TMI Blog1999 (9) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... A) ought to have upheld the order of the Assessing Officer. 3. It is therefore prayed that the order of CIT(A) be set aside and that of the Assessing Officer be restored. The grounds of appeal for the other years are identically worded except with regard to the amounts mentioned in ground No. 1(ii). The figures relating to the other years are as under: Asstt. year Amount 1978-79 1,23.500 1979-80 1,60,000 1980-81 70,000 1981-82 1,70,000 3. From the above, it is clear that the main grievance of the Revenue is with regard to the CIT(A)'s decision in holding that the reassessment proceedings were not valid and also in holding that the application of the trust funds for the purchase of premises in Suraj Plaza-II, amounted to utilisation of income for charitable purposes of the trust. 4. The assessee is a trust constituted under a deed of settlement dated 5-9-1958. The objects of the trust are set out in para III of the trust deed. Since the objects of the trust are germane to the adjudication of the disputes involved in the present appeals, we consider it necessary to reproduce para-Ill of the trust deed below:- "III Obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny kind, from any person on such terms which are in conformity with the objects of this Trust and on conditions including the condition of associating the name of such person and for such purposes and such objects as are in conformity with the objects of this trust as the trees in their absolute discretion shall deem fit. (i) To accumulate the income of the trust fund and to amalgamate the same with the corpus of the trust. (j) To purchase, acquire, lake on lease movable and immovable properties and to construct, build, repair, rejuvenate, rehabilitate and develop any immovable property for the purposes of the trust. (k) To take on hire or exchange any property for the purposes of the trust. (l) To allow the use and occupation of any immovable property of the trust with or without licence fee or to lent the same at nominal rent or concessional rent or at such rent for carrying on the purposes of the trust. (m) To appoint committees, advisory boards, governing body, for any institution established, run and maintained by the trust. (n) To employ and discharge staff for the purposes of the trust. (o) To open and operate accounts with banks, individuals and to purchase, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed verbatim the reasons for reopening recorded by the Assessing Officer for the various years. He has also reproduced the contents of the original assessment orders and also the text of the reassessment orders for each of the years in question. He has also made a reference to the details of the return of income filed by the assessee along with copies of audited income and expenditure accounts and the balance-sheet for the relevant years, both at the time of original assessments and the time of reassessment. It is remarked by the CIT(A) that there was no difference between the statements of account furnished at the time of original returns and at the time of filing the returns in response to the notices under section 148. 6. In para 14 of the impugned order the CIT(A) has referred to an order under section 263 passed by the CIT, Baroda on 27-3-1989 for the assessment year 1984-85 wherein the Assessing Officer was directed to treat the expenditure on the acquisition of flat(s) at Surat Plaza as application for purposes other than charitable purposes and also to bring the accumulated amount of Rs. 1,70,000 to tax, if facts so warrant, in terms of the provisions of section 11 (3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) held that the reopening of the assessment was void for all these years as the conditions set out in section 147(a) were not fulfilled. 7. The CIT(A) has also discussed the merits of the case with regard to the question whether the trust fund has been utilised for charitable purposes or otherwise. He found that the assessee had accumulated its income for the objects set out in Form No. 10 filed before the Income-tax authorities who permitted the accumulation from the year, 1974-75 upto the assessment year, 1984-85. He also found that the trustees had acquired certain properties out of the sums set apart for charitable purposes, and for the purpose of raising further money for carrying out the objects of the trust, let out the premises so acquired to Bank of Baroda and ultimately effected sale in favour of Bank of Baroda and then the funds received on sale were ultimately used for giving donation to tile M.S. University of Baroda. The CIT(A) thereupon concluded that the expenditure incurred for acquisition of the property could not be considered as applied for purposes other than the charitable purposes of the trust in terms of section 11(3)(a) and section 11(3)(c)of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stoutly defended the order of the CIT(A). The ld. counsel pointed out that right from the inception, the trust was enjoying exemption under section 11 of the Income-tax Act, 1961. The accumulated funds of the trust were utilised for investment in certain immovable properties from which rental income was realised by the assessee trust and the entire income was subsequently spent by way of donation to the M.S. University, Baroda and also for construction of buildings for the said University in accordance with the objects of the trust which were obviously charitable in nature. The ld. counsel, Shri K.C. Patel put emphasis on the fact that but for the audit objection for the assessment year 1984-85, revisional order under section 263 would not have been passed by the CIT, Baroda directing the Assessing Officer to examine the question of application of funds and the Assessing Officer would not have reopened the assessments for the assessment years prior to 1984-85. The ld. counsel has drawn our attention to the relevant portions of the CIT(A)'s long order. Particular emphasis is placed on the ratio of the decision of the Supreme Court in Indo-Aden Salt Mfg. Trading Co. (P.) Ltd.'s c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not in furtherance of the charitable objects of the trust as letting out of the property is not one of the charitable objects of the trust. Relying on the decision of the Supreme Court in Aditanar Educational/institution v. Addl. CIT[1997] 224 ITR 310/90 Taxman 528, the ld. D.R. pleaded that the question of exemption should be considered for each year specifically in the light of the application of the funds for specified purposes. 13. We have considered the rival submissions and the evidence on record. We have also given serious thought to the ratio of the decisions relied upon by the ld. CIT(A), the ld. counsel for the assessee and the ld. Departmental Representative. In our view the impugned order of the CIT(A) does not call for any interference as it is based on a detailed analysis of the facts of the case in the light of the judicial principles laid down by the Hon'ble Supreme Court and the High Courts in regard to the law of reassessment under the provisions of section 147 of the Income-tax Act, 1961. 14. As rightly observed by the CIT(A), the genesis of the reassessment proceedings in question can be traced to the revisional order passed by the Commissioner of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er came to an independent conclusion without regard to the audit note while forming the belief that income chargeable to tax has escaped assessment, we have to observe that the other ingredients of section 147 are not fulfilled in this case. The reopening has been done under clause (a) of section 147, according to which there should have been omission on the part of the assessee, to make the return under sect ion 139 or to disclose fully and truly all material facts necessary for the assessments. This essential ingredient clause (a) of section 147 is not available in the present case as it is found that the assessee had in the original proceedings filed the return of income accompanied by copies of audited statements of account wherein the investment in the properly under consideration was clearly indicated. Moreover, rental income from a property at Mumbai, Shivasagar Estate, has been offered for taxation for various years and this has been accepted by the Assessing Officer as the income of the trust which was also considered as available for application for charitable purposes. In other words, letting out of a property for earning income for the purposes of the trust was consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the same paper book shows a receipt dated 3o-3-1991 by the Maharaja Sayaji University, Baroda (referred to as M.S. University of Baroda) of a sum of Rs. 3 lakh by way of donation from the assessee trust. For the assessment year 1992-93, we find that the assessee trust incurred expenditure to the tune of Rs. 17,38,166.70 during the financial year 1991-92 for the construction of a building for M.S. University. A further expenditure of Rs. 21,10,585.63 was incurred during the financial year 1992-93 relevant for the assessment year 1993-94 for the same purposes. All these details are reflected in the copies of the statements of account furnished to the Assessing Officer for the relevant assessment year concerned. 18. One of the arguments advanced by the revenue was that tile trust did not use the accumulated income for the purpose specified in Form No. 10. However, we find that this argument is not tenable in view of the evidence available on record which indicates that the assessee trust has not misused the accumulated funds for any purpose other than the charitable objects of the trust. The third object in Form No. 10 was staled as under:- "to donate and/or spend funds set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicated by us earlier. We fully endorse the decision of the CIT(A) in holding the reassessment proceedings as invalid based on the ratio of the decisions cited in para 6 above. On merits also the application of the trust funds for the purposes of the trust is clearly established in view of the case laws cited in para 7. The decisions quoted by the ld. counsel as indicated by us in para 11 above also lead to the inescapable conclusion that the decision of the CIT(A) cannot be faulted on the facts of the case. 19. Coming to the decision relied on by the ld. D.R. namely Aditanar Educational Institution supra, we have to observe that the ratio laid down by the Supreme Court in this case does not vindicate the stand taken by the Department in the present case. On the other hand, this decision supports the case of the assessee in the context of overall object of promotion of education. The following observations of their Lordships would be worth quoting in this context:- "We may state that the language of section 10(22) of the Act is plain and clear and the availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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