TMI Blog1991 (1) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to a Special Bench, inter alia, on the ground that exemption to the appellant-trust under section 11 was denied by the authorities below on the strength of a decision of the Tribunal in the case of Champa Charitable Trust [IT Appeal Nos. 936 937 (Bom.) of 1987] placed on record and the legislative intention had not been clearly brought in this decision. After a careful consideration this Bench takes the view that there is no necessity for such a reference and as such, the appeal is proceeded with on merits. 3. On facts, assessee-trust received a donation during 1977-78 of a sum of Rs. 3,50,000 from Shree Hazarimal Somani Charitable Trust (hereinafter referred to as " HS MT "). This HS MT was donated a sum of Rs. 85,000 by the appellant trust during the year. Shortly, on these facts, the question arises as to whether the appellant-trust loses the exemption under section 13(1)(c)(ii) read with section 13(3)(b) of the Act. In view of the Assessing Officer, by making the donation of Rs. 85,000, the appellant-trust applied its income and property for the benefit of HSMT ; thus, attracting the provisions of section 13(1)(c)(ii) and consequently lost exemption under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee strenuously contended that it will not be correct to say that HSMT is a " person " and that if a donation has been made by one charitable trust to another and if it could be proved to the satisfaction of the concerned authorities that it is not for the benefit of the donee-trust or for its beneficiary, there is no infraction of the provisions of section 13 and consequently the donor-trust cannot be visited with any adverse consequences. As against this, the learned Departmental Representative submitted that the donee-trust is very much covered by the definition of the term " person ", as is evident by sub-section (31) of section 2 of the Act. 8. This definition of the term " person " runs as under : " 2.(31) ' person ' includes---- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses ;" 9. Elaborating it has been contended on behalf of the assessee that if we carefully go through the provisions of sub-section (3) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of clause (b) of sub-section (3) and that sub-section (1)(c)(ii) of section 13 will be attracted in the case of the assessee." 11. Assailing the view taken by the Tribunal, the learned counsel for assessee contended that since the provisions of section 13(3)(d) were not particularly taken into consideration, the view taken is not binding for the other case. A substantial difference, it was contended, did arise as unless an impracticable situation is upheld it could not be said that a trust could have relatives. Only the trustees were possible to have relatives as envisaged by section 13(3)(d). It was also vehemently submitted that the mandate of section 13(1)(c)(ii) clearly postulates that the income should be used or applied for the benefit of any person, patent thrust made for individual or individuals. To lend support to this plea our attention was also invited to the provisions of section 40(c) where too the term " person " has been applied in relation to an expenditure which resulted directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person as a substantial interest in the company or to a relative of the director or of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " it was contended that as per Black 4th Editi on page 200, it meant no advantage or profit to the donee-trustees. Therefore, when the donation was made by one charitable trust to another, by its very nature it does not result into in an advantage to any one. Further, benefit envisaged by section 13 should not be abstract or notional. In this connection reliance was placed on a decision of the Madras High Court in Manickavasagam Chettiar v. CIT [1964] 53 ITR 292 wherein it has been held that the characteristic of the benefit is that it is real and not notional, concrete and not abstract, certain and not conjectural. 14. As against this the learned Departmental Representative also made several submissions to say that the impugned order did not call for any interference. He, inter alia, contended that the interpretation of the term " person " appearing in section 40(c) of the Act relates back to the definition of " person who has a substantial interest in the company ", as appearing in sub-section (32) of section 2 and not sub-section (31) of section 2 of the Act and had, therefore, no direct bearing on the issue ; that for the purpose of section 54 relating to the computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if one particular clause applies to a given statute, we may not go to the other clause but if a case falls within the ambit of two clauses simultaneously, a harmonious construction by a Judicial/quasi-judicial authority is called for. We shall now go to the specific submission made by the learned Departmental Representative that the case of the assessee falls within clause (b) of section 13(3) of the Act. This clause, as has been reproduced in para 6 aforesaid, says that among the various persons referred to in clause (c) of sub-section (1) and sub-section (2), one of them is any person who has made a substantial contribution to the trust or institution, which has been put exceeding Rs. 25,000 calculated up to the end of the relevant previous year. Patently the case of assessee falls within this clause as HSMT made the donation of Rs. 3,50,000 to the assesseetrust yet, to consider as to what was really meant by the term " person " appearing in sub-section (3) of section 13, in our opinion, assessee can legitimately hop to the context of the same term used in this very sub-section exclusively and this is what has been attempted to be done by the assessee. 19. In the result, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial contribution to the trust, clause (c) speaks of a member of the family where the author or founder is it member of the HUF, clause (cc) speaks of trustee of the trust and clause (d) speaks of a relation of such author, founder, person, member, trustee or manager. In view of these provisions, we cannot visualize charitable trust ' as a ' person ' contemplated within the various clauses of sub-section (3) of section 13 for the simple reason that there cannot be a relative of a charitable trust. At best, there can be relatives of trustees of such trust. Therefore, the expression " used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) ", which is used in sub-clause (ii) of clause (c) of section 13(1), has to be interpreted to mean that the expression refers to a person who is a human-being and not a person as it is defined under the Income-tax Act. Now, the word ' benefit ' has to be interpreted as an advantage, profit, fruit or privilege and, in the context in which it is used in the present section it has to be treated as an advantage of a pecuniary nature. Such advantage does not seem to have been derived by the Trust to whom t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 555 at page 591 of the report. Therefore, the moot question in the present case is whether the donation given by the appellant to Shree Hazarimal Somani Charity Trust can be said to have been used or applied for the benefit of any person. In our opinion, it has not been so used. Nothing is used in the present case for the benefit of any individual person or for the benefit of Shree Hazarimal Somani Charity Trust itself or its Trustees and it has not been established that any person has received the payment beneficially. There is no evidence of any direct, limited or beneficial enjoyment of the amount donated by any person as such. 23. There are several High Court decisions where the Courts have held, though in a different context, that the term ' person ' has to be considered as an animate being or a human being. For example, in Shrigopal Rameshwardas's case, the Madhya Pradesh High Court held that the exemption under section 54 is available only to a living person and not available to property owned by HUF. Similar view was expressed by the Karnataka High Court in South Kanara Central Co-op. Wholesale Stores v. CIT [1978] 114 ITR 298 where the Karnataka High Court held that se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h trust or institution or any relative of such author, founder or person. Under one of the proposed, amendments, all charitable or religious trusts or institutions created or established after the 31st March, 1962, will be denied the benefit of exemption from income-tax if any part of their income or property enures or is, during the previous year, applied, directly or indirectly, for the benefit of the author, founder, substantial contributor or relative aforesaid or for the benefit of any concern in which any such author, founder, substantial contributor or relative has substantial interest. In the case of trusts or institutions created or established before the 1st April, 1962, the exemption from tax will be denied only if their income is applied for the benefit of the author, founder, etc., otherwise than in compliance with a mandatory term of the trust or a mandatory rule governing the institution." These Notes would amply clarify the position that the exemption was to be denied only if the income was applied for the benefit of the author, founder, substantial contributor or relative or for the benefit of any concern in which such author, founder, substantial contributor ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
