Delhi High Court

Director Of Income Tax vs Maruti Center For Excellence on 21 May, 2012

Author: Sanjiv Khanna

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                    ITA No. 1335/2010

                                           Reserved on: 3rd May, 2012
%                                      Date of Decision: 21st May, 2012

DIRECTOR OF INCOME TAX                 ....Petitioner
          Through    Ms. Suruchi Aggarwal, Sr. Standing Counsel.

                         Versus

MARUTI CENTER FOR EXCELLENCE            ...Respondents
          Through    Mr. S. Ganesh, Sr. Advocate with
                     Ms. Kavita Jha and Mr. Somnath Shukla, Advs.

+                    ITA No. 50/2011

DIRECTOR OF INCOME TAX                ....Petitioner
          Through    Mr. Abhishek Maratha, Sr. Standing Counsel

                         Versus

MARUTI CENTER FOR EXCELLENCE            ...Respondents
          Through    Mr. S. Ganesh, Sr. Advocate with
                     Ms. Kavita Jha and Mr. Somnath Shukla, Advs.

CORAM:
HON'BLEMR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE R.V. EASWAR

SANJIV KHANNA, J.

Director of Income Tax (Exemptions) has filed these two

appeals against Maruti Center for Excellence (assessee/respondent,

for short). In ITA No. 1335/2010, which relates to assessment year

2005-06, order dated 2nd September, 2009, passed by the Income

Tax Appellate Tribunal (tribunal, for short) has been challenged. In

ITA No. 50/2011, order dated 12th May, 2010 which relates to the

assessment year 2006-07, passed by the tribunal has been

challenged. As the issue and question involved in the above two

appeals are identical and similar, they are being disposed of by this

common order. We heard the learned counsel for the parties on the

following substantial question of law framed on 3rd May, 2012:-

"Whether the Income Tax Appellate Tribunal was right in holding that the assessee is a charitable institution and has not violated the Section 13(1)(c)(ii) read with 13(3) of the Income Tax Act, 1961?"

2. The assessee is a society which was set up on or about 24th

June, 2002. Its office was initially located at c/o Maruti Udyog

Limited, 11th Floor, Jeevan Prakash, 25 Kasturba Gandhi Marg, New

Delhi 110 001. The persons desirous of setting up the society and

the initial members of the governing body were Mr. Jagdish Khattar,

and six others. It is an undisputed position that Jagdish Khattar was

the Managing Director of Maruti Udyog Limited. Rules and

regulations of the society have been placed on record. Some of the

relevant rules read as under:-

"MEMBERSHIP:

4. An individual, partnership firm, company or a body corporate who is associated with Maruti Udog Limited (MUL) as vendor, dealer, transportation, & logistic company, casual

supplier or civil contractor or is sub-vender of big vendors of MUL, shall be entitled to apply to become a member of the society.

5. An application for membership shall be made in writing on the application form prescribed by the Governing Board and shall be accompanied by the prescribed admission fee for the membership.

xxxxxx

7.(a) The membership fee shall be determined by the Government Board from time to time. For the time being it shall be Rs.25,00,000/-.

(b) membership fee shall be determined by the Association shall be the founder members of the society and shall not be required to pay any admission fee. However, they have subscribed as nominees of MUL and shall remain as members of the society so long as they are not withdrawn by MUL.

xxxxxx

10. A member shall cease to be member of the Society, if,

(i) By notice in writing addressed to the Society he resign from his/its membership

(ii) In the case of an individual members upon the death of the said member.

(iii) In the case of his/its disassociation with MUL as its vendor, dealer, transportation & logistic company, casual supplier or civil contractor or as sub-vendor of big vendors of MUL.

(iv) On his /its expulsion of membership under the Rules & regulation of the Society.

xxxxxx

GOVERNING BOARD/COUNCIL

13. The property and affairs of the society shall be managed by the Governing Board/Council.

14. The Governing board shall consist of not less than seven members and not more that twelve members. Majority members, not exceeding severs shall be nominated by MUL, the founding member and the balance shall be elected members.

xxxxx

MANAGING COMMITTEE

22. The Governing Board shall have powers to constitute a managing committee to provide it necessary guidance and supervision in important matters of the centre. The Managing Committee shall comprise of the following five members:

1. CEO

2. Four Governing Board members two each representing MUL and elected members."

3. The aims and objects for which the society was established are

stated in the Memorandum and Articles of Association and read as

under:-

"a. To propagate amongst organizations up-

gradation in terms of quality, cost and technology orientation through training, consultancy and other supportive services.

b. To help organizations to reach world class levels of performance and to gain word vide respect for professional competency in the field of quality management.

c. To help organizations thorough training, consultancy and supportive services to achieve total Quality Management(TOM), TPM, ISO 9000/QS9000/TS16949, ISO14000.

d. To organize short term and certification training courses in the fields of quality management.

e. To provide consultancy in the field of TQM-

Deming prize, 6Sigma, NPD, QFD, FMEA< TPM, Kaizen, TS16949/QS9000 and ISO 9000 and ISO 14000.

f. To provide support services in the field of measurement of IQS/CST for OEMs, vendor auditing for OEMs/big vendors,

g. To provide library, standards and research papers and internet centre relating to quality management and related fields.

h. To provide support services as benchmarking clearing house and tired party certification services for ISO 9000.

i. To establish and/or acquire, maintain and/or support schools. College, Seminary, Study Centres, Universities and other Institutions for imparting and training of students in the field of quality management.

j. To establish and support Professorships, Fellowships, Lectureships, Scholarships, and prizes at Schools, Colleges or other education Institutions.

k. To establish, maintain and support Hostels and /or Boarding houses and grant of free food and lodging to deserving students upon such terms and for such periods in each case as the Governing Board may think fit.

l. To grant endowment at Universities, Research Institutions and other educational and scientific institution for spread of education and knowledge in all or any branches of quality management.

m. To avoid scholarship and fellowship on such terms and conditions as the Governing Board may thing proper.

          n.       Establish, maintain and support Libraries,
                   Museums       and    Reading     Rooms   for

advancement of Education and Knowledge in all or any branches of quality management.

o. To Carry out any other charitable activity as the Governing Board think proper."

4. Paragraph 4 of the said Memorandum and Articles of

Association is also relevant and reads as under:-

4. All the income earning (including amount received by way of sale of know how premium and royalty fee charged for a research project) moveable, immovable properties at the society shall be solely utilized an applied towards promotion of its aims and objectives only as set forth in the memorandum of association and not profit and thereof shall be paid for transferred directly or indirectly by way of dividends, bonus, profits or any manner whatsoever to the present or past members of the Society or to any person claiming through anyone or more of the present to past members. No member of the claiming through anyone or more of the present to past members. No member of the society shall have any personal claim on any moveable or immovable properties of the society or make any profit whatsoever by virtue of its membership."

5. The admitted position is that the respondent society was

granted registration under Section 12AA of the Income Tax Act (Act,

for short), by the Director of Income Tax (Exemptions). We have

been informed at the Bar that this exemption was cancelled by an

order passed by the Director of Income Tax (Exemption) but the said

order has been set aside by the tribunal with a direction of remit.

This decision proceeds on the position that the registration granted

under Section 12AA of the Act has not been revoked.

6. The Assessing Officer in the two assessment years has held

that the assessee was not performing charitable activities as defined

under Section 2(15) of the Act and the purpose of the formation of

the society appeared to be for mutual benefit of Maruti Udyog

Limited and members of the respondent. It has been held that the

society had violated Section 13(1)(c)(ii) read with Section 13(3) of

the Act as the society was for the private benefit of the members.

Accordingly, the entire income of the assessee was held to be taxable

including corpus receipts of Rs.5.25 crores received in the

assessment year 2005-06. In the assessment year 2006-07, an

excess of income over expenditure of Rs.69,16,879/- was held to be

taxable in addition to interest on Fixed Deposits of Rs.43,84,753/-.

7. The assessee succeeded in the first appeal before the CIT

(Appeals), who referred to the decision of the Supreme Court in

ACIT vs. Surat City Gymkhana, (2008) 300 ITR 214 (S.C.). By the

impugned orders, the tribunal has affirmed the decision of the first

appellate authority.

8. Sections 2(15) {as it existed prior to amendment w.e.f.

1.4.2009}, 13(1)(c)(ii) and 13(3) of the Act read as under:-

Section 2 Definitions.-- In this Act, unless the context otherwise requires,--

xxx

(15) "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility;

Section13(1)(c)(ii) (1) Nothing contained in section 11 [or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof--

.................

(c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof--

(i) ................

(ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) :

Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution :

Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3) in so far as such use or application relates to any period before the 1st day of June, 1970;

[Explanation.--For the purposes of sub-clause

(ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause

(a) thereof] of the Finance Act, 1972.]

Section 13(3)(3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely :--

(a) the author of the trust or the founder of the institution;

(b) any person who has made a substantial contribution to the trust or institution, [that is to say, any person whose total contribution up to the end of the relevant previous year exceeds [fifty] thousand rupees];

(c) where such author, founder or person is a Hindu undivided family, a member of the family; [(cc)any trustee of the trust or manager (by whatever name called) of the institution;]

(d) any relative of any such author, founder, person, [member, trustee or manager] as aforesaid;

(e) any concern in which any of the persons referred to in clauses (a), (b), (c) [, (cc)] and (d) has a substantial interest."

9. Section 2(15) of the Act defines "charitable purpose". The last

portion thereof includes "advancement of any other object of

general public utility". It is accepted position that the respondent

claims that it was/is a charitable institution because its activities fall

in the last portion or the residuary part of the aforesaid clause. The

Supreme Court in Surat City Gymkhana (supra), did not permit and

allow the Revenue to challenge the ratio expounded by the Gujarat

High Court in Hiralal Bhagwati vs. CIT, (2000) 246 ITR 188 (Guj.).

It has been held in Hiralal Bhagwati's case (supra) that once an

institution has been registered under Section 12A/12AA, the

Assessing Officer cannot go into and reexamine whether or not

objects for which the institution was established is charitable within

the meaning of Section 2(15) of the Act. This aspect has to be

examined at the time of registration and cannot be re-examined

every time at the time of assessment. At the time of the registration,

the authority is to examine the objects for which the institution was

created as well as conduct an empirical study of the past activities.

10. To this extent, we find merit in the contention raised by the

assessee who has drawn our attention to the aims and objects for

which the respondent society was established. He has also drawn

our attention to the paragraph 4 of the Memorandum of Association

which has been also reproduced above. A reading of the said objects

ex-facie shows that the respondent is established for advancement

of an object of general public utility. However, the aims and objects

of association which are incorporated in the Memorandum is one

aspect and the other aspect is the actual working and the activities

undertaken by the assessee with reference to the assessment year in

question. These are two separate aspects and have to be examined

independently. We are concerned with the second aspect i.e. the

application of income and use of property of the institution, during

the assessment years in question. The activities undertaken and

performed should be charitable and should not violate the specific

stipulations mentioned in the Act. Incorporated in Sections 11, 12

and 13, are various provisions/stipulations regarding the actual

working and functioning of an institution, which claims that its

object and purpose is charitable. Violation of these provisions, have

their own consequences and effect.

11. Section 13(1)(c)(ii) is a provision in the Act which deals with

actual functioning and activities undertaken during the assessment

year in question. The said Section has to be read along with Section

13(3). Section 13(1)(c)(ii) states that no part of the income or any

property of the institution should be used or applied directly or

indirectly for the benefit of any person referred to in sub-section (3).

The words "directly or indirectly"are important and reflect the

intention of the Legislature that income or property should not be

even indirectly used for benefit of a member. The word 'indirectly'

used in Section 13(3)(c)(ii) shows the expansive and comprehensive

scope and intention behind incorporation of the said provision. The

provision postulates and states that charity for self or closely

related/associated persons as defined in Section 13(3) is an

anathema and not acceptable. Income and the property of the

charitable institution should be used for charitable activities which

benefit third persons and should not directly or indirectly benefit

the persons covered under Section 13(3).

12. Section 13(3) of the Act, as noticed, consists of several sub-

paras. These clauses refer to the author or founder of the

trust/institution; in case of HUF any member of the family; trustee

or the manager, any person who has made substantial contribution

as stipulated; or any relative of the said persons or any concern in

which any of the said persons have substantial interests. Reading of

sub-clauses again indicates the broad and expansive coverage which

the Legislature wanted to give to Section 13(3). The obvious

intention is to prevent abuse and misuse of theprovisions. However,

care and caution must be taken not to expand the scope beyond the

legislative intent. We should not be understood to mean and imply

that income or property of the institution cannot be paid or utilized

by any person covered by Section 13(3) of the Act. What is

postulated by Section 13(1)(c)(ii) is that the income or the property

should not be used directly or indirectly for the benefit of the

persons mentioned in Section 13(3). The term 'benefit' is important

and shows that reasonable and fair payments made for the actual

services rendered and provided by persons under Section 13(3) will

be and are allowed. Justified and reasonable payments and

adequate compensation for services rendered, goods supplied etc.

cannot be regarded as providing a"benefit" to a person under

Section 13(3). What is prohibited and barred is application of

income or use of the property of the institution directly or indirectly

for "benefit" of a person mentioned in Section 13(3) i.e. he is paid

beyond what is reasonable, adequate, commensurate and justified

for the services rendered or goods supplied. The said person should

not profit at the expense of the trust/institution. Charity should not

become the primary or important source of business profits and a

façade to promote business interest or secure advantage, for

persons mentioned in Section 13(3) in the name of charity. The

word "benefit" need not be restricted to direct material benefit, but

is of wide significance comprehending whatever would be beneficial

in any respect, materially or otherwise. Benefit can be pecuniary or

non pecuniary. This would be the correct legislative intent.

13. Under Section 13(1)(c)(ii) of the Act, the purpose of the

society must be to benefit the public or sub-serve the object of

general public. Thus, where the dominant motive of the application

of income or property is to help the members of a society, and

remotely and indirectly to benefit the public, it cannot be said that

the institution meets the requirements of the said Section. Again,

where the primary purpose is to benefit the private interests of

persons under Section 13(3), provisions of Section 13(1)(c)(ii) are

attracted. Thus, the general purpose or object as stated in the

Memorandum may be a beneficial one, but it would violate Section

13(1)(c)(ii) read with Section 13(3), where the benefit is primarily

confined to the members of the institution itself or employees of a

particular firm or company covered under the ambit of 13(3),

however large the number of beneficiaries may be. Where the

institution/charity operates and uses its income/ property for the

benefit of its members, it violates Section 13(1)(c)(ii) and has to be

denied the privilege bestowed. A word of caution, we are not

concerned, and are not examining the question "business held under

trust", the income of which subserves charity. We are answering and

examining the actual utilization and deployment of income/

property, i.e., the end use and not generation of income for the end

use.

14. This brings us to the factual position in the present case and

the findings recorded by the tribunal, keeping in mind the aforesaid

exposition with reference to Section 13(1)(c)(ii) and Section 13(3)

of the Act. In the order dated 2nd September, 2009 of the tribunal

for the assessment year 2005-06, the entire discussion is limited to

two paragraphs and they read as under:

"3. Having heard the arguments of the ld. DR supporting the grounds of appeal raised, we do

not find any merit therein. The ld. CIT(A) found as undisputed facts that registration u/s 12A of the I.T. Act, as granted to the assessee, was followed for the period under consideration; that during this period, a certificate u/s 80G of the Act had also been granted to the assessee; that therefore, the assessee was entitled to exemption 11 of the Act; that as per the assessee's balance sheet and Income & Expenditure Account, no income or asset or property of the Society had been used or applied during the year for the benefit of either the Settlor or the Maruti Udyog Limited; that the income of the assessee Society was mainly from interest on fixed deposits and bonds, data processing charges, consultancy fee, training programme fee and incentive received; that none of these items could be said to have been used for the benefit of the Supplier; that the assets in the balance sheet of the assessee were fixed assets, investments in RBI bonds, fixed deposits with banks, current assets and loans and advances; that none of them had been placed with the Settlor or the Maruti Udyog Limited; that therefore, 13(1)(C) (ii) of the Act was not attracted; and that neither in the assessment order, nor in the remand report submitted before the CIT9A), had the AO brought out any such user of the income or the assets of the Society for the benefit of the Settlor or the Maruti Udyog Limited.

4. The above facts, as noted by the ld. CIT (A) while deciding in favour of the assessee, remain patent on record. No material to the contrary has come on the file. As such, the ld. CIT(A) cannot be said to have committee any error in passing the impugned order. The findings of the ld. CIT(A) are therefore upheld and the grounds raised by the Department are rejected."

15. For the assessment year 2006-07, there is no discussion about

the factual matrix and the tribunal has recorded that adhering to

principle of stare decisis, there was no justification to interfere with

the well reasoned order passed by the first appellate authority.

16. The order of the tribunal in the assessment year 2005-06 is

devoid of reasoning and does not refer to factual matrix and details

which have to be examined and considered while deciding the

question whether or not Section 13(1)(c)(ii) read with Section 13(3)

is violated. The facts, figures mentioned in the income expenditure

account and the activities undertaken etc. have not been mentioned

or specifically examined. What was and whether any benefit or

advantage was enjoyed by the person mentioned in Section 13(3)

has not been adverted to and considered. General observations have

been made. The order of the tribunal is cryptic and cannot be

categorized as a reasoned and speaking order which is mandated

and required to be passed by the final fact finding authority.

17. We may, in this regard refer to some observations and

findings recorded by the Assessing Officer in the two assessment

orders including the reply given by the assessee and "donor

members" in the assessment proceedings. In the two orders, the

Assessing Officer had made a specific reference to clause 4 of the

Rules which postulates and prescribes conditions for becoming a

member of the society, which has been quoted above. It was noticed

that the assessee had received corpus donation of Rs.5.25 crores

from 30 parties in the assessment year 2005-06. They were the

vendors or the original equipment suppliers of Maruti Udyog

Ltd.Though clauses (a) and (c) to (d) may not be attracted, but

clause (b) to Section 13(3) would be attracted in case the

contributions made upto the end of the previous year exceed

Rs.50,000/-. Accordingly, clause (e) to Section 13(3) would apply.

18. Notices were issued to the said vendors/suppliers and in an

identical worded reply, they had stated as under:-

"(1) "Maruti Centre for Excellence, a society registered under the Societies Registration Act XXI of 1860 accepted our donation with a specific direction that the said money shall from a part of Corpus of the Institution to provide us Quality Up gradation, Productivity Improvement, Reduction in Delivery Failures, Training of Manpower, Improvement in customer satisfaction, Implementation of Maruti production System and support to Tier-2 Suppliers to upgradation to achieve world class standards."

(2) "Your goodself has asked to specify the purpose for which donation have given are as under mentioned:

* Quality Up gradation

* Productivity Improvement

* Reduction in Delivery Failures

* Training of Manpower

* Improvement in Customer Satisfaction

* Implementation of Maruti production System

* Support to Tier-2 Suppliers to upgrade them."

(emphasis supplied)

19. The Assessing Officer thereafter has observed that :

"From the above, it is clear that the benefit of the above training goes to the Maruti Udyog Ltd' production, not to general public at large."

20. The assessee had stated and submitted to the Assessing

Officer as under:-

"Suzuki Corporation, Japan has promised to the Govt. of India that Maruti Udyog Ltd. shall be made an export oriented unit for supplying cars in other parts of the world. Working in that direction, it has been felt that suppliers of Maruti have to be upgraded to world class levels in terms of quality, cost and technology orientation through consultancy training and other support services. To achieve these objectives the idea to launch "Maruti Center for Excellence" was conceived.

The vision of this center is to become an Indian Equivalent of JUSE, helping organizations reach world class levels of performance and gain worldwide respect for professional competency in the field of Quality Management.

This 'CENTER" encourages vendors to attain and implement world class best practices like TOM, TPM, Lean manufacturing. Six Sigma Business Excellence programmers etc. under the guidance of foreign consultants. The "Center"

provides external support to implementation & teaching of foreign consultants at the operating level."

(emphasis supplied)

21. In the reply given by the vendors/suppliers they have stated

that money was paid to provide them with quality upgradation,

productivity improvement etc. They have stated this was the

purpose for which the donation was given. The assessee, in its reply

in the form of notes on activities, has averred that the Center

encourages the vendors to attain and implement world class best

practices.

22. The orders of the Assessing Officer, though somewhat

confusing and unclear, with reference to the aforesaid assertions

states that the training given by the respondent institution was for

the benefit of the Maruti Udyog Limited or the vendors or suppliers

connected with the Maruti Udyog Limited. Training facilities were

not available to general public at large and was not for the benefit of

the public at large. He observed that the membership was only open

to the parties associated to the Maruti Udyog Limited and not to

others and the activities undertaken by the assessee were for the

benefit of the members.

23. Clause 13(3) of the Act quoted above, states that a person

whose total contribution upto the end of the relevant previous year

exceeds Rs.50,000/-, is covered and must not be the beneficiary of

any benefit, directly or indirectly. This is the

restriction/requirement of Section 13(1)(c)(ii). Thus all the vendors

or suppliers of the Maruti Udyog Limited who had paid contribution

of more than Rs.50,000/- have to meet and should not violate the

mandate of Section 13(1)(c)(ii).

24. Learned counsel for the assessee, during the course of hearing

had specifically relied on and drawn our attention to the order of the

assessment year 2006-07. The assessment order refers to the letter

dated 20th November, 2008, written by the assessee, in which it was

stated that the assessee was engaged in the activities of imparting

education and training in the field of quality, cost and technology

orientation to public at large including its members. The

programmes undertaken were attended by employees of various

companies/firms which were engaged in the automotive sector. He

had submitted that the Assessing Officer had recorded that 39 non-

Maruti vendors were given training in the period relevant to the

assessment year 2005-06. Our attention was drawn to the names of

12 unconnected concerns/companies, whose officers/employees

were given two days training in the period relevant to the

assessment year 2006-07. It was stated that same fee was charged

from the participants, whether or not they were members of the

respondent society. Thus, it was submitted that charitable

purpose/activities is proved and there was no violation of Section

13(1)(c)(ii).

25. This to our mind may be relevant to determine and decide

whether an institution was carrying on charitable activities and

whether or not it is violating Section 13(1)(c)(ii) of the Act but this

alone is not the only or sole requirement to determine and decide

the question/aspect of benefit. What the said Section postulates and

requires is no benefit directly or indirectly must accrue to a person

mentioned in Section 13(3) of the Act by application of income or

use of property of the charitable institution. Thus, charging the

same fee may be relevant but may not determinative for deciding

whether or not direct or indirect benefit in the form of use of

property or income of the institution, by a member has taken place

during the relevant previous year. The issue/question is much

broader and requires deeper scrutiny and verification. In the

present case, it will require examination of the expenditure incurred

on the training and whether this was a "benefit" to the persons

mentioned in Section 13(3). For example, in case training was

subsidized, then it can be said and argued that benefit was given to

the member, even if same fee was charged from non-members.

Further and importantly, Section 13(1)(c) (ii) will get attracted if the

benefit was confined primarily and predominantly to the persons

mentioned in Section 13(3) (b) and (e) and incidentally some benefit

had percolated and flowed to the public/third persons.

26. During the course of hearing, learned counsel for the assessee

had drawn our attention to paragraph 8 of the order passed by the

CIT (Appeals) for the assessment year 2005-06, in which he had

recorded as under:-

"8. On examination of the Balance Sheet and Income & Expenditure Account at pages 6 and 7 of the paper Book , I do not find that any income or asset or property of the Society has been used or applied during the year for the benefit of the Settlor or for that matter the Maruti Udyog Ltd. (MUL). The income of the Society is mainly from interest on Fixed Deposits and Bonds, data processing charges received, consultancy fee, training programme fee, and incentive received. None of these items could be said to be used for the benefit of the Settlor. The assets in the Balance Sheet of the assessee are fixed assets, investments in RBI bonds, fixed deposits with Bank, current assets, loans and advances. None of these have been placed with the settler or the Maruti Udyog Ltd. Therefore, the conditions necessary for the application of Section 13 (1)(c)(ii) are not fulfilled in this case. Even according to the judgment of the Hon'ble Allahabad High Court (supra), the AO has, neither in his assessment order nor in the remand report, pointed out any income or asset of the Society or any part thereof, having been used for

the benefit of the Settlor or the Maruti Udyog Ltd. Therefore, on a plain reading of the Act and the Balance Sheet and Income & Expenditure Account, it has to be held that the appellant Society is not in violation of Section 13(1)(c)(ii) of the Income Tax Act."

27. The aforesaid paragraph does not help us to decide the

question in favour of the assessee. The said paragraph/reasons

ignore and do not refer to aspects and issues which require

elucidation and verification. In this connection, we may reproduce

the findings recorded by the CIT (Appeal) in the same order, which

are to the following effect:-

10. ...The beneficiaries of this education and training programme are the Auto ancillarie' manufactures who may also be suppliers of MUL, apart from other auto companies. The direct benefit is to the people i.e. employees of these concerns who may also, incidentally, change their jobs. Therefore, education and training is to the public at large facilitated by auto ancillaries and imparted by the appellant Society it was claimed.

11. I have considered appellant's submission. I find that this issue does not arise from the order of the AO. Hence, I dismiss ground No. 6 of the appellant as infructuous."

Thus, the findings/observations of the CIT (Appeal) are not

conclusive and are ambiguous.

28. We note that CIT(Appeal), in the order for the assessment year

2006-07, has not recorded any independent findings but merely

recorded that the issue was decided by the tribunal in the earlier

assessment year and he was bound by the said decision.

29. In view of the aforesaid position, we answer the aforesaid

question of law in negative with the order of remit. Question of law

is partly decided in favour of the appellant Revenue. The tribunal

will examine the factual matrix and position in the light of legal

position mentioned above. Before applying the ratio/law, they shall

first examine and record finding on facts relevant and which are to