TMI Blog1991 (2) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... d that donation was received from Stockem Co., London while confirmation letters are from these two individuals. Further more the initial intention of the donors as revealed from the receipts issued for such donations shows that it was meant for 'Morvi Flood Relief Fund'. The ITO after allowing 25 per cent amount of permissible accumulation held the balance amount of Rs. 1,53,351 as liable to tax in the hands of the trust. 2. The CIT(A) vide his order dt. 20th March, 1987 agreed with the findings given by the ITO and dismissed the assessee's appeal. 2.1. Thereafter the assessee submitted an application dt. 5th Oct., 1989 to the CIT, Rajkot alongwith Form No. 10 dt. 5th Oct., 1989 accompanied by a copy of resolution passed by the trustees on 22nd Aug., 1988. In this petition it was mentioned that the aforesaid amount of donations claimed by the assessee as corpus donations have been added as income of the assessee trust by the ITO by treating the same as voluntary contribution. To avoid such technical point for corpus donations, the trust submitted before the CIT in this petition that the said corpus donations be treated as general donation and the assessee may be allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of charity is suffering since long, and directed the Commissioner to pass a speaking order on or before 30th June, 1990. 2.3. The assessee again wrote to the CIT on 6th June, 1990 for condonation of delay in the light of the Board's circular in accordance with the order of the Hon'ble High Court. The learned CIT vide order dt. 24th July, 1990 once again rejected the assessee's petition for condonation of delay in filing Form No.10. 3. In the present appeal submitted before us against the order of the CIT(A) dt. 28th March, 1987, the assessee raised the following grounds: "1. The order of the CIT(A) dismissing the appeal is bad in law as also on facts. 2. The CIT(A) failed to appreciate that the assessment was invalid by virtue of the fact that the notice under s. 147(1)(a) was without jurisdiction and therefore, in valid. 3. The CIT(A) failed to appreciate that on any view of the matter, the receipt of Rs. 2,04,468 was not belonging to the appellant trust but it had received it for and on behalf of Morvi Flood Relief Fund and therefore, there is no question of taxing it in the hands of the appellant trust. 4. The CIT(A) erred in so far as he did not accept t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds corpus and should not be treated as voluntary contributions liable to tax under s. 2(24)(iia). 5.2. The learned counsel thereafter addressed his arguments with regard to entertainability of the additional ground raised by him. It was pointed out that the necessity to pass the resolution on 22nd Aug., 1988 arose because the Department treated the aforesaid corpus donations as income by considering the same as voluntary contribution liable to be treated as taxable income under s. 2(24)(iia). The assessee trust in order to avoid litigation passed the aforesaid resolution and submitted Form No. 10. Such a ground can therefore be validly raised before the Tribunal for the first time, as it involves consideration of purely a legal contention that r. 17 of the IT Rules, to the extent it lays down time limit for filing Form No. 10 beyond the scope of s. 11(2) and is therefore bad to that extent. The assessee is clearly entitled to avail the benefit of s. 11(2) even at that stage after completion of the assessment and after passing of the order by the CIT(A), as the provisions of s. 11(2) does not prescribe any limitation of time for passing such a resolution providing for accumulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for "Morvi Flood Relief Fund' which is clearly covered by the definition of 'income' given in s. 2(24)(iia). The initial intention of the donors is reflected from the donation receipts issued by the trust, which shows that these donations were towards Morvi Flood Relief Fund. At that time the donors had no intention to give the same towards corpus of the trust. The confirmation letters obtained after a period of six years from Bakul V. Sangani and Smt. Ramila P. Doshi were obtained to suit the convenience of the appellant to overcome the findings given in the assessment order and these documents are after thought. Further the donation was given by M/s Stockem Co. and the confirmations have been given by the two individuals without establishing any nexus or their relationship with M/s Stockem Co. The donations were given in the month of Nov., 1979 and Feb., 1980 sometime after the floods in Morvi which took place on 11th Aug., 1979. He therefore contended that CIT(A) has rightly rejected the assessee's contention in this regard and the order passed by him deserves to be confirmed. 6.1 As regards the additional ground the learned DR vehemently opposed the entertainability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill first deal with the grounds mentioned in the memorandum of appeal. In ground No. 3 it has been contended that the receipts of Rs. 2,04,468 does not belong to the appellant trust but it had received it for and on behalf of Morvi Flood Relief Fund and therefore there is no question taxing it in the hands of the appellant trust. No arguments were addressed by the learned counsel for the assessee in relation to this ground and it was not at all contended that the funds stood diverted at source in favour of Morvi Flood Relief Fund. The only contention which was canvassed by the learned counsel for the assessee is that the aforesaid donations were made towards corpus of the trust and the departmental authorities were not justified in rejecting this contention. The donations of Rs. 2,04,468 consist of the following four items: Rs. 10,000 Settled amount Rs. 1,74,432 From Stockem Co., London on 29th Nov., 1979 receipt signed by Smt. Vijaykunverba. Rs. 9,036 From Stockem Co., London on 27th Feb., 1980 receipt signed by Smt. Vijaykunverba. Rs. 11,000 From Ma Shri Anandmayima on 24th March, 1980 collected by Ruxamanidevi. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Considering the totality of the facts and circumstances, we are of the view that the CIT(A) has also rightly held that the two confirmation letters dt. 31st Jan., 1986 from Bakul V. Sangani and Mrs. Ramila P. Doshi cannot be accepted as indicating the true intention at the time of making the donations in question. In view of aforesaid discussions, the findings given by the learned departmental authorities that the aforesaid amount of donations is covered by the term 'income' defined in sec. 2(24)(iia) is perfectly valid and correct. 7.2 Now we will consider the additional ground raised by the learned counsel for the assessee. In the additional ground it has been submitted that the trust is not taxable in view of resolution of accumulation and the notice thereof to ITO under s. 11(2). During the course of hearing the decision of Tribunal Delhi Bench (SB) in the case of Indo Java Co. vs. IAC (1989) 35 TTJ (Del) (SB) 111 : (1989) 30 ITD 161 (Del) (SB) was brought to the notice of the learned DR and his comments were invited as to why the aforesaid additional ground should not be entertained. He simply submitted that since this point is based on resolution passed in the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion relating to interpretation of s. 11(2) and the facts on the basis of which such a decision is to be given regarding interpretation of s. 11(2) are not at all in dispute, we should proceed to decide the additional ground on merits also. We were persuaded to take this decision in view of the fact that as per resolution passed by the appellant trust on 22nd Aug., 1988 the trust is required to spend the amount set apart or accumulated by the said resolution on or before the dates mentioned in that resolution. Some amount is also required to be spent as per that resolution before 31st March, 1991 and the remaining amount is to be utilised on or before 31st day of March for the four subsequent years. Ordinarily we would have directed the CIT(A) to decide this ground, but this procedure would be item consuming and will unnecessarily delay the cause of charity. Besides this fact the legal question raised in the additional ground is clearly supported by various judgments of the different High Courts and therefore we have considered it appropriate under the facts and circumstances of this case to proceed to deal with the merits of the additional ground. 7.4 The submissions made by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-s. (1) of s. 139 for furnishing the return of income) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub-cl. (i) during the previous year in which the income is received or during the previous year immediately following as the case may be, and, in the case referred to in sub-cl. (ii), during the previous year immediately following the previous year in which the income was derived". (2) Where seventy five per cent of the income referred to in cl. (a) or cl. (b) of sub-s. (1) r/w the Explanation to that sub-section is not applied or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law in this regard was amended w.e.f. 1st April, 1989. After the amendment such option is required to be exercised before the expiry of the time allowed under s. 139(1). 7.6 Sec. 11(2) further enlarges the scope of exemption and removes the restrictions relating to accumulation of income subject to fulfilment of conditions laid down in s. 11(2). Sec 11(2) allows accumulation of the income of the trust for the specified purposes for a maximum period of 10 years on the condition that the trust specifies, by a notice in writing to the ITO in the prescribed manner, the purpose for which the income is being accumulated or being set apart and the money so accumulated or set apart is invested or deposited in the form or modes specified in s. 11(5). The provisions of s. 11(2) nowhere prescribes any time limit by which such a notice in writing should be given by the trust to the ITO nor it prescribes any time limit by which the money so accumulated or set part should be invested or deposited in the prescribed modes. In r. 17 of IT Rules it has been prescribed that the notice under s. 11(2) shall be in Form No. 10 and the same shall be delivered by the Trust to the ITO before the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment made by the Temple Trust after the expiry of the period mentioned in para 2 of Form No. 10 prescribed by r. 17, had to be considered for the purposes of s. 11(2) of the Act and therefore the income of the temple trust was held exempt from taxation. 7.10 The Bombay High Court in the case of Trustees of Shri Tekchand Chandiram has held that a trust cannot be denied exemption on the ground that the trustees have not given a notice for accumulation or made investments of the amounts as required within 4 months, as such requirements of the Form or Rules cannot qualify statutory provision or impose time limit. 7.11 The Hon'ble Supreme Court in the case of STO vs. K.I. Abraham has held as under: "The expression 'in the prescribed manner' occurring in s. 8(4) of the Central ST Act, 1956, only confers power on the rule making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they are sold and to which authority the form is to be furnished. But it does not take in the time element. In other words, the section does not authorise the rule making authority to prescribe the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f enacting provisions like s. 11 of the IT Act is to promote the laudable purpose viz., charity meant for sufferings of human beings. Sec. 11(2) further liberalises and enlarges the scope for grant of such exemption by permitting the charitable institution to accumulate and set apart their income for maximum period of 10 years to be utilised for carrying out the specified charitable purpose for which such amount is accumulated or set apart. These provisions have to be interpreted in a manner so as not to deprive a genuine cause of charity on the basis of mere technicalities. Even if the interpretation of such a beneficial provision is reasonably capable of more than one interpretation, then the interpretation which is beneficial to the subject and the interpretation which does not result in deprivation of such an intended relief, should be accepted. 7.13 It will also be worthwhile to make a reference to an order under s. 119(2)(b) of IT Act, 1961 issued by the CBDT on 3rd June, 1980 in this regard, which is reproduced hereunder: "In exercise of the powers conferred under s. 119(2)(b) of the IT Act, 1961 (43 of 1961), the CBDT hereby authorise the CIT to admit applications und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of demand in the income-tax assessment orders and confirmed by the CIT(A), thought it most proper and appropriate that instead of entering into prolonged litigation with the Department, let the donation in question be treated as general donation and the trust accordingly passed a resolution setting it apart for construction of the orphanage. The donations were lying in bank in fixed deposits right from inception and the settlors did not derive any benefit by not submitting Form No. 10 within the time prescribed under r. 17. 8. After considering the entire facts and circumstances and after going through the various judgments discussed hereinbefore, we are of the considered opinion that in the absence of any specific time limit prescribed under s. 11(2) for submission of the notice in the prescribed manner to the assessing authority and in the absence of any express or by clear implication any delegation to the rule making authority of any power to impose any time limit, such time limit prescribed in r. 17 for submission of Form No. 10 by the rule making authority is apparently invalid and is clearly contrary to the above referred judgments of various Courts. The appellant t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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