarily a person who is attending some college and reading books according to some syllabus meant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int of view for preserving the national cultural heritage. The IAC has disallowed this expenditure on the ground that the assessee had neither advertised nor given a public show of these materials in the last eight years and that there were no membership and no rules for obtaining these records and that no educational institution had been informed regarding the availability of this material. He has noted that the person in charge of the library, who had joined the service from February 1984 had stated that nobody from outside had ever attended to avail of these facilities. He has also stated that the Managing Trustee, Smt. Gitaben had admitted that the cassettes had not been played before anybody except before the VIP guests and that they were specially good for Gujarati students of B.A. and M.A. (perhaps what he means is students of Gujarati). From this he has concluded that the recordings were not made with the intention to benefit the general public but for special classes of students of B.A. and M.A. and also that the cassettes and gramophone records were "acquired by the Foundation for the personal benefit, amusement, and entertainment of the trustees and their relatives." He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s task of organising the Botanical garden and the museum, the activity regarding the recordings had not yet been systematically organised. 26. At the time of hearing before us a copy of the aforesaid leaflet accompanied by the form etc. was supplied to us. Therein we find the list of 48 authors and a blank form for placing an order. In the covering letter an introduction is given regarding the preparation of these cassettes and it also states that the cost of each cassette would be Rs. 60 and would be available within 6 months of the placing of the order. 27. The learned Standing Counsel submitted that the aforesaid facility was made available only from the 1st February, 1985 and that the reference library of recorded music could be availed of only on Saturdays and that too only for two hours in the morning and three hours in the afternoon. He pointed out that the number of persons who had availed of the facility of the lending library as stated at page 391 of paper book I was only twelve out of which one was the trustee Smt. Gitaben Mayor. He submitted that the extremely limited time for which the facilities were available and the very small number who had availed of this faci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use he is a poet. All that is necessary is that somebody who is knowledgeable in this field and having a sufficiently high standard of intellectual and educational attainments with an established reputation should be associated with it and that requirement has been fulfilled in this case. The IAC's approach is narrow and bookish. 29. The disallowance is also on the ground that the expenses were not properly vouched but the assessee has replied that these vouchers were never asked for and that they could be supplied at any time. This reply has not been contested by the Revenue. 30. It may be true that blind people may find it difficult to go to the Foundation premises and use this facility. But it is not as if they do not move about. They could use these facilities although with difficulty. The emphasis by the trustees was on the fact that it was no longer necessary to read in order to use what was communicated. In any case even if blind people were excluded the other persons did constitute members of the public. Moreover as pointed out above it was not the assessee's intention that these recordings should be meant only for B.A. & M.A. students. 31. It may also be true that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 years no one from outside had gone and made a reference ; and (d) that no public notice of the availability of this facility had been given. The IAC has observed that the books came in the possession of the Foundation long ago and if they were meant for public use then a library would have been established within a period of about one year. The learned Standing Counsel also put forward a similar argument that although the books were acquired long ago they were open to the public only on 16th April, 1985 and that organising the library should not have taken so long. He pointed out that the assessee had not engaged any qualified Librarian to finish the work of organising it and submitted that the reply of the Managing Trustee in that connection that the assessee had to decide the priorities showed that the trustees were treating the work as if it concerned their own property and not a public charitable trust. The assessee has replied that the IAC's observation that the library could be organised in one year's time is based on ignorance. They also submitted that the assessee was fully occupied in organising the botanical garden and the museum and, therefore, could not devote the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " was not registered as a charitable institution under the IT Act. He has observed : " How a payment to a group of individuals claimed to be involved in promoting Indian classical music, both vocal and instrumental, can be said to be application of income for charitable purposes. The IT Act allows donation to any institution which is a charitable institution as per the IT Act and not to any other institution." The assessee replied that : " the claim of the assessee is under sec. 11 and not as a deduction under sec. 80G. It is submitted that a charitable institution may render assistance in the nature of a charity even to an individual who cannot have any registration or recognition under the IT Act and yet that would be an application of income under sec. 11." The learned Standing Counsel submitted first of all that the activities of the " Samaj " were not open to the public and secondly that even if that " Samaj " was doing charitable activities the donation to it would not confer the status of charitable trust on the donor because a donor does not acquire the status of a donee. The assessee had given a 'clarification' stating that the assistance given to the " Samaj " was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other institutions. The assessee had submitted that the late Dr. Vikram Sarabhai who was a trustee of the Foundation was to guide and direct the above scheme but unfortunately he expired in 1971 and Smt. Sarladevi Sarabhai, who was the Chairman and Managing Trustee of the Foundation was keeping indifferent health for a number of years and she also passed away in 1975. Further the well in the farm had dried up and there was an acute shortage of water and due to the growth of population around the farm there was considerable pilferage and trespass. For these reasons the development of the farm with the above objects could not be pursued. Further, making a new tube-well and providing a proper boundary wall for preventing pilferage and trespass involved heavy expenditure in the assessment years 1982-83 and 1983-84. The assessee had submitted that the farm had been entered as property of the Foundation in the Public Register maintained under the Bombay Public Trust Act, 1950 and since the Foundation was a registered public charitable trust the property acquired was for the furtherance of the objects of the Foundation and formed part of the corpus of the trust and consequently income ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various persons " from Hansol village including the sarpanch and his " personal knowledge ". He has concluded that since this would be the correct estimate of income and since that has not been shown, either the produce had been used by the family members of the trustees and their relatives or after the sale thereof the income had been transferred to them through one J. K. Gandhi. This later part of the conclusion is based on the statement of this Mr. Gandhi to the effect that he looked after the activities of the farm and the statement of one Nankuram who was selling the produce of the farm and who stated that the sale proceeds were handed over by him to Mr. Gandhi. The IAC has noted that Mr. Gandhi was not in the service of the Foundation but in the service of a sister concern and that he was working for the managing trustee who had asked him to do that work. This, according to him, showed that the members of the Sarabhai family wanted to retain their control over the income of the Foundation through their personal trusted employees who were not on the roll of the Foundation. 42. This part of the order falls into three parts and raises three corresponding questions : (a) Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere would naturally be some shortage of funds which cannot be expected to be always available for this project because there were other projects also to be implemented. Therefore, if for a number of years the project is not implemented that does not mean that its starting with the acquisition of the farm was for the benefit of the trustees or their relatives. It is the gathering of the circumstances which made it difficult, if not impossible, to implement the project. It is a simple case of--man proposes ; God disposes. 44. Regarding the second questions the IAC's order is based on his disbelief that the trees on the farm would give such a low yield. Normally speaking if a farm is well taken care of and some one is actively taking interest in it, it could have yielded a good return. However, the very reasons indicated above, for which the project could not be implemented, are sufficient reasons for the yield being very low. How much that yield would be, in a given case is a question of fact. We cannot say that the IAC has investigated this question thoroughly. First of all he was carrying out the investigation in the end of 1984 when the question is regarding the yield in 1980-81. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition of sown khariff crop was reported poor. It also shows that there was unseasonal rainfall during the month of October and states that due to uneven distribution of rainfall in the State the growth of crops in the agricultural year 1979 cannot be said to be satisfactory. The above indicates that for the relevant period it cannot be assumed that the crop position for the farm was good. 45. That brings us to the actual estimate and the evidence in that regard. The first is the statement of the Talati of Hansol village dated 6-2-1985. He has stated, inter alia, as follows : " We have no record for the actual production of crops on the land. So we have no information on that point. According to the statement of Maganji Bapuji, aged about 62 years, the yield of one Kalami mango tree is about 10 to 12 maunds of mangoes and the yield from ordinary mango tree is approximately 50 maunds of mangoes on an average. One lemon tree yields produce of about Rs. 500 in 12 months of season." In his cross examination on the same day he has, inter alia, answered various questions as follows :-- Q. Are you an agriculturist ? A. No. Q. Do you have any agricultural land in your name ? A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also relied upon his personal knowledge. What the basis of the IAC for that personal knowledge is has not been stated by him. The learned Standing Counsel, on the basis of the available figures, submitted that according to the assessee every mango tree gave a gross return of only Rs. 3.75 and every lemon tree gave a return of only Rs. 2 and that since this was unbelievable, the estimate made by the Commissioner (Appeals) should be accepted. In our view although this kind of yield appears to be too low, what is necessary for an estimate is a reliable basis for estimate such as comparable instances or opinions of persons who have personal knowledge and who are independent outside witness subjected to cross examination. As indicated above there is no firm evidence regarding the number of fruit bearing trees in the period 1980-81. Therefore, it cannot be said that there is a reasonable basis for arriving at the estimate made by the IAC. It is true that he has given a reduction for losses due to cloudy weather and age of the trees and the Commissioner (Appeals) has also given a further reduction but that is no way of arriving at an estimate for the purpose of making an addition. It must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Regarding the above evidence of Nankuram he has denied that the sale proceeds are handed over to him. But he has stated that Nankuram hands over the sale proceeds to Anubhai who in turn hands them over to the cashier who gives a receipt for it. According to the IAC since Shri J. K. Gandhi was not an employee of the Foundation but was a trusted person of the managing trustee, the sale proceeds were taken away by the trustees. We are of the view that there is no justification for the conclusion reached by the IAC and confirmed by the Commissioner (Appeals). First of all regarding this allegation of misappropriation no question has been put to the managing trustee Smt. Giraben. Secondly, the fact that Shri J. K. Gandhi was not an employee of the Foundation will make no difference because if any misappropriation was to be done it could have been done also through an employee of the Foundation. Thirdly, if the trustees wanted to misappropriate the produce or the sale proceeds they would not have kept such a system of gate passes and accounting for the sale proceeds. That this kind of system was maintained has not been doubted by the IAC or the Commissioner (Appeals). The system is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being shown to the public ; (iv) From the visitor's book it was seen that hardly anybody from the public had visited the gallery in the last 2 or 3 years since it had been opened. Although foreign guests and VIPs had visited it that did not mean that it was open to the public. On the same grounds the expenditure on Archives has also been disallowed. 50. The assessee has replied that the Court gallery was open to the public on 24-10-1983 by posters at public places, such as hotels, Gujarat Tourism office and IIM vide letter of that date, notice boards and letters to people interested and the Vallabh Sampraday Pustimarg gallery was open on 31-1-1984 by announcements in the Gujarat Samachar. Our attention was also drawn to the entries in the visitor's book bearing the dates prior to visit by the IAC. Now, the IAC has not doubted that the public announcements regarding the opening of these galleries were in fact made. Therefore, the first conclusion to be drawn is that the galleries were in fact open to the public and the IAC is wrong in stating that they were not open to the public. However, his emphasis is on the small interval of time for which, according to him, they were op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar the dates which are prior to the IAC's visit. The following two entries would show that : N. H. Trivedi--28-4-1984 Mridula Bihari Kanaiyalal-- 26-4-1984 Therefore, we must say that the conclusion of the IAC that the galleries were not open to the public is wrong and against the evidence. 51. Regarding the allegation that the news item was published in order to show that the Calico museum was open to the public when the Gujarat High Court was seized with the matter, the assessee has replied that actually the announcement in the papers was made when the Gujarat High Court was not seized with the matter. The assessee's reply shows that it was the City Civil Court which was concerned with the matter and had granted the temporary stay. It is unnecessary to consider this reply because the fact that the said galleries were open to the public has been established by the assessee and an imputation of motives, even if correct, is totally irrelevant. 52. It is true that the galleries were open in 1983 and 1984 but preparations have naturally to be made for them and that involves quite a long time. A museum is not just a collection of interesting objects. They have to be kept in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the amount had been received and for which it was set apart for future expenditure. The assessee has explained that the amount had first been received from Darshan Charity Trust on the condition that it would form part of the corpus. A copy of the letter dated 25th December, 1979 from that trust to the Foundation and a copy of the resolution of that trust in that connection are in the paper book before us. In that letter the Foundation has been informed that the donation of Rs. 50,000 is given as per the copy of the resolution, the material part of which is as follows : " It is proposed to donate a sum of Rs. 50,000 to Sarabhai Foundation, a Public Trust registered under the Bombay Public Trusts Act, 1950 with a condition that the amount so donated shall forth part of the corpus of the Foundation and be held by the Trustees of the said Foundation upon the same trusts and subject to the powers, provisions and stipulations contained in the Deed of Trust creating the said Sarabhai Foundation. " The assessee explained that it was decided that the amount should be utilised promptly for the objects of the trust and, therefore, it was credited to the income and expenditure account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naging trustee was questioned on this aspect and she explained that the Jhummars had been purchased for creating a certain atmosphere and environment in the museum particularly in relation to the display of articles regarding Vaishnav religion. Regarding the cushions the assessee has explained that they were used in the Foundation premises for different purposes including sitting arrangement on the verandah at the entry to facilitate the visitors to remove their shoes. In our view, if the museum expenses are allowed then this kind of ancillary expenditure has also to allowed. It has to be appreciated that this is a museum of valuable (or rather invaluable) articles from the historical and aesthetic point of view. Its equipment, furnishing etc. have to be looked at from a different point of view. What may generally be regarded as articles of luxury may not be such in a place like this. Therefore, in our view, this expenditure has to be allowed. 57. Regarding the expenditure on books we have dealt with it earlier and we hold that this expenditure is allowable. There is also no justification for disallowing the expenditure on the purchase of air conditioners on the ground that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 ; (e) Even if the said facilities are open to the public they are only for a small section of the public and that too once in a week or for 15 to 20 minutes in a day. In this connection we will also mention that in the earlier part of the order the learned IAC has also recorded that Ramdas, the gardener had stated that no outsider was allowed to come to the garden. 62. Now, first of all the entry, both to the Foundation premises and to the private residences of the Sarabhai family, is through one common gate and in order to go to the Foundation one has to enter the common road. It has been clarified to us that the guards at the gate merely tried to ascertain whether a visitor wants to go to the Foundation or to the residence of the Sarabhai family. If the visitor wants to go to the Foundation the guards indicate to him the direction and if he wants to go to the residence the guard telephones to the residence and ascertain whether the visitor should be permitted to go in. In that connection we have the evidence of Narayan Singh, the guard at the gate. He has stated that he stands at the gate near the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding the main road and it is this right which enables the Foundation to let in the visitors by using this road. So the observations of the IAC that the visitor has to trespass the property of the MAPL and that there is any hindrance has no basis. 63. Regarding the sign board the assessee had filed in the paper book before the Commissioner (Appeals) photographs of the sign board indicating the activities of the Sarabhai Foundation (Pratishtan) at the counter of the Gujarat Tourism Corporation at the Air Port and other places. Before us a copy of a similar photograph has been filed. It is a hoarding mentioning the name Sarabhai Pratishtan and it has been stated that it was there since 1979. This assertion had not been denied by the Commissioner (Appeals) or by the Standing Counsel. Photographs of the subsequent boards which replaced the old one were also filed before the Commissioner (Appeals) and before us. They mention the timing regarding the botanical garden, the audio cassette library etc. Moreover there is sufficient evidence as indicated above that the Foundation premises were open to the public. 64. The IAC has relied upon the decision of the Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit. The fact that instead of books there may be cassettes should not make a difference because one is to be read and the other is to be heard but ultimately both are means for communication. 66. As stated above the IAC has made a number of disallowances, inter alia, on the basis of applicability of section 13(c) such as the expenditure on the farm and on other activities on the ground that they are for the personal amusement and entertainment of the trustees and their relatives. He has, however, made a disallowance in respect of a payment to a concern, MAPL only on the ground of applicability of section 13(1)(c) read with section 13(3). The assessee had made this payment for use of the road, drinking water and services of watchmen which were provided by the MAPL. Now, as stated above the road to the Sarabhai Residences and to the Foundation is common. The department's case is that although there are two other gates available at the retreat campus for entering the Foundation premises, only this one gate which provides a common entry has been kept open. The road and other services are actually meant for the Sarabhai residence but the assessee is paying for them while the owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... names--Puji Ram, Bhikhaji, Raiji etc. as having been kept separately for the Foundation as those with the MAPL. Therefore, it cannot be said that the Foundation is keeping separate watchmen and so there was no necessity for paying the MAPL for their services. In our view it cannot be said that these services are meant only for the purpose of the residences inside just because the entry of the road are common. Therefore, this disallowance is unjustified and is cancelled. 69. The next disallowance is in respect of repairs and maintenance of buildings amounting to Rs. 1,31,351. The disallowance has been made on the ground that the cross examination of the valuer who submitted the valuation report for the repairs showed that the expenditure was highly exaggerated and not supported by proper vouchers. The assessee has replied that the IAC had not called for the vouchers and the valuer was examined by the IAC (not cross examined) on the same day on which the assessment order running into 64 long sheets was passed. The assessee has further stated that the said examination was completed at 6 p.m. on that day and the offer to the assessee's representative to re-examine the valuer thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to various disallowances and so there remains the first one. Nothing very much turns on it because the disallowances are mainly based on the second one but it has occasioned the 'detailed investigation'. We are dealing with it because it is of a serious nature and the assessee has made an acute grievance of it. In this connection, the evidence of one Rohitbhai, a mechanic has been relied upon by the IAC. According to him : (a) Rohit got Rs. 20 per day whereas the assessee debited Rs. 30 per day ; (b) Rohit got Rs. 112 for 10-12 days while the wage sheet shows Rs. 212 ; (c) Rohit was not signing any vouchers and two vouchers produced before the IAC were signed by Rohit just then. Now the evidence recorded is as follows :--(Questions and answers translated by us from Hindi) Q. At what rate of daily wages are you working here ? A. I am working on daily wages at the rate of Rs. 30 per day. Q. Who pays you your wages ? A. I get the wages from Sarabhai Foundation. Q. Do you give your signature for the wages that you get ? A. No. I get wages on daily basis and I do not give my signature. Shri Vinay Kumar has interfered when Shri Rohitbhai gave the reply that my labour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O, 6-12-1984 73. Now, immediately after answer to Q. 16 both the IAC and the ITO have recorded that this witness said Rs. 30 and not Rs. 20. Moreover in the wage sheets which have been produced before us Rs. 30 has been recorded. Regarding the signature on the wage sheets we have found that he has signed not in two places but in six. These signatures are the same as that on the statement. Therefore, even if two signatures might have been made on the day of the statement, the other four were not. These documents were impounded. Therefore, the signatures could not have been put afterwards. Further, referring to the signature on the 1st December, he has stated that it has been given recently and not now. The word recently fits because the statement is on the 6th and the signature on the 1st i.e., recent past. Moreover, Mr. Anil Shah was not permitted to put a specific question regarding payments and receipts. Towards the end the deponent says that he must have received not what he in fact received and the total would be Rs. 200 for ten days @ Rs. 20 per day. Again the evidence of Jaswantbhai---the guest house cook, Laxmanbhai Vaghela, the attendant at the gate, Jagatsingh, the Jamada ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were asked for and the amount of details which were in fact supplied. The IAC has stated that even after repeated reminders stock register of articles meant for public use or office use was not supplied but the assessee's counsel has denied this. We find from the letter dated 4-1-1985 that all that has been asked for were details regarding dead stock. Even in the IAC's letter dated 19th January, 1985 the assessee was required only to give those details mentioned in the letter dated 4-1-1985. The assessee has supplied those details regarding dead stock. We, therefore, see no reason for this allegation also. 76. There are further allegations regarding discrepancies in the accounts. The basis for them, we find, is so untenable and the assessee's explanation so reasonable that we see no reason for making those allegations. In any case we have deleted all the disallowances made in respect of these items and, therefore, it is unnecessary to consider each and every one of them in details. However, we have substained the disallowance in respect of payment of Rs. 11,000 to Harrang Samaj. In that regard the discrepancy according to the IAC was that the assessee changed its stand. Ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Value of the property of the Sarabhai Foundation. Since we have held that the Foundation is a charitable trust there is no question of any A.L.V. in respect of this property. This addition is, therefore, cancelled. 79. We may now consider the general aspects of this case. As stated above the Commissioner (Appeals) has not discussed the evidence independently. Rather his order proceeds on many irrelevant considerations, misstatements of fact, misunderstanding of the legal position and shows lack of application of mind. He has also expressed himself at places in a language which, to say the least, is intemperate. All this reflects on his impartiality and affects the general validity of his order. Thus in para 3(vi) of his order he has stated that : " for considering whether a charity is being done for an object of general public utility it is also essential to examine certain aspects like the image of the sponsorers, . . . the reputation of the institution. . . . . " This view has been reiterated in para 48 of the order. These factors are totally irrelevant because it is a question of fact whether the income is being utilised for the object of the trust or not and it has nothi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts own creation. " This is a classic in irrelevance and shows the way in which the Commissioner (Appeals)'s mind has been working. The following are examples of the intemperate language and also of irrelevance :-- " 20......In this regard the question would, therefore, arise whether a well-heeled tax-payer (like the appellant) can masquerade as a charitable entity merely on its ipse dixit without even attempting to do good to someone in any walk of life. " " 21...... Here the appellant Sarabhai Foundation is apparently the beneficiary of the expert legal advice given by a coterie of professional tax advisers who are paid by the Sarabhai family annual retainerships and fees in amounts running in six figures individually. Such has been moral fibre of the trustees ; and such was the ethos of the advice of their six-figure paid Counsels or to use the term mentioned by Hon'ble Supreme Court in 148 ITR 153 the lawyer-turned-magicians. " In para 13, the Commissioner (Appeals) has stated that : " I find from the side of the appellant the basic facts, the relevant and ancillary evidence (specifically brought on record in the assessment order) had remained unrebutted. " In para 23 he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the Tribunal exercises. It is again wrong to say that liberal interpretation can be done only by the Board. The Board is not a judicial body and it has no powers to make interpretations of statutes. The legal position is that the lowest court has the power of interpretation of a statute and the Board has no such power. It is surprising that the Commissioner (Appeals) should not have followed the Tribunal's order without distinguishing it and that too on the above reason. 80. The Commissioner has confirmed the IAC's order with hardly any discussions but the IAC's order is highly defective in more ways than one. 81. First of all his general approach is illogical. He has alleged that the donation of lands and buildings to the Foundation were a part of the tax planning but he has overlooked that in doing so the donor loses the property itself. Further the assessee started receiving the lands and buildings in 1979 and so made plans for utilising them and consequently its spending on other objects like education, relief of poverty etc. was considerably reduced and the spending for implementing the plans for utilising these buildings increased. These new plans were for objects o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this glaring announcement ? Further it is no small consideration that the assessee had applied for registration before the Charity Commissioner. By doing so the assessee was subjecting the administration of the property of the Foundation to the supervision of that Charity Commissioner which will show the bona fides of the assessee. This aspect of the matter has been paid little attention to by the IAC. Further as pointed out above the assessee vide his letter dated 12-1-1985 tried to supply the information called for by the IAC by his letter dated 4-1-1985. In spite of that the IAC has stated that no such details were furnished. The IAC has made allegations of such trifling nature as that one of the trustees was going for stroll in the garden of the Foundation which also we have found to be false. He has rejected the books and made an estimate, ignoring that they were audited books and basing that decision on such minor discrepancies that no one would take them seriously and which we found are satisfactorily explained by the assessee. He has started his order by an allegation regarding tax planning and as to how much tax would have been paid by the assessee. If there is objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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