Delhi High Court
Bharat Krishak Samaj vs Deputy Director Income Tax (E) on 30 August, 2007
Author: M B Lokur
Bench: M B Lokur, S Muralidhar
JUDGMENT
Madan B. Lokur, J.
1. The assessed is aggrieved by an order dated 28th February, 2006 passed by the Income Tax Appellate Tribunal, Delhi Benche "E", New Delhi in ITA No. 831/Del/2002 relevant for the Assessment Year 1997-98.
2. Admit.
3. The following substantial questions of law arise for consideration:
(a) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in law in negating the assessed's claim for accumulation of unspent income in the sum of Rs. 8,16,799/- for the assessment year 1997-98?
(b) Whether the Income Tax Appellate Tribunal was right in holding that the sum of Rs. 2,00,000/- received by the assessed from WAFM for holding a national convention for farmers was not a capital receipt in the hands of the assessed but was its income under Section 2(24)(iia) of the of the Income Tax Act, 1961?
4. Filing of paper books is dispensed with.
5. The assessed is a society registered under the Societies Registration Act, 1860 and is also registered under Section 12A(a) of the Income Tax Act, 1961 ('the Act').
6. The assessed filled in Form No. 10 provided under the Income Tax Rules, 1961 and submitted it to the Assessing Officer along with its resolution dated 30th May, 1997 seeking permission to accumulate unspent funds under Section 11(2) of the Act for the objects of the trust. The Assessing Officer was of the view that the objects for which accumulation was sought were not particularized inasmuch as they covered the entire range of objects of the trust. On this basis, the Assessing Officer denied the benefit of accumulation to the assessed.
7. The assessed then preferred an appeal before the Commissioner of Income Tax (Appeals) but that appeal was dismissed.
8. Aggrieved, the assessed then preferred a further appeal before the Tribunal. During the course of submissions before the Tribunal the assessed relied on decisions rendered by this Court on the interpretation of Section 11(2) of the Act and the question whether the benefit of accumulation should be given to an assessed and under what circumstances.
9. The Tribunal considered one of the decisions rendered by this Court, namely, Director of Income Tax (Exemption) v. Daulat Ram Education Society (2005) 278 ITR 260 (Delhi) and came to the conclusion that this decision did not help the case of the assessed as in that case out of 29 objects of the trust, the assessed therein had specified 8 objects for which accumulation was sought. In the present case the assessed had sought accumulation in respect of all the objects of the trust.
10. We do not think that this is the correct way to distinguish a decision of a superior court. The Tribunal has first to see what is the law laid down and then apply it to the facts of a given case. What has been done by the Tribunal in this case is that it has noted that the facts of the cited case is different and has not discussed the law laid down. This is not the correct approach for determining whether a decision is distinguishable or not.
11. Our attention has been drawn to the Commissioner of Income Tax v. Hotel and Restaurant Association . On a reading of this judgment, we find that it has been held by this Court that it is not necessary for a charitable trust to particularize each and every object for which accumulation is sought. It is enough if the assessed seeks accumulation for the objects of the trust. In the case at hand, the assessed has gone a step further and has specified each and every object for which accumulation is sought.
12. As held in Hotel and Restaurant Association the plurality of purposes for which accumulation is sought is not precluded but whether accumulation should be permitted depends on the precise purpose for which it is intended. This is what the Division Bench had to say in this context:
It is true that specification of certain purpose or purposes is needed for accumulations of the trust's income under Section 11(2) of the Act. At the same time the purpose or purposes to be specified cannot be beyond the objects of the trust. Plurality of the purposes for accumulation is not precluded but it depends on the precise purpose for which the accumulation is intended. In the present case, both the appellate authorities below have recorded a concurrent finding that the income was sought to be accumulated by the assessed to achieve the object for which the assessed was incorporated. It is not the case of the Revenue that any of the objects of the assessed-company were not for charitable purpose. The aforenoted finding by the Tribunal is essentially a finding of fact giving rise to no question of law.
13. In view of the law laid down, it is held that the Tribunal erred in denying the claim of the assessed for accumulation of a sum of Rs. 8,16,799/- as unapplied income in terms of Section 11(2) of the Act. Question (a) is accordingly answered in the negative, in favor of the assessed and against the Revenue.
14. As regards question (b), the contention that is urged by learned Counsel for the assessed is that it had received an amount of Rs. 2,00,000/- from WAFM for the purposes of holding a national convention for farmers. According to the assessed the amount was received by way of advance for holding the convention but the convention could not held in that year and was only held in the subsequent year and the amount of Rs. 2,00,000/- was utilised for that purpose.
15. However, we find from the record of the case that there is nothing to suggest that the amount was actually received by the assessed as an advance as contended. The amount received was for holding a national convention. It is also not clear from the record whether the national convention of farmers was to be held for and on behalf of the donor or was to be utilised for holding a national convention of the assessed.
16. Under the circumstances, in view of the failure of the assessed to explain the receipt of Rs. 2,00,000/- the provisions of Section 2(24)(iia) of the Act would be attracted and the amount must be treated as income of the assessed and not as a capital receipt for the assessment year in question.
17. We answer the second question in the affirmative, in favor of the Revenue and against the assessed.
18. The appeal is disposed of accordingly.
