TMI Blog1988 (7) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... Gurucharandas settled in trust Rs. 5,000 and created trust known as "L.B. Trust". The beneficiaries to this trust were the assessee and another trust having 50% share each in the income. Through its trustee, L.B. Trust became a partner in the firm of M/s Jain Traders. The assessee received its share of income in the said trust in the previous yeas relevant to the asst. yrs. 1980-81 and 1981-82. 5. Apart from the aforesaid income, the assessee also earned income by way of interest on the deposits made incertain concerns in which its trustees or the partners of M/s Jain Traders were partners. Again, the assessee had also earned interest on deposits made with certain banks. 6. Vide cl. 3 of the deed of trust dt. 10th March, 1970, the trustees were required to utilise net income in the following manner: "3(a). The Trustees shall in their absolute discretion utilise the net income of the said Trust Fund for charitable purposes, viz., relief of the poor education, medical relief and the advancement of any other objection of general public utility which are not restricted to or for the benefit of any particular community, in such proposition and in such manner and on such terms a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief and the advancement of any other objects of the General Public utility. The object clause of the Trust clearly denotes that it is meant for the advancement with other objects of general public utility also. 2. We also invite your honour's kind attention that s. 13(1)(bb) which was enacted from 1st April, 1977 is applicable only to the Chartiable Trusts having its objects for the relief of poor education, or medical relief. It does not cover the Trusts which are having included in their object clause of the 4th object, namely; General public utility. In this reference, it should not be out of place to mention that the changes recommended by the Chokshi Committee vide (para 29) which inter alia proposed that the provisions of s. 13(1)(bb) should also be made applicable to the Trust of the fourth category objects. The para runs as follows : "The provisions of s. 13(1)(bb) should also be made applicable to the trusts with the fourth category objects, i.e. trusts for the advancement of objects of general public utility other than relief of the poor, education and medical relief, with effect from the 1st April, 1977, as in the case of trusts with the other three categories o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is well in time. In the above circumstances and in the light of the above, it is requested that the additions made by the ITO are not in order and may kindly be deleted." It may be mentioned that objections on the aforesaid lines were also filed before the IAC in respect of the asst. yrs. 1980-81 and 1981-82 wherein it had also highlighted the fact that it was not a partner in the firm M/s Jain Traders though one of its trustees but it had received its beneficiary interest from the income of L.B. Trust which was a partner in the firm though one of its trustees. 11. For the asst. yr. 1977-78, the IAC had overruled the objections filed by the assessee and directed the ITO to frame the assessments "in accordance with the reasonings and conclusions arrived at in the preceding paragraph". For the asst. yr. 1980-81, the IAC accepted the assessee's contention that the provisions of s. 13(1)(bb) of the Act would not be applicable in respect of beneficiary share from L.B. Trust. He, however, held that in respect of interest income from various concerns, the provisions of s. 13(1)(bb) of the Act would be applicable. However, for the asst. yr. 1981-82, the IAC purportedly followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on behalf of the appellant which have been duly considered but they are not very much relevant to the points at issue. After having gone through the points taken up by the ITO and after duly considering the submissions made on behalf of the appellant, my observations are given below : (i) In terms of r. 17 of IT Rules, the assessee is required to give notice to the ITO under s. 11(2) in Form No. 10 before the expiry of the time allowed under s. 139(1) or (2) of the Act for getting the benefit of accumulation of surplus income. Secondly, in terms of s. 11(2)(b), surplus funds have to be invested in the approved securities/investments within 6 months of the closing of the previous year. Now I find that r. 17 is procedural and there is no doubt that there is a short delay in furnishing Form No. 10 to the Department at least, for asst. yrs. 1977-78 and 1978-79, whereas for the next year, i.e., for asst. yr. 1980-81, the Form No. 10 has been submitted well in time. In view of the judicial pronouncement on the provisions contained in r. 17 and in view of the fact that our of these three years there is a short dealy in filing this Form for 2 years, I am of the opinion that short del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ored." 16. The learned representative for the Department submitted that the reported decisions regarding filing of Form No. 10 relied on behalf of the assessee before the CIT(A) would not be of any help to the assessee in view of substitution of r. 17 in IT Rules, 1962 w.e.f. 1st April, 1971. In this connection, he invited the attention of the Tribunal to pages 591 592 of Chaturvedi Pithisaria's commentary, viz. Income-tax Law (Third Edition), more particular the Board's circular No. 273 dt. 3rd June, 1980 giving guidelines regarding condonation of delay in filing Form No. 10. Since in the instant case, the assessee had not made such application before the concerned authority, the learned representative for the Department went on to urge that the ITO/IAC had rightly held that the assessee was not entitled for the benefit of accumulation of surplus income. In this connection, he placed reliance on the decision in the case of Thakurdas Surekha Charity Fund vs. CIT (1983) 139 ITR 437 (Cal). In this view of the matter, he submitted that the CIT(A) was not justified in brushing aside this issue on the ground of "technical and procedural lapse". 17. The learned representative f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection, he pointed out that the assessee's stand regarding the Chokshi Committee' report and submitted that since the fourth object viz., "advancement of any other object of general public utility" is not covered under that section, the ITO/IAC were not justified in denying the claim made by the assessee from exemption under s. 11 of the Act. According to the learned counsel for the assessee, since the income earned by way of share of profit/interest was not with a view to earn profit but to augment the trust fund, the ITO/IAC was not justified in taking adverse decision against the assessee. He also submitted that even though the assessee was a partner in the firm of M/s Jain Traders for the first two years under appeal and in the firm of M/s Bhojraj Sunderpal for the asst. yr. 1977-78 through one of its trustees, who was not taking active part in the running of the partnership business, the provisions of s. 13(1)(bb) of the Act cannot be attracted. According to him, the provisions of the said section would be attracted only in a case where a trust is carrying on proprietory business. Relying on the decision in the case of CIT vs. Surat Art Silk Cloth Mfrs. Associatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncement of any other object of public utility" in s. 13(1)(bb) of the Act. It is not doubt true that before the IT authorities as well as before the Tribunal it was the stand of the assessee that the income sought to be accumulated was for the purpose of constructing a Dharma Shala/Hospital at Bhatinda. However, we find from the copies of Form No. 10 filed with the Department that the accumulation of income was sought to be made "for the construction of Hospital at Bhatinda". Since the construction of a hospital is nothing but providing "medical relief" as envisaged in s. 2(15) of the Act, we are of the view that the assessee's case is clearly hit by the provisions of s. 13(1)(bb) of the Act. According to us, it is of no consequence as to whether the assessee itself was carrying proprietory business or was carrying on business in partnership, with other persons. It is pertinent to note that the argument of saying firm and partners are separate and distinct entities is an argument of convenience only. It is a trite law that a firm is nothing but a compendious name given to partners who are carrying on business jointly. In this view of the matter, according to us, the fact that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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