Delhi High Court

India Habitat Centre vs Joint Director Of It (Exemption) on 16 September, 2003

Equivalent citations: (2004) 87 TTJ Del 76

ORDER

R.M. Mehta, V.P.

All these appeals are directed against separate orders passed by the Director of IT (Exemp.) (hereinafter referred to as DI) under section 263 of the Income Tax Act, 1961. The assessment years involved are 1990-91, 1991-92, 1995-96 and 1996-97. A perusal of the separate orders passed under section 263 shows that these are identically worded and it is an accepted fact between the parties that in the assessment orders passed by the assessing officer under section 143(3) it was held that the assessed had carried out charitable activities of general public utility during the assessment years under consideration and in view of the aforesaid, the income was to be treated as exempt under section 11 of the Income Tax Act, 1961 (hereinafter referred to as the Act).

2. It is apparent that the facts insofar as the four assessment years under appeal are concerned, are identical and for purposes of disposing of the present appeals, it would suffice in case the facts pertaining to assessment year 1990-91 are discussed at length and wherever necessary the facts for the remaining assessment years could be adverted to, but the decision of the Tribunal in assessment year 1990-91 would apply to the remaining assessment years as well. On the basis of these observations, we now proceed to detail relevant facts for assessment year 1990-91 as under.

3. The assessed filed return, declaring income at nil and this was initially processed under section 143(1) (a). Subsequently, notice under section 148 was issued and in the assessment proceedings pursuant thereto the assessed was asked to give a detailed explanation about the charitable activities undertaken during the relevant previous year as also to show how the activities of the centre were covered under section 11 of the Act. The assessed was also asked to explain as to how the various organisations which were also to be housed in the premises allotted to the centre by the Government had contributed to the construction of the building/centre and whether these were covered by the provisions of section 13(1) (d) read with section 13(3) of the Act. The assessed was also asked by the assessing officer to show-cause as to why principles laid down by the Tribunal in the judgment reported in Visveswaraya Industrial Research Development Centre v. Dy. CIT (1997) 59 ITD 156 (Mumbai) be not applied to it.

4. In response to the queries raised by the assessing officer the assessed submitted that the centre had been set up under the sponsorship of Ministry of Urban Development & Employment in 1989 to provide a physical environment to the different institutions to carry out their activities. Further the centre was to be run by a governing council and further there was to be an interlinking between the various institution members for the purpose of building up and carrying forward programmes pertaining to the "Habitat". Further, according to the assessed, the centre was in its infancy even though the superstructure was in an advanced stage of construction and development, but it would still take sometime before the activities of the centre came into full steam.

5. Coming to the stand of the revenue about the contravention of the provisions of section 13(1) (d) read with section 13(3), the assessed submitted that the money received from the various institutions were for the purpose of acquiring ownership by way of sub-lease of the proportionate part of the land at the Institutional Area, Lodhi Road, New Delhi, near to the IHC, which was brought into existence to create a centre for excellence where the participating institutions could be located and to facilitate their interconnection, conference, library, etc., as also other facilities which were to be created. The further explanation was that the amount received from these organisations had been fully utilised in the construction of the superstructure and that such organisations had obtained the proportionate area of the superstructure determined by a system of allotment. Further, according to the assessed, the flat/space had not been sold to the institutions at a profit, but had been given to them at cost and the distribution had been made amongst the participating institutions. According to the assessed, there was no contribution as such made by the organisations to the centre since whatever had been received from them was for the purpose of obtaining their contribution to the cost of the land as also to the cost of the structure itself.

6. The assessed further submitted at the assessment stage that the decision of the Tribunal in (1997) 59 ITD 156 (Mumbai) (supra) was not applicable to the facts of the case and the further submissions were to the effect that no amount had been received either towards corpus or as donation and the sums defrayed by the other institutions had been utilised in putting up the superstructure. It was explained to the assessing officer that each institution, which had defrayed money to the centre had been given legal ownership by way of special lease of the land and consequentially the space. The further submission was to the effect that charitable activities of general public utility had been carried out during the relevant previous year.

7. Considering the aforesaid facts as also applying thereto the relevant provisions of the Act, the assessing officer proceeded to exempt the income under section 11 of the Act and assess the same at Rs. Nil.

8. The DI on subsequent perusal of the record opined that the assessment order passed by the assessing officer was erroneous insofar as the same was prejudicial to the interest of revenue since the benefit of exemption under section 11 had been wrongly given. He accordingly issued a notice under section 263(1) and in response thereto the assesseds representative attended along with the counsel making the following submissions:

(i) The provisions of section 263 were not applicable to the facts and circumstances of the case since the assessing officer in the course of the assessment proceedings had examined relevant facts as also the material to arrive at the conclusion that he did. That the conclusion arrived at could not be disturbed under section 263;

(ii) The aims and objects of the assessed fell under the team "advancement of any other object of general public utility" stipulated by section 2(15) of the Act and the assessed, therefore, was entitled to the benefit of exemption under section 11;

(iii) The building activity carried out by the assessed did not constitute a business operation since it was incidental to the carrying out of the primary objects of the institution. That the construction of the building was essential to accomplish the main objective and in the subsequent assessment years the work was completed and the space allotted in terms of the letter of allotment given by the Ministry of Urban Development; and ;

(iv) The provisions of section 13(3) were not applicable to the facts of the case since no benefit had been given by the assessed to the category of persons mentioned in the said section.

9. On the basis of the aforesaid it was submitted that there had been no violation of the provisions of sections 11 and 12 as also section 13(1) (d) read with section 13(3). The aforesaid submissions, however, did not find favor with the CIT, who in the ultimate analysis, held that the action of the assessing officer in allowing the benefit of exemption under sections 11 and 12 was erroneous. According to him, the assessing officer failed to marshal full facts of the case as also to analyze the material that was available on record. He accordingly proceeded to set aside the assessment with the directions that the same shall be framed afresh by the assessing officer in accordance with the provisions of law.

10. A perusal of paras 7 to 13 of the order of the CIT shows that it was not in dispute insofar as the department was concerned that the aims and objects as illustrated in the memorandum of association fell within the "charitable purposes" as defined in section 2(15). It was also noted as a fact by the CIT that the assessed was registered under s, 12A(a) of the Act and that habitat related activities qualified for exemption under section 11. The view of the CIT was that for purposes of availing the benefit of section I I the assessed necessarily had to fulfill the prescribed conditions so as not to be hit by the violations prescribed in section 13 and further, according to the CIT, the assessed during the relevant previous year under consideration as also in some subsequent assessment years had not engaged in a single activity that was habitat related. In relying on the judgment of the Hon'ble Delhi High Court in the case of Kirti Chand Tara Wati Charitable Trust v. Director of IT (Exemption) & Ors. (1999) 232 ITR 11 (Del), the CIT opined that one was not to remain confined to the objects of the trust as set out in the deed of declaration and the real purpose of establishment of a trust had to be fou*nd out and spelled out.

11. In proceeding further to the order of the CIT under section 263, we note the following main grounds and reasons for forming the view that the order passed by the assessing officer was erroneous insofar as it was prejudicial to the interest of revenue and setting aside the same under section 263:

(i) That the assessed had collected huge funds from member organisations towards'the proportionate cost of land and the construction cost and in the books of accounts these had been shown as contributions. That such member organisations fell in the category of substantial contributors in terms of section 13(3) of the Act and since the assessed had allotted space to these organisations at a price far below the market price, the provisions of section 13(1)(c) read with section 13(3)(b) were aITRacted. In view of the aforesaid, exemption under section 11 had been wrongly allowed;

(ii) The assessed had placed large funds in deposits on which substantial interest income had been earned and the interest so earned was passed on to the institutional members in the form of reduced cost of space which resulted in undue benefit to them. This again was a violation of section 13(1)(c);

(iii) That the assessed's case was similar to the case decided by the Mumbai Bench of the Tribunal in (1997) 59 ITD 156 (Mum) (supra) as that assessed had also claimed exemption under section 11 and as a part of its activities had constructed three buildings on the land obtained on long term lease from the Maharashtra Govt. and leased out the space in these buildings receiving thereby substantial amounts. That the view taken by the Tribunal was that the activities of construction could not be said to be for "general public utility"; and

(v) That even after completion of the building and allotment of the space the activities of the assessed did not fall within the purview of section 2(15) inasmuch as during 1998-1999 the assessed started "functioning as a club" having institutional as well as individual members. During the calendar year 1999 the centre held seminars as also a variety of other functions and which had been classified under various heads in its report. That such activities were not habitat related. That the centre was having a bar, dining hall, restaurant, swimming pool as also a library and the main activity of the centre was maintaining and up-keep of the complex as also the various activities noted earlier.

12. As already stated the CIT set aside the assessment order to be framed afresh placing reliance on the judgment of the Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. Addl. CIT & Ors. (1975) 99 ITR 375 (Del) as also the decision of the Hon'ble Calcutta High Court in the case of CIT v. Active Traders (P) Ltd. (1995) 214 ITR 583 (Cal).

13. Before us, the learned counsel for the appellant reiterated the arguments advanced before the CIT taking strong exception to his order under section 263. At the outset, the learned counsel submitted that the assessing officer had dealt with each and every aspect of the matter in an order passed under section 143(3) and there was, therefore, no justification on the part of- the CIT to take a different opinion on the same set of facts. Further, according to the learned counsel, the CIT had not conducted any enquiries nor had he given any specific findings while setting aside the assessment order.

14. With reference to the facts of the case the learned counsel, first of all, referred to the memorandum of association of the centre and a copy of which was placed at pp. 2 to 4 of the paper book. It was emphasised by the learned counsel that there was a distinction to be drawn between the objects of the centre and the powers for achieving the said objects. With reference to pp. 2 and 3 of the paper book, the learned counsel stated that items (a) to (j) were the powers to be exercised for attaining such objects. The next reference by the learned counsel was to pp. 19 to 23 of the paper book and which was a copy of the land allotment letter received from the L&DO, Ministry of Urban Development. A specific reference was made to clauses (11) to (IV), (VI) to (XI) and (XVII) & (xviii) to stress on the following:

(i) The assessed did not pay a single paisa either for the land or the construction of the superstructure since this was paid by other institutions, which were also allotted space in the premises; and

(ii) The amounts paid by the other institutions were entered in the assessed's books of accounts as "contributions" and thereafter paid out towards the cost of land as also on the construction of the superstructure.

15. The learned counsel thereafter referred to p. 70 onwards of the paper book up to p. 70(20) and which was the copy of the annual report for the years 1989 and 1990. In referring to p. 70(11) the submission was that this was the income and expenditure account for the year ended 31-3-1990 and what was shown therein were receipts on account of interest from Bank s and interest from HUDCO along with nominal miscellaneous receipts aggregating Rs. 15,91,000 and insofar as the expenditure was concerned, this was the day-today expenditure of the staff and other connected items for running the office of the centre. Coming thereafter to p. 70(15) the learned counsel pointed out that this represented the building activities depicting payments to contractors and payments to consultants. The next reference was to page No. 70(18) which according to the learned counsel pertained to the contributions/receipts from the various institutions which had been allotted space in the centre. It was highlighted by the learned counsel that such amounts were received towards the building construction.

16. The next reference by the learned counsel was to pp. 65 to 68 of the paper book and which, according to him, contained the balance sheets of certain institutions located in the premises and wherein the payment made to India Habitat Centre (hereinafter referred to as IHC) had been reflected as investment in immovable property/land and building and depicted as fixed assets. AT page No. 65 item No. 5 was referred to and correspondingly at p. 66 item 4 was referred to and similarly land and building at pp. 67 and 68. The further reference was to p. 69 of the paper book and which, according to the learned counsel, contained details of the amounts received from the various institutions for the period 1987 to 1998 and correspondingly on the same page was depicted the, utilisation of the amounts so received. The stand of the learned counsel was that the role of the assessed was more in the nature of a supervisor of the buildings under construction in the "campus" of the IHC and nothing more.

17. The learned counsel at this stage referred to certain orders passed by the assessing officer as also the Commissioner (Appeals) and the Tribunal in the assessed's own case for the years other than those under consideration in the present appeals. The first reference was to the assessment order for assessment year 1988-89 placed at pp. 89 and 90 and wherein, according to the learned counsel, the assessing officer had taken the view that the activities of the assessed were not charitable within the meaning of section 2(15) of the Act since it was engaged only in the construction activities for various institutions. It was emphasised by the learned counsel that on further appeal against the said assessment order the Dy. Commissioner (Appeals) had taken the view that the assessed was a charitable institution within the meaning of section 2(15). It was emphasised by the learned counsel that a second appeal was filed by the department against the order of the Dy. Commissioner (Appeals) and the Tribunal had been pleased to dismiss the same vide copy of the order placed at pp. 94 and 95. Going further the learned counsel stated that the reference application filed under section 256(1) against the order of the Tribunal by the revenue was also rejected as per the copy of the order placed at pp. 96 and 97 of the paper book.

18. The learned counsel thereafter took us to pp. 47 and 48 of the paper book which was the copy of a communication addressed by the Ministry of Urban Development to IHC indicating the space earmarked for various institutions. For the same purpose, a reference was also made to pp. 51 and 52 and the next reference was to pp. 53 and 54, which was a copy of a letter addressed by the assessed to one of the institutions, who had been allocated space in IHC. It was emphasised by the learned counsel vis-a-vis the aforesaid communication that the institution to whom the space had been so allocated was to pay the proportionate amount towards total cost which included cost of land as also common facilities, etc. The learned counsel also referred to the same communication for emphasising the manner in which the cost of the structure as also the rates of land were to be charged/paid.

19. The next reference was to p. 70(9) which was the copy of the balance sheet of the centre as at 31-3-1990 and the learned counsel sought to point out that under the column of "Assets", building project in progress had been shown at Rs. 12.41 crores and correspondingly the amounts received from the institution members had been shown under the head "Liabilities" at Rs. 14.74 crores. The plea, in other words, was that the amounts received from the institution members were not to be treated as "contributions" in the same manner as had been done by the CIT in his order under section 263 and which in fact represented the amounts received from the various institutions in accordance with the scheme of allotment approved by the Ministry of Urban Development vis-a-vis the copies of various letters and other communications already referred to on the paper book. By reference to the sums paid, the learned counsel submitted that there was no "corpus" fund depicted in the assessed's balance sheet and all sums received from the allottee institutions were treated as liabilities. For the same very submissions, a reference was made to p. 73(23) which was the copy of the balance sheet as at 31-3-1997.

20. We may mention at this stage that during the course of the hearing of the present appeals the Bench had raised certain queries about the manner in which the allotments to the various institutions were made as also the manner in which these institutions 'depicted in their balance sheets the amounts disbursed to the IHC and these papers thereafter were placed on our record in the form of a supplementary paper book running from pp. 113 to 186. A copy was also provided to the learned departmental Representative, who was asked to offer his comments/arguments after the assessed's counsel had addressed the Bench. It is, however, emphasised that the pages which were relied upon by the assessed's counsel were from 161 to 186 and it was in fact the submission of the learned counsel that these were not fresh evidence, but had only been placed on record to support the stand already taken vis-a-vis the status of the institutions, who were located in the premises of the centre as also the question of ascertaining the nature of the amounts paid by them to the assessed.

21. With reference to the aforesaid documents, we may mention that pp. 161 to 178 are the copies of the communications addressed by the assessed to various institutions to whom space had been allotted and we, in fact, have discussed similar communications in the earlier part of the present order and nothing more need be said. At p. 179 is the balance sheet of one of the institutions and similar balance sheets in the cases of other institutions and these would be our comments in respect of pp. 180 to 182 as well and at pp. 183 to 186 some of the institutions have certified that the amounts paid by them to the IHC towards the office space are reflected as fixed assets in their balance sheets. It is, therefore, quite apparent from a perusal of the aforesaid documents that these are strictly speaking not in the nature of additional evidence and these are required to be examined and considered along with the other evidence to which a reference was made by the parties during the course of the hearing of the present appeals.

22. In conclusion, the learned counsel urged that since the order passed by the assessing officer had taken into account the relevant facts as also the position of law, the action of the CIT in acting under section 263 was not proper in law inasmuch as the order of the assessing officer was neither erroneous nor was it prejudicial to the interest of revenue. In support of the arguments advanced and more so in support of the order of the assessing officer, the learned counsel placed reliance on the following judgments:

(i) Thiagarajar Charities v. Addl. CIT & Anr. (1997) 225 ITR 10 10 (SC) ;

(ii) CIT v. Podar Cement (P) Ltd. Etc. (1997) 226 ITR 625 (SC) ;

(iii) State of Madras v. Gannon Dunkerley & Co. (Madras Ltd.) 9 STC 353; and

(iv) CIT v. Krupp Industries India Ltd. (2000) 243 ITR 6 (SC) -

23. The learned counsel sought to distinguish 1975 CTR (Del) 61 : (1975) 99 ITR 375 (supra) and (1993) 115 CTR (Cal) 69 : (1995) 214 ITR 583 (Cal) (supra) relied upon by the CIT that in these two cases no enquiries had been made by the assessing officer whereas in the present cases in appeal before the Tribunal the assessing officer after due examination of the facts and application of mind passed order under section 143(3) taking the view that. he did. The learned counsel also sought to distinguish the judgment of the Mumbai Bench of the Tribunal in (1997) 59 ITD 156 (Mum) (supra) contending that the facts were entirely different and not relevant to the facts prevailing in the present appeals.

24. The learned Departmental Representative, on the other hand, supported the order passed by the CIT under section .263 and subsequent arguments advanced by him were a reiteration of the reasons recorded by the CIT in acting under the said section. On the powers of the CIT to act under section 263, the learned Departmental Representative placed reliance on Venkata Krishna Rice Co. v. CIT (1987) 163 ITR 129 (Mad) and CIT v. Amritlal Bhogilal & Co. (1958) 34 ITR 130 (SC). By referring to p. 60 of the assessed's paper book the stand of the learned departmental Representative was that land had been allotted to the centre by the Govt., i.e., the centre was the lessee and the other institutions to whom space had been allotted were sub-lessee and by constructing buildings for others the assessed was violating the provisions of sections 11, 12 and 13(1) (d). Further, according to the learned Departmental Representative, the subsequent activities of the assessed in the years other than those under appeal showed that it had lost the character of a charitable institution and On all the aforesaid grounds it was not entitled to the benefit of ss . 11 and 12, In support of the aforesaid arguments and more so in support of the order of the CIT under section 263 the learned Departmental Representative placed further reliance on the following decisions:

(i) H.H. Maharaja Pawer Dewas v. CIT (1982) 138 ITR 518 (MP);

(ii) CIT v. R.K. Metal Works (1978) 112 ITR 445 (P&H);

(iii) CIT v. Smt Minalben S. Parikh (1995) 79 Taxinan 184 (Guj);

(iv) Yogiraj Charity Trust v. CIT (1976) 103 ITR 777 (SC) ;

(v) Dharmaposhanam Co. v. CIT (1978) 114 ITR 463 (SC) ; and

(vi) Trustees of H.E.H. The Nizam's Pilgrimage Money Trust v. CWT/CIT (1987) 65 CTR (AP) 290.

25. In reply, the learned counsel for the assessed, at the outset, submitted that the judgment in 163 ITR 129 (supra) relied upon by the learned Departmental Representative, stood disproved by the judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC). By referring to p. 21 clause IX and p. 20 of the assessed's paper book the submission of the learned counsel was that even common areas were paid for by the various institutions. In conclusion, the learned counsel sought to distinguish the various decisions relied upon by the learned Departmental Representative as according to him these had been delivered on their own facts and were not applicable to the facts of the assessed's case.

26. Before we proceed to express our opinion on the arguments advanced by the parties, we would like to mention that during the course of the hearing of the present appeals, we had raised a query as to the manner in which interest was being charged from the various institutions for the period of delay on their. part in paying the sums "called" for vis-a-vis the space allocated to them and the cost of construction of the superstructure thereon. As directed by the Bench, the assessed has placed on record a written note and which appears at pp. 191 and 192 of the paper book.

27. We have examined the rival contentions and have also perused the orders passed by the tax authorities. The material on record to which our attention was invited during the course of the hearing as also the decisions cited at the bar have also been taken into account. At the outset, we would refer to para 2 of the order of the CIT for assessment year 1990-91, which summarises the factual aspect of the case as follows:

"The Ministry of Urban Dev., Govt. of India allotted land to the centre for construction of building. No lease deed has so far been executed in favor of the centre. However, in terms of the allotment letter dated 2-5-1988, the centre was required to construct a composite building to provide for space and allot the same to various institutions engaged in "Habitat" concept as well as common areas and facilities to be shared by those institutions. The allotment of space to the institutions was subject to approval from the ministry in accordance with clause (vii) of the allotment letter. The centre was to provide relevant data along with the recommendations approved by the governing body in respect of allotment of space to those institutions. In terms of allotment, the centre was authorised to recover the proportionate cost of land, building and indivisible share in the common areas and facilities from the allottees. The centre is also required to execute sub-lease with the allottees of space in the form of tripartite agreement. However, so far the agreement of sub-lease has neither been executed nor indeed finalised as yet."

28. We now refer to para 7 of the order of the CIT wherein the following facts are recorded:

(i) That the aims and objects as illustrated in the memorandum of association fall within the term "charitable purposes" as defined in section 2(15);

(ii) The assessed is registered under section 12A(a) of the Income Tax Act, 1961; and

(iii) That Habitat related activities qualify for exemption under section 11.

29. In reverting to para 2 of the order of the CIT already reproduced earlier, the main activity of the IHC is to construct a building to provide space to various institutions engaged in the Habitat concept and such allotment of space is subject to the Govt. approval. The other thing which emerges is that the centre is authorised to recover the proportionate cost of land, building and indivisible share in the common areas and facilities from the allottees. In the light of the aforesaid, one really cannot appreciate the stand of the revenue that the amounts received from the allottees towards the proportionate cost of land and construction represented income as detailed in section 13 of the Income Tax Act, 1961 or that the allottees would be treated as falling in the category of substantial contributors in terms of S. 13(3) of the Income Tax Act. To this is connected the other stand in the order of the CIT, namely, the allotment of space at a price, which was far below the market price and, therefore, attracting the provisions of section 13(1) (c) read with section 13(3)(b). It is apparent from perusal of the material on record that the allotment of space was subject to the approval of the Ministry of Urban Development and this pre-supposes that the rate at which the space is to be allotted also has such approval. Even if the latter not be so, then as per the communications addressed by the assessed to the various allottees the development and construction cost was to be met on self financing basis whereby each institution was to pay the proportionate amount towards the total cost including the cost of land and the common facilities. By the same communication it was intimated that calls would be made on the allottee institutions as per the decision taken by the governing council of the centre from time to time and insofar as the public sector undertakings were concerned, the land cost was to be worked out on the basis of commercial rates of land as would be decided by the L&DO of the Ministry of Urban Development.

30. We have perused the memorandum of association, a copy thereof being placed on the paper book and do find that under "aims and objects" the centre is required to develop an integrated physical environment in which various professions and institutions dealing with different facts of habitat and habitat related environmental issues would function and in addition to such activities, the centre was required to construct a building and related facilities on behalf of the members of the centre. In view of the aforesaid, one really cannot appreciate the stand of the revenue that the amounts received from the allottees represented income/contributions within the meaning of section 13 since it is quite apparent that the assessed was to construct the building and allot space to various institutions and it could, at the best be treated as a custodian of the funds of the allottees as also the supervisor of the construction activities. In our opinion, therefore, the view expressed by the CIT in para 8 of his order is not the correct one both on facts and in law. No material has been 4aced on record by the CIT to justify the observation about the space being allotted at a price below the market price and even going by the assumption that it is so, then allotment made under the directions and supervision of the Govt. cannot be treated to be a violation of the provisions of section 13 since the assessed was bound to comply with Govt. directives as contained in the letter of allotment of the land as also the subsequent allotment of space to member institutions and more so in the background under which the IHC came into existence viz. the memorandum of association and the rules and regulations. It may not be out of place to mention that the "governing council" consisted of high Govt. functionaries as also heads of non-Govt. reputed institutions.

31. Much has been made of the fact that during the relevant assessment years as also in subsequent assessment years the assessed had not engaged itself in a single activity that was related to the "habitat". As far as the years under appeal are concerned, it must be appreciated that the assessed was engaged in the construction of the superstructure as also the allotment of space to various institution members and such activities, in our opinion, are related to the concept of habitat since the memorandum of association as also the terms of allotment of land cast a liability on the assessed to construct the building and thereafter allot space to other institutions and all these activities taken together are important steps in participating in the development of an integrated physical environment in which the assessed along with other institutions can carry on/participate in habitat related activities. As regards the assessment years other than the one under appeal, we in the present appeals, are not concerned with what happened in 1997 or 1998 onwards since those aspects of the matter vis-a-vis such subsequent assessment years can be taken care of in those assessment years as and when they arise. In other words, the CIT, in our opinion, should have confined himself to the facts as prevailing in the assessment years under appeal rather than to be guided by the activities which took place during 1998-99 and onwards.

32. We now come to para 9 of the order of the CIT wherein he has observed that the assessed had put large funds on deposit on which substantial interest income had been earned and the interest so earned was passed on to the institutional members in the form of reduced cost of space which in turn resulted in undue benefit to the "substantial contributors". This, according to the CIT, was violation of the provisions of section 13(1) (c). We have already observed in the earlier part of the order that the institutional members to whom space had been allotted are not to be treated as "substantial contributors" in terms of section 13(3) and insofar as the interest income is concerned, we have already observed that the institutional members are to pay on a proportionate basis for the cost of land and the space and the entire construction is on self-financing basis and the cost of landtand the space is subject to Govt. approval. Under these circumstances, we do not find anything -adverse in the action of the assessed to allow the benefit of the interest income to the institutional members in working out the cost of space since apparently. it is the money of these institutional members which has been placed in deposits tin the time it is required and during this intervening period it has earned interest. In other words, there is no violation of provisions of section 13(1) (c).

33. In para 13 of his order for assessment year 1990-91 the CIT has relied upon the judgment of the Hon'ble Delhi High Court in 1975 CTR (Del) 61 : (1975) 99 ITR 375 (Del) (supra) as also that of the Hon'ble Calcutta High Court in (1993) 115 CTR. (Cal) 69 : (1995) 214 ITR 583 (Cal) (supra) for the proposition that action under section 263 is warranted in a situation where there has been a failure on the part of the assessing officer to make necessary enquiries. These decisions, in our opinion, would not be applicable to the facts of the present case where a perusal of the orders passed by the assessing officer shows that detailed enquiries have been made before opining that the income of the assessed is exempt under section 11. An instant reference to the assessment order for assessment year 1990-91 shows that relevant facts of the case have been set out in detail and the case law discussed more specifically (1997) 59 ITD 156 (Mumbai) (supra) which has also been relied upon by the CIT in his order under section 263. According to the assessing officer the judgment of the Mumbai Bench of the Tribunal (supra.) is not applicable and we now ourselvers proceed to examine the facts of the case before the Mumbai Bench of the Tribunal. The assessed in that case was a company registered under section 25 of the Companies Act, 1956 and its main object was. to organise, sponsor, promote, establish or conduct scientific research in any area or field. It was granted approval under section 35(1) (ii) which was not allowed after 31-3-1981 by the prescribed authority. The company had taken land on long-term lease from the Maharashtra Govt. and had constructed three buildings, viz. World Trade Centre, Commercial Centre and IDBI Centre on the said land. In order to raise funds for construction the assessed leased out space in these buildings for a period of 60 years and collected: (i) basic rent; (ii) common outgoing rent; and (iii) car park rent in advance. In addition the sub-lessees were permitted to transfer lease to another for a large sum by giving transfer fee to the assessed- company. Activities pertaining to the construction of the centres, building infrastructure for various services connected with building, like airconditioners, common through fares, etc. were carried out in an organized manner. No attempt was made by the company to build infrastructure necessary for carrying out its primary object of scientific research.

34. The assessed filed returns showing loss and claimed exemption under section 11. The assessing officer denied exemption on the ground that the construction activities were carried out on a commercial level and which did not make it a charitable purpose. The primary basic rent received in advance was treated as salami and assessed as business income after deducting the cost of construction. Additional rent received by the assessed for allowing transfer of lease hold rights was also treated as business income. On the guestion whether activity of construction of centres could be held to be for general public utility, the Tribunal took a view against the assessed and in favor of the revenue. In discussing the matter at length, the Tribunal dealt with the activities carried out in the three buildings, viz., Wo~d Trade Centre, Common Centre and IDBI Centre opining in the ultimate analysis that these had no connection to the research and scientific activities which were the avowed objects for which the centre had been set up. The application of income for construction activity was not held to be an application as warranted by section 11.

35. We really cannot understand as to how the aforesaid judgment of the Mumbai Bench of the Tribunal is applicable to the facts of the assessed's case because the construction of the superstructure by the assessed is an integral part of the objects for which IHC has been created, viz., the promotion of habitat related activities. We have already reproduced para 2 of the order of the CIT for assessment year 1990-91 and wherein all relevant facts, which are not in dispute on both sides have been adverted to.

36. Another decision relied upon by the CIT in his order under section 263 is that of the Hon'ble Delhi High Court in the case of Kirti Chand Tara Wad Charitable Trust (supra). This decision, in our opinion, is also not applicable to the facts of the assessed's case. The assessed in that case had applied to the DI (Exemption) for renewal of the recognition granted to it under section 80G, but which came to be rejected primarily on the ground that the assessed was not in fact carrying on activities of a charitable nature although the objects as set out by the trust deed were charitable in nature. Their Lordships took the view that the approval was not to be granted merely by looking at the instrument creating the trust and the real purpose of the trust as distinguished from the ostensible purpose was to be found. It was noted as a fact that the donations instead of being spent on charity were being utilised for making investments to earn income thereon and such returns were utilised for religious purposes. The assessed in the present case before us has not departed from the aims and objects as set out in the memorandum of association and we need to repeat once again that acquisition of land and construction of the building on behalf of the member institutions for purposes of carrying on habitat related activities was an integral part of the aims and objects of the centre.

37. Coming to some of the other decisions relied upon by the learned Departmental Representative on behalf of the revenue (1978) 112 ITR 445 (P&H) (supra), (1982) 138 ITR 518 (MP) (supra) are delivered on their own facts and these are, therefore, not found to be applicable to the facts of the assessed's case where the assessing officer himself has made detailed enquiries before coming to the conclusion that he did. The same could be said of the judgment reported in 79 Taxman 184 (supra). The learned Departmental Representative placed reliance on 163 ITR 129 (supra), but the learned counsel for the appellant was quick to point out that the said judgment of the Hon'ble Madras High Court had been dis-approved by the Hon'ble Supreme Court in the case of Malabar Industlial Co. Ltd. v. CIT (Supra). This submission of the learned counsel is found to be correct on perusal of p. 88 of the report and we, therefore, say nothing more.

38. Two other judgments were relied upon by the learned Departmental Representative and which we intend to discuss henceforth. The first is the judgment of the Hon'ble Supreme Court in the case of Yogiraj Charity Trust v. CIT (supra). This judgment does not pertain to the powers of the CIT under section 263, but deals with the exemption to be allowed to a charitable institution. We reproduce relevant extracts from p. 777 of the report, as follows:

"If one of the objects of the trust deed is not a religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption from tax under section 4(3)(i) of the Indian Income Tax Act, 1922, is not available to the assessed.

If the primary dominant purpose of a trust is charitable, another object, which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust from being a valid charity.

Where in a trust deed providing for many charitable objects, the trustees were authorised to open and maintain commercial institutions where work at living wages could be provided to the poor and to contribute to commercial, technical or industrial concerns, institutions, associations or bodies imparting any type of training or providing employment to persons; and the deed gave uncontrolled discretion to the trustees to spend the whole of the trust fund on any of the non-charitable objects of the trust;

Held, that the income of the trust was not exempt from tax under section 4(3)(i) of the Indian Income Tax Act, 1922. "

39. It is not the case of the CIT while invoking section 263 that the objects of the centre were partly charitable and partly otherwise. As already observed by us and which is even acknowledged by the CIT in his order the centre was required to construct a building for purposes of providing space to various institutions engaged in the habitat concept and the allotment of the said space was subject to the approval of the Govt. It is accepted as a fact by the CIT in para 11 of his order that it was only during 1998/1999 that the centre engaged itself in activities, which were not Habitat related. The decision of the Hon'ble Supreme Court in the case of Yogiraj Charity Trust v. CIT (supra) would not apply. The other judgment is that of Dharmaposhanam Co. v. CIT (supra) and the facts being entirely different, the same would not apply to the present case. That was also a case in which their Lordships of the Hon'ble Supreme Court were considering charitable as well as non-charitable objects and there being a discretion with the assessed to apply its income for both. The assessed's claim for exemption under section 11 failed before the Hon'ble Supreme Court, but in the case of the present assessed there is no such issue and what is being examined for all the four years under appeal is the activity of the construction of the building as also the connected and intimate activity of allotting space to institution members and as already observed by us and once again reiterated the construction of the building as also the allotment of space is one of the avowed objects of the IHC and the same is subject to approval of the Govt. and the aforesaid activities are carried out and overseen by a governing council consisting of eminent persons including high Govt. functionaries.

40. Before we part with these appeals, we would like to deal with two other aspects and these are:

(i) The note filed during the course of the hearing by the assessed on the charging of interest on calls paid late; and

(ii) An order of the CIT under section 263 for assessment year 1991-92 dated 27-3-1996 placed on the paper book at p. 8.

In other words, there are two orders under section 263 for assessment year 1991-92 since the one passed on 28-3-2000 is presently in appeal.

41. As regards the first point, the matter can be examined in a given year by the department since the CIT in the years under appeal has not made this as an issue for acting under section 263.

42. Coming to the first order of the CIT under section 263 dated 27-3-1996 the learned counsel stated that this had not been appealed against to the Tribunal, but we find from a perusal thereof that the CIT has relied on the assessment order for assessment year 1988-89 observing that the facts are the same for assessment year 1991-92. It is seen from the paper book itself at pp. 91 to 97 that the Dy. Commissioner (Appeals) took the view that for assessment year 1988-89 the IHC was a charitable institution and this was confirmed by the Tribunal and reference application under section 256(1) came to be rejected. Further observations in the order under section 263 only suggest enquiries to be made by the assessing officer on certain lines and which the assessing officer did subsequently leading to a second assessment order and another order under section 263 (presently in appeal).

43. In the final analysis, we opine that the revisionary action of the CIT not being justified either on facts or in law, we quash the orders passed under section 263 for the four assessment years under appeal.

44. In the result, the appeals are allowed.