Income Tax Appellate Tribunal - Delhi
Equivalent citations: 1991 38 ITD 435 Delhi
Bench: G Krishnamurthy, None, M Khan, None
Income-Tax Officer vs Prem Nagar Ashram on 18/6/1991
ORDER
M.A.A. Khan, Judicial Member
1. Foundational facts and mother of controversy being common to all these appeals, these were heard together and are now being disposed of by this consolidated order.
2. Round about the forties of this century there lived on the outskirts of Jawalapur town near the city of Hardwar (U.P.) one Sri Hans Ram Singh Rawat whom we shall henceforth call as 'Hansji Maharaj'. He preached for universal brotherhood, love for humanity, service to mankind and uplift of mortals to spiritual heights. His preachings and sermons based on synthesis of all religions attracted saints and sages and people of all hue and colours to him and he began to act as a spiritual Guru gathering quite a number of disciples and followers. During his lifetime he established a religious-cum-spiritual society known as "Divine Light Mission" (the Mission). This Mission was later on registered as a society in the year 1961. Hansji Maharaj also established several Ashrams for the stay, meditation, discourses and discussions of the Mahatmas. The assessee before us in all these appeals is one of such Ashrams established by Hansji Maharaj.
3. Hansji Maharaj died on 19-7-1966 leaving behind him Smt, Rajeshwari Devi (widow), S/Sri Satpal Singh Rawat, Mahipal Singh Rawat, Dharampal Singh Rawat and Prempal Singh Rawat, all minor sons at that time as his heirs. As Mission's property he left Prem Nagar Ashram at Hardwar (the assessee), Satlok Ashram at Muradnagar, Meerut (U.P.) and House No. 26/96, Shakti Nagar at Delhi. For his heirs he left Kothi at 13, Municipal Road, Dehradun (in the name of his second wife Smt. Rajeshwari Devi) and agricultural lands at village Majri Muaji in Dehradun, U.P. (in the names of his four minor sons).
4. After the death of Hansji Maharaj his youngest son, Sri Prempal Singh, then 9 years, was made the 'Head' of the Mission. But he was removed from the 'Gaddi' in 1973. He left for America and is reported to be now settled there as American citizen. His eldest brother, Sri Satpal Singh Rawat succeeded the 'Gaddi'.
5. The assessee-Ashram was established as back as in 1946 as a property of the Mission. In that year the public and devotees of Hansji Maharaj had thought of constructing an Ashram for the stay of the Mahatmas, where they could pray, meditate, discuss and deliberate over the spiritual philosophy of Hansji Maharaj. Therefore, with the funds contributed and raised by them they purchased on 2-12-1946 in the name of the Guru i.e. Hansji Maharaj Khasra No. 2546 of Khewat No. 12 from Smt. Bhagwan Devi and others, Khasra Nos. 2548 and 2549 from Mohal Prabhu Lal and Durga Dass Khanna. The total agricultural land purchased admeasured 3 big has and 14 bis was pucca and was situated at Ahmedpur Khodach, Pargana Jawalapur, Tehsil Hardwar, Distt. Saharanpur (now Distt. Hardwar) in U.P. with further funds raised and contributed the Ashram building could be completed by the year 1957.
6. During the lifetime of Hansji Maharaj the Ashram was being managed by his three disciples S/Shri Satyanand, Brahmanand and Premanand (all renunciates) and two household persons S/Shri Behari Lal Gupta and Hari Ram Gupta. As per will dated 15-8-1965 of Hansji Maharaj, the Ashram was to continue to be managed with the advice and consultation of the aforesaid five persons even after his death. By the year 1969 the assessee-Ashram had acquired its identity as a separate entity and had spread over its multifaced activities in various directions. By that year it was running a lunger, a gaushala, a pustak bhandar, publishing two magazines Dharam Kshetra, a Kurukshetra and Hansadesh. In a part of its building a pharmacy in the name of Hans Ayurvedic Aushadhi Nirmanshala (Aushadhalaya) had also started running.
7. The management of the Ashram seems to be carried on as per wishes of Hansji Maharaj up to the year 1976 when a society for the purposes was formed and got registered as such on 10-9-1976 under the U.P. Societies Registration Act, Mahatma Satyanandji Maharaj, the chief disciple of Hansji Maharaj, was given a prominent position as President in the Executive Committee of the Society. But he is reported to have left the Ashram for some unknown destination and his whereabouts are also unknown.
8. It was sometimes in September 1976 that the activities of the heirs of Hansji Maharaj attracted the attention of the Income-tax Department. Search operations at the residential premises of the heirs and at the premises of the Ashram were undertaken on 19-9-1976/24-9-1976 and some incriminating documents including certain balance sheets and ledgers were seized. On the basis of the material seized, the IT authorities issued notices under Section 148 of the IT Act, 1961 (the Act) to the heirs of Hansji Maharaj as also to the assessee-Ashram as an assessable entity in itself. Returns were filed by the concerned persons, assessments were taken up and made and the appeals were carried on and decided, up to the stage of Tribunal in the cases of some of those persons. That is how we come to decide the present appeals for various years in the case of the assessee.
ITA No. 3794/Del/88(A.Y. 1970-71) :
9. Claiming its status as "Artificial Juridical Person" holding various properties for charitable or religious purposes the assessee filed its return of income for A.Y. 1970-71 on 29-6-1979 declaring its gross income at Rs. 22,289 from its following activities, viz.: Rs.
(a) Pustak Bhandar 4059
(b) Hansadesh Magzine 16183
(c) Dharam Kshctra Kurukshetra 2047
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Total 22,289
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Asserting its character as a charitable institution the assessee also filed an application under Section 11(2) of the Act along with the return claiming accumulation and setting apart of its declared income in the following manner:
(i) Rs. 10,000 Accumulated for future investment (ii) Rs. 12,289 Setting apart for specified purposes under Section 11(2)
------
Rs. 22,289
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The assessee had supported its above claim with the J&K High Court decision in CIT v. Sh. Krishen Chand Charitable Trust [1975] 98 ITR 387 and Madras High Court decision in Second ITO v. M.C.T. Trust [1976] 102 ITR 138.
10. The ITO held that the properties left by Hansji Maharaj belonged to his heirs, that the activity of publishing books and magazines was not an activity in the direction of meeting out any charitable purpose but was in the nature of commercial activity, that the Aushadhalaya was being run by Smt. Rajeshwari Devi with her two sons, Satpal, Prempal as partners and that benefit of Section 11(2) was not available to the assessee as application in Form No. 10A under Rule 17A of IT Rules, 1962 (the Rules) was not filed in time and investments in specified Govt. securities were not made according to provisions of Section 11(2). In that behalf he refused to follow J&K and Madras High Court decisions relied upon by the assessee. Holding thus he computed assessee's income at Rs. 56,000 vide his order dated 25-2-1983, in the following manner :
Rs.
(i) Pustak Bhandar 16,782.00
(ii) Hansadesh 20,183.00
(iii) Dharam Kshetra Kurukshetra 4,048.00
(iv) Aushadhalaya 15,000.00
---------
Rs. 56,013.00
i.e. Rs. 56,000.00
With regard to the income from Aushadhalaya the ITO, on the basis of the statement of one Sri Shyam Narain Chowdhry recorded on 3-4-1978, came to the conclusion that the said activity, as a partnership venture of Guru Hansji Maharaj (Sri Prempal Singh) and Sri Bal Bhagwan (Sri Satpal Singh), was commenced in 1969 by their mother Smt. Rajeshwari Devi such initial funds of Rs. 5,000 to which more funds amounting to Rs. 50,000 were contributed in Jan. 1970. On the basis of a balance sheet pertaining to the period from 1970 to 2-8-1974, seized during the search, the ITO reached the conclusion that the credit balances of Rs. 1,42,985 each in the capital accounts of Guru Maharaj and Bal Bhagwan, totalling to Rs. 2,85,970 supported the view that the said activity was being carried on by Smt. Rajeshwari Devi for the benefit of the two of her minor sons. Reducing the amount of initial investment of Rs. 55,000, as stated above, from the total amount of Rs. 2,85,970 he arrived at the figure of Rs. 2,30,970 which he considered to be the income from Aushadhalaya for six years and spread over the same in the following manner:
Rs.
A.Y. 1970-71 15,000.00
A.Y. 1971-72 25,000.00
A.Y. 1972-73 35,000.00
A.Y. 1973-74 45,000.00
A.Y. 1974-75 60,000.00
A.Y. 1975-76 50,970.00
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Total 2,30,970.00
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He accordingly made an addition of Rs. 15,000, as income of the year under consideration from Aushadhalaya substantively in the cases of S/Sh. Satpal Singh, Prempal Singh and on protective basis in the cases of the assessee and Smt. Rajeshwari Devi. The aggrieved assessee approached the AAC in appeal.
11. In appeal, the AAC, reversing all the findings of the ITO, held that properties left by Hansji Maharaj belonged to the assessee and not to his heirs, that the activity of publishing books and magazines was not, in the facts and circumstances of the case, a business activity with profit-earning motive but an activity for accomplishing charitable objects and meeting charitable purposes, that the Aushadhalaya was started in this year and no income was earned by the assessee from that source in this year, that benefit of Sections 11(1) and 11(2) was available to the assessee as its application under Section 11(2) was legally maintainable and accumulation of income of Rs. 41,003 from publishing magazines was utilised over the years on construction of Ashram building and purchasing a printing press, the objects which were mentioned in the application in Form No. 10 of the Rules. The AAC computing assessee's income at Nil, allowed its appeal. Dissatisfied with this order of AAC Revenue approached the Tribunal in second appeal.
12. Disposing of Revenue's second appeal [ITA No. 5832/Del/83] vide its order dated 28-3-1985 the Tribunal held that the properties were held by the assessee in trust for charitable purposes and that addition of Rs. 15,000 as assessee's income of this year from Aushadhalaya had been rightly deleted. The Tribunal, however, further held that the issue relating to application and accumulation of income with reference to Section 11(2) were not properly appreciated and considered by the AAC. The Tribunal, therefore, remitted the issues, relating to those points to the AAC for his decision afresh according to law.
13. By the time the AAC could have decided the remitted issues, as aforementioned, Revenue's second appeals [ITA Nos. 3450 and 3451/Del/1985] in the case of this very assessec for A.Y. 1971-72 and 1972-73 happened to come up for hearing before the Tribunal. In the course of the hearing of those appeals and in the context of the solitary ground taken therein and which related to the very character of the assessee as a charitable institution, Tribunal's earlier order dated 28-3-1985 in ITA No. 5832/Del/83 for A.Y. 1970-71 (supra) fell for Tribunal's consideration and construction. The stand taken by the assessee was that Tribunal's earlier decision dated 28-3-1985 for A.Y. 1970-71 decided the issue involved in the two appeals, in assessee's favour. The stand of the Revenue, however, was that the issue relating to the very character of the assessee as a charitable institution was left wide open in that year as that issue had also been remitted by the Tribunal to the AAC for his decision afresh. The Tribunal accepted Revenue's contention and setting aside the order to the CIT(A) in the two appeals for A.Y. 1971-72 and 1972-73 vide order dated 25-9-1987 directed him to dispose of the appeals for those years in the light of directions of the Tribunal in Revenue's second appeal for A.Y. 1970-71 [ITA No. 5832/Dcl/83].
14. Reverting to the facts in the appeal before us, though the AAC, in compliance of Tribunal's order dated 28-3-1985 [ITA No. 5832/Del/83] proceeded to decide assessee's appeal for A.Y. 1970-71 on 25-2-1988 yet, it appears, by one reason or the other he could not look into Tribunal's order dated 25-9-1987 passed in appeals for A.Y. 1971-72 and 1972-73. Considering that the Tribunal had already held that the assessee was engaged in charitable and religious activities the AAC diverted his attention to the issue of accumulation and application of assessee's income for the year under consideration. He held that the funds were accumulated and spent for religious or charitable purposes. It is against that order of the AAC dated 25-2-1988, passed by him in second round that revenue has come up before the Tribunal in this second appeal.
15. It is in the above background that the following grounds have been raised by Revenue in this appeal, viz.-
On the facts and in circumstances of the case the AAC has erred-
(1) In holding that the Hon'ble ITAT in its order dated 28-3-1985 for A.Y. 1970-71 has held the assessee as a charitable Trust within the meaning of Section 2(15) of IT Act, 1961, without taking into account the findings of the ITAT in ITA Nos. 3450 and 3451/Del/1985 for A.Y. 1971-72 and 1972-73.
(2) In holding that the Trust was charitable in terms of Section 2(15) of the Income-tax Act, 1961 ignoring the evidence brought on record by the ITO in the assessment order.
(3) Without prejudice to the above in holding that the provisions of Sections 11 and 12 are applicable even though the assessee has failed to comply with the provisions of Section 12A.
16. At the very outset we would like to mention that Mr. S.B. Gupta, Advocate appearing for the assessee urged that since the order of the Tribunal for assessment year 1970-71 was construed and interpreted differently by the AAC on the one hand and by the Tribunal in its order dated 25-9-1987 for assessment years 1971-72 and 1972-73 on the other, the matter be referred to a larger or Special Bench for resolving the controversy regarding correct construction and interpretation of Tribunal's order dated 28-3-1985 for assessment year 1970-71. As we see no such controversy as may justify a reference under Section 255(3) of the Act we decline to accept the prayer.
17. As stated above the order of the Tribunal dated 28-3-1985 for assessment year 1970-71 was construed and interpreted by subsequent Coordinate Bench of the Tribunal in the course of deciding Revenue's appeal for assessment years 1971-72 and 1972-73. The Bench construed and interpreted the earlier order of the Tribunal in a particular way. This Bench is not sitting in appeal over the judicial wisdom of the earlier Co-ordinate Bench deciding Revenue's appeal for assessment years 1971-72 and 1972-73. Judicial propriety, judicial restraint and long established convention of the Tribunal require a Co-ordinate Bench to respect the view of another Co-ordinate Bench when such a view could also be a possible view in the facts of a particular case. We have gone through the relevant orders of the Tribunal and are of the opinion that the view expressed by the Tribunal in its order dated 25-8-1987 regarding the construction and interpretation of Tribunal's earlier order dated 28-3-1985 could also have been a possible view. We, therefore, reject the preliminary objection of Mr. Gupta.
18. Now coming to the merits of the grounds raised in the appeal we find that on ground No. 1 there is no evidence on record to show that the order of the Tribunal dated 25-8-1987 for assessment years 1971-72 and 1972-73 was even brought to the notice of the AAC before he passed the impugned order. It may be mentioned that as per relevant provisions, practice and procedure the copy of the order of the Tribunal dated 25-8-1987 was sent to CIT(A) VII, New Delhi, appeals from whose orders were decided by the Tribunal and not to the AAC who passed the impugned order for assessment year 1970-71. Under such circumstances, the AAC was free to take his own view of the scope of the issues remitted to him. In that sense of the matter Ground No. 1 must fail on its language. We would, however, hasten to add that incidentally the true subject matter of this ground makes the subject matter of Ground No. 2 also and, therefore, we would make our final decision on Ground No. 1 dependent upon and subject to our decision on Ground No. 2.
19. Ground No. 2 relates to the very character of the assessee-Ashram as a charitable Trust in terms of Section 2(15) of the Act. This, in fact, is the main issue in this and other appeals by Revenue. We find that in one form or the other and in the case of this assessee and/or in the cases of the heirs of Hansji Maharaj the character of the assessee-Ashram as an charitable institution fell for the judicial consideration of the Tribunal but no final opinion over the point appears to have been ever recorded. We, therefore, heard the parties days together to set the controversy at rest once and for all.
20. The learned D.R. submitted that the ITO had found it as a fact that the Prem Nagar Ashram property was mutated on 6-7-1975 in Municipal records in the name of four sons of Hansji Maharaj in whose name the same stood recorded up to that time, that the very fact that the Ashram property was purchased in the name of Hansji Maharaj and not in that of the Ashram itself showed and indicated that it was the personal property of Hansji Maharaj. He further submitted that the society itself was registered on 10-9-1976 and the aims and object as enshrined in its Memorandum of Association, rules and regulations or bye-laws would not be relevant to appreciate the affairs of the assessee in the year 1969 relevant to assessment year 1970-71. The learned D.R. vehemently urged that the conduct of the assessee in indulging too much in business activities, earning substantial amounts as profits from its various adventures clearly showed that it did not hold the various properties (even if they were found as being held by it) for charitable purposes. Figures of assessee's income in assessment year 1971-72 from publishing magazines, as available at page 6 of CIT (Appeals)'s order for that year were referred to. He pointed out that the onus to prove that a property is held for charitable purposes was on the person who makes such an assertion. Reference in this behalf was made to the Bombay High Court decision in the case of Lokmanya Tilak Jubilee National Trust Fund [1942] 10 ITR 26 (Bom.) and Supreme Court decision in Smt. Charusila Datti, In re [1946] 14 ITR 362. In the end it was also submitted that simply publishing magazines did not constitute charitable purpose.
21. In reply Mr. Gupta supported CIT(A)'s order in the first round wherein facts relevant to this issue were thrashed out and critically examined. He submitted that none of the heirs of Hansji Maharaj had even claimed the Ashram property as his own and that the ITO had mentioned a wrong fact about the mutation of their names on 6-7-1975. Mutation was in fact effected in the name of the Ashram from the name of Hansji Maharaj. Mr. Gupta further submitted that the CIT(A) had examined the entire expenses incurred vis-a-vis income earned and had concluded that the conduct of the assessee was fully in conformity with the conduct of a charitable institution and that the income earned was applied to charitable objects. Mr. Gupta submitted that this finding was based on proper appreciation of the material on record and should not be disturbed. The learned counsel referred is an earlier order of the Tribunal dated 15-12-1983 in the case of ITO v. Sri Satpal Singh Rawat for assessment year 1973-74 [IT Appeal No. 513 (Delhi) of 1982] and submitted that the Aushadhalaya was regarded as assessee's property. Mr. Gupta summed up by referring to the fact that the society, now managing the affairs of the Ashram was registerd as a society under the U.P. Societies Registration Act and unless a society was a charitable society, meaning thereby it was having charitable purposes as its object, it cannot be registered as a society under the said Act.
22. After having given our thoughtful consideration to the arguments and on study of the material placed before us we are left in no doubt that the issue on hand had rightly been decided by the AAC in the first round of first appeal and correctly acted upon by him in the second round. The propositions laid down in the cited cases that one who asserts a fact must prove it and that simply publishing magazines would not by itself be indicative of an activity being carried on for religious or charitable purposes, are subject to no dispute.
23. The scope of ground No. 2 read in the light of arguments advanced thereon by the learned D.R. does not question the time and manner of the birth of the assessee as a unit of assessment as have been narrated above. The facts found and narrated above were gathered from the order of the Tribunal dated 15-12-1983 passed in the case of Satpal Singh Rawat (supra) and the will of the late Hansji Maharaj dated 15-8-1965 referred to therein. We were given to understand at the hearing that Revenue had not challenged the correctness of the order of the Tribunal meaning thereby that it had accepted the same.
24. In its order in Satpal Singh Rawat's case (supra) the Tribunal has conclusively held that the properties of the Mission were acquired, may be in the name of late Hansji Maharaj, with the offerings made to him and which offerings were not, meant for his personal use but were meant for the cause of the Mission. The Tribunal clarified that apart from the above position the late Hansji Maharaj, by a very specific, clear and unambiguous statement in his will dated 15-8-1965, had made a complete dedication of the Ashram property in favour of Divine Light Mission, i.e., for religious or charitable purpose. This finding had been recorded by the Tribunal on the basis of Supreme Court decision in Tilkayat Sri Govindlalji Maharaj [1964] 1 SCR 629 and B.K. Mukerjee's Tagore Law Lectures on Hindu Law of Religious and Charitable Trust, Fourth edition, at pages 101 and 105. The Tribunal had further held that Prem Nagar Ashram, i.e., the assessee here, had been existing right from the beginning and it was a separate entity by itself and whatever be its properties by the time the society was registered in the year 1976 would be treated as the properties of the Ashram by virtue of Sections 5 & 6 of the Societies Registration Act. Those findings of the Tribunal regarding the character of the assessee as a religious or charitable institution are conclusive in nature and effect. We, therefore, hold that the assessee came into existence as a religious and charitable institution and was holding that character in the year under consideration. In its return the assessee has rightly, for that matter claimed its status as that of "Artificial Juridical Person". This was a point raised by the Tribunal in its order at the earlier occasion but had left that undecided. Status of assessee being essential for making assessment upon him we have recorded the above finding accepting assessee's declaration of its status in its return, to avoid any confusion in giving effect to the order of the Tribunal.
25. The pertinent question that still remains for our decision, however, is whether the various properties were held by the assessee during the year under consideration for religious or charitable purposes. In this behalf we entertain no doubt that it was so. The properties of the assessee in this year consisted of the Ashram building which was being used for the free boarding and lodging of the Mahatmas, disciples and followers of Hansji Maharaj, coming to and staying in the Ashram for prayer, meditation, discourse and discussions. The activities carried on by the assessee involved publishing books, magazines viz., Dharmshetra, Kurukshetra and Hansadesa, certain books of the religio-spiritual knowledge preached by Hansji Maharaj, bringing up an Aushadhalaya and running a lunger and gaushala. It is quite evident from the material placed on our record that the books and magazines propagated the teachings and philosophy of Hansji Maharaj for the consumption of the Mahatmas, his disciples and followers in particular and the people at large in general. The publication of the books and magazines was not with a profit-earning motive. Similarly, the manufacture of Ayurvedic aushadhies in the pharmacy to be started was also with a view to distribute the same to poor for no price or for least price. This venture too was not being undertaken with any profit-earning motive. This is for providing for medical relief against an object referred under Section 2(15) of the Act. It is in evidence that the persons working in the Ashram and engaged in the publication work, manufacture of medicines, running the gaushala were being paid no salaries or wages. They were rendering their selfless services for no consideration purely out of missionary zeal for charity. Whatever surplus was there from the sale of books, magazines, etc., the same was being utilised and spent on providing free food and necessary clothing to the inmates and visitors to the Ashram. When the holding of various properties by the assessee is read in the context of its activities and in the light of its conduct there remains no room for doubt that the assessee was certainly an institution or organisation pursuing religious or charitable purposes within the meaning of the term defined in Section 2(15) of the Act.
26. Section 2(15) gives an inclusive definition of the term "charitable purpose". At the relevant time it ran as under:
' "Charitable purpose" includes relief of the poor, education, medical relief and advancement of any other object of general public utility not involving the carrying on of any activity for profit.'
The words 'not involving the carrying on any activity for profit' were omitted by Finance Act, 1983 with effect from 1-4-1984. That indicates that the Legislature, in its wisdom, had considered that those words were not in line with the meaning and the true concept of "charitable purpose" as intended to be conveyed through the definition of the term given in Section 2(15). If providing money to the pauper, food to the hungry, cloth to the naked, learning to the illiterate, eyes to the blind, limb to the lame or medicine to the sick is a charitable purpose, the carrying on an activity earning profit solely to be spent on those purposes or on the advancement of any other object of general public utility may well be in the direction of fulfilment of such "charitable purpose" and hence fall within the purview of the definition of the said term.
27. Publishing books or magazines with a view to earn profit is not, in itself, a charitable purpose. But if such an activity is carried on with the dominant view of propagating moral or socio-religious ideas highlighting the secular aspect of religious philosophy of all religions and the minimal profit earned in the course of such an activity is intended to be spent on the recognised charitable purposes, such an activity would also be for charitable purposes within the meaning of the term defined in Section 2(15). As discussed above, we find the same position in this case. In that sense of the matter earning profits of Rs. 2047 and Rs. 16,118 out of sales of Rs. 11,782 and Rs. 40,892 of the two magazines in assessment year 1971-72 by the assessee cannot be claimed to be substantial profits and cannot deprive the assessee of its character as a religious or charitable institution with reference to Section 2(15). Taking note of the principles laid down in the cases relied upon by the learned D.R. we hold that the assessee was a religious or charitable institution with reference to Section 2(15). Ground No. 2 is accordingly decided against the revenue. Consequently Ground No. 1 is also dismissed.
28. Now coming to the subject matter of Ground No. 3 we find that it is not disputed that the assessee had filed an application under Section 11(2) in Form No. 10 under Rule 17 of the Rules along with the return. No defect other than that it was belated was found by the ITO. The assessee had very rightly relied upon the decisions of J&K and Madras High Courts, mentioned above, that time was not the essence of the spirit enshrined in the purpose of Section 11(2). The learned AAC in his first order had clearly mentioned that the accumulated fund was utilised for construction of Ashram building. In his second order which is under appeal he has found that there were no surplus for bringing to tax. The character of the assessee has been found as that of a religious or charitable institution. The property held by it has also been found by us as held for religious or charitable purposes. The provisions of Sections 11 and 12 of the Act were thus clearly applicable to the assessee's case and were rightly applied by the learned AAC. Section 12A was not at all in picture in this year. Ground No. 3 is, therefore, also dismissed.
29. In the result, Revenue's appeal for assessment year 1970-71 must fail.
ITA Nos. 2363 to 2366/Delhi/88 (Assessment years 1971-72 to 1974-75)
30. In its appeals for assessment year 1971-72 to assessment year 1974-75 Revenue has raised the following common grounds, viz. - On the facts and in the circumstances of the case, the CIT(A) erred in :
1. In holding that the assessee was a charitable trust within the meaning of Section 2(15) of the Income-tax Act, 1961 without giving reasons.
2. In holding for this assessment year that the Trust is 'Charitable' when the directions of Tribunal in order dated 28-3-1985 in ITA No. 5832 (Del.)/1983 for assessment year 1970-71 to determine whether trust is charitable have not yet been complied with.
3. In holding that the trust was charitable in terms of Section 2(15) even though the Assessing Officer has brought on record that the assessee was engaged in commercial activities.
4. Without prejudice to above in holding the provisions of Sections 11 and 12 are applicable even though the assessee had failed to comply with the provisions of Section 12.
31. At the hearing it was agreed between the parties that insofar as the questions relating to the character of the assessee, the properties held by it and their user by the assessee in all these four years were concerned there was no change in fact from those obtaining in assessment year 1970-71, discussed above. With this position of facts we have to observe that the subject matter of Ground Nos. 1 to 3 as raised in all these appeals for assessment year 1971-72 to assessment year 1974-75, is covered by that of Ground Nos. 1 and 2 in assessment year 1970-71. We accordingly hold that the assessee was a charitable institution in terms of Section 2(15). Ground Nos. 1 and 3 in all the appeals are, therefore, dismissed.
On the subject matter of Ground No. 2 in all these appeals we take the same view as was taken by us in Ground No. 2 in assessment year 1970-71 and dismiss the same as well.
32. Ground No. 4 in all the appeals is the same as was there Ground No. 3 in appeal for assessment year 1970-71. Position of fact and law relating to Section 12A remaining the same for assessment years 1971-72 and 1972-73 as well. We dismiss ground No. 4 in appeals for Assessment years 1971-72 and 1972-73.
33. The factual as well as the legal position in relation to Section 12A is, however, quite different in assessment years 1973-74 and 1974-75. Section 12A was brought on Statute Book by Finance Act, 1973 with effect from 1-4-1973. It required the registration of the religious or charitable institution or Trust with the Commissioner of Income-tax for purposes of obtaining benefit of Sections 11 and 12 of the Act. For that purpose, it required such institution or trust to move an application to the Commissioner of Income-tax within a specified period. Admittedly, the assessee did not move an application under Sections 12A to the CIT. Benefit of Sections 11 and 12 was not available to it in the assessment year 1973-74 and assessment year 1974-75. Mr. Gupta, however, urged that as per Rule 17A r.w. Form No. 10A the application was required to be accompanied with the original instrument creating the trust or establishing the institution and since this was a case of oral trust no such document in original along with its copies could have been produced by the assessee and since the application would have been incomplete for want of those documents, no application under Section 12A was filed. In this behalf, Mr. Gupta referred to the definition of the term 'document' as given in Section 3 of Evidence Act, in General Clauses Act and Section 14 of the Stamp Act. In our opinion, this argument carries no weight.
34. Rule 17A r.w. Form No. 10A no doubt provides that the application under Section 12A shall be accompanied by the instrument of creation of a trust or establishment of an institution but in this case the will of Hansji Maharaj could have accompanied the application under Section 12A, as establishment of the assessee as a religious or charitable institution was evidenced from that document. That was not done. Moreover, the CIT could have been told of absence of such document in this case through a note appended to the application or through separate application. We thus do not feel satisfied with the explanation offered and reject the argument.
However, since Section 12A recognising the difficulties in the way of charitable institution in filing application for registration in time, empowered the CIT to admit applications after the expiry of the prescribed period, the assessee can make an application to the CIT and seek the benefit of registration. That is to say the assessee is not without an adequate remedy. However, for the purpose of disposal of the appeal, non-filing of application under Section 12A is fatal to the grant of exemption provided in Section 11.
35. In ground No. 4 for assessment years 1972-73 and 1974-75 revenue has simply challenged the application of the provisions of Sections 11 and 12 of the Act by the CIT(A) on the ground of non-compliance of the conditions laid down under Section 12A by the assessee. We have accepted Revenue's case to that extent. The computation of income for those two years is to be made by the ITO without applying the provisions of Sections 11 and 12 of the Act.
At this stage it was pointed out that the issue of computation of assessee's income for assessment years 1973-74 and 1974-75 is also an issue for the consideration of the Tribunal in assessee's appeal for those two years being ITA Nos. 1849 and 1850/Del/88. Under these circumstances we keep our findings limited on Ground No. 4 in both these two years with our holding that the CIT(A) erred in holding the provisions of Sections 11 and 12 as applicable to assessee's case for assessment years 1973-74 and 1974-75 even though the assessee had failed to comply with the provisions of Section 12A of the Act. We accordingly accept and allow ground No. 4 in appeals for assessment years 1973-74 and 1974-75.
36. In the result, Revenue's appeals for assessment year 1970-71 to assessment year 1972-73 [ITA No. 3794, 3263 and 3264/Del./88], are dismissed.
Revenue's appeals for assessment years 1973-74, 1974-75 [ITA Nos. 3265 and 3266/Del/88] are partly allowed to the extent and in the manner mentioned above.