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TMI Blog1991 (5) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... the said action of the ITO. Thereafter, the assessee had come up in appeal before the Tribunal and the Tribunal in its consolidated order dt. 30th Sept., 1978 in ITA Nos. 3306,3307, 3376 and 3378/Bom/1977-78, held that since the provisions of s.13(2)(h) of the Act were not applicable in the assessee 's casee, the IT authorities were not justified in not granting exemption to the assessee under s. II of the Act. In his order dt. 7th Sept., 1981, the ITO gave effect to the order of the Tribunal and determined the refund amounting to Rs. 4,20,321 to the assessee. It may be mentioned that the Revenue has not accepted the said order of the Tribunal and has preferred a reference, to the Hon'ble Bombay High Court, which was granted by the Tribunal and is pending for disposal in the Hon'ble High Court. 4. On the aforesaid facts, in their meeting held on 29th March, 1982 the Board of Trustees of the assessee-trust decided the treatment to be accorded to the refund of Rs. 4,20,321 in the following manner: "Mr. F.P. Sarkari informed the Board that the balance in Home Saving Account of Godrej Trust is Rs. 4,70,131.62 which consists of income-tax refund of Rs. 4,20,321 for asst. yrs. 1972- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,20,321 is to be considered as the income of the Trust, the same has been, by a Resolution passed by the Trustees on 29th March, 1982 set apart for application by 31st Dec., 1991 to— (a) Payment of income-tax if the same becomes payable and (b) in the event of such liability not arising, by way of donations to hospital for founding or starting a ward or beds in the hospital or for grant to educational institutions". 6. The ITO framed the assessment under s. 143(3) r/w s. 11 of the Act, determining the surplus at "Nil" in the following manner: "In the note appended to the explanation of income, the assessee has stated that the refund of Rs. 4,20,321 received from the Dept., for the asst. yrs. 1972-73 and 1973-74 is not treated as income as there is no (sic) of spending the amount as a reference application preferred by the Dept., is pending in the High Court. No such restrictions were imposed in any of the record for those years. The refund referred to above is part of tax deducted at source which was not considered as income in those years. Hence, the said am of Rs. 4,20,321 is included in the income of the assessee. Alternatively the assessee has requested that should the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of its balance sheet wherein the refund amount has been shown in the liability side under the head "Suspense Account". It was further submitted that for the purposes of the applicability of the provisions of s. 11 of the Act, the income of the assessee-trust should be determined on commercial principles and should not be computed as provided under the Act. Reliance was placed on the decision of the Hon'ble Madras High Court in the case of CIT vs. Rao Bhadur Calavala Cannan Chetty Charities (1982) 135 ITR 485 (Mad) and of the Hon'ble Andhra Pradesh High Court in the case of CIT vs. Trustees of H.E.H. the Nizam's Supplemental Religious Endowment Trust (1981) 127 ITR 378 (AP). Reliance was also placed on the order of the Tribunal in the assessee's own case in ITA Nos. 1447 & 1448/Bom/83 in respect of the asst. yrs. 1974-75 and 1975-76. It was, therefore, contended that Rs. 4,20,321 should not be considered as available for application on the objects of the Trust. The AAC rejected the assessee's contention in the following manner:"The appellant is right in stating that while computing the income under s. 11 of the IT Act, it is to be computed on commercial basis. The learned ITAT has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and strongly urged that unless and until the assessee had a right to utilise the amount of refund, the refund granted by the Revenue has not become its "income". In this connection, he pointed out that even though the assessee has won its appeals before the Tribunal for the asst. yrs. 1972-73 and 1973-74, the Revenue has not accepted the decision of the Tribunal and the matter is still pending in a reference before the Hon'ble High Court. In case the Hon'ble High Court decided the reference in favour of the Revenue and against the assessee, the assessee will have to pay back the refunded amount to the Revenue. Relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Hindustan Housing & Land Development Trust (1986) 58 CTR (SC) 179 : (1986) 161 ITR 524 (SC), he further submitted that when the right to receive the amount of refund is in dispute, the amount of refund cannot be treated as the income available for application. In other words, he wanted to impress upon the Tribunal that since the assessee has no right to utilise the amount of refund, the same has not acquired the character of "income" for the purposes of the application of the relevant provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income-tax which was originally treated as application of income. In any event, according to the learned representative for the department, the likelihood of repayment of the amount of refund depending on the decision of the Hon'ble High Court in a reference pending before them is a contingent liability which cannot be allowed in determining the commercial profits of the assessee. For this proposition, he relied on the decision of the Hon'ble Supreme Court in the case of Indian Molasses Co. (P) Ltd. vs. CIT (1959) 37 ITR 66 (SC). He, therefore, urged that we should uphold the action of the IT authorities. 10. The learned counsel for the assessee in his reply submitted that the decision in the case of Indian Molasses Co (P) Ltd. has no application to the facts and circumstances obtaining in the instant case, for in the reported case the issue was whether the assessee was entitled to deduction of a liability which was contingent in nature. However, in the instant case it is the assessee's contention that the amount of refund granted by the Revenue was not its income available for application on objects of the Trust. 11. We have carefully considered the rival submissions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, and, therefore, the ratio laid down therein cannot have any application to the facts and circumstances obtaining in the instant case. Coming to the submissions made on behalf of the assessee, that the reference pending in the Hon'ble High Court is not a commercial litigation and, therefore, the trustees would be personally liable to make good the amount of refund, in the event, the Hon'ble High Court decide the reference against the assessee if in the meanwhile, the assessee utilises the amount of refund for charitable purposes, we need only note that this possibility does not change the position in law. Further, we are not impressed by the submissions made on behalf of the assessee that the trustees would not only be personally liable to make good the amount of refund, but they would also be liable to pay interest thereon. All these eventualities cannot, in our opinion, change the character of the amount of refund as income available for application. We would, therefore, hold that the amount of refund has to be treated as the income available for application. 12. This brings us to the alternative submission that unequivocally expressed intention of paying this sum as ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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