| SooperKanoon Citation | sooperkanoon.com/65421 |
| Court | Income Tax Appellate Tribunal ITAT Kolkata |
| Decided On | May-29-1992 |
| Judge | D Meenakshisundaram, Vice |
| Reported in | (1992)42ITD312(Kol.) |
| Appellant | income-tax Officer |
| Respondent | Ramlalji Dhapidevi Golchha |
2. These appeals arise out of the income-tax assessments of M/s.
Ramlalji Dhapidevi Golchha Charity Trust, the assessee herein. The assessment years under appeal are 1986-87 and 1987-88 for which the previous years ended on 12-11-1985 and 31-10-1986 respectively. For these two years, the assessee filed its returns on 22-2-1988 alongwith audited statements of accounts and Auditor's report in Form No. 10B.After examining the assessee's accounts, the ITO held that the assessee-trust had violated the provisions of Section 13(1)(d) read with Section 11(5) of the IT Act, 1961 by investing/depositing its funds with M/s. W.H. Horton & Co. Ltd. and, therefore, the assessee was not entitled to the benefit of exemption under Section 11 of the Act for both these years. For this, the assessee relied on the fact that an amount of Rs. 1,65,748.04 P. was shown as outstanding as on 12-11-1985 relevant for the assessment year 1986-87 from the said M/s. W.H. Horton & Co. Ltd. and that further the sum outstanding from the said party was Rs. 1,25,748.04 P. as on 31-10-1986 relevant for the assessment year 1987-88. The ITO rejected the assessee's plea that it had not invested or deposited any of its funds with the said firm but it only represented the amount that was due from the said party to the assessee-trust as a result of the assignment of the actionable claim by the settlor of the trust by his deed of assignment dated 17-5-1983.
3. When the matter went before the Dy. Commissioner (Appeals), he accepted the assessee's contentions and held that the full facts were brought to the notice of the ITO in its letter dated 15-12-1988, that it was not disputed that the assessee-trust had full and absolute authority for realisation of the debt of Rs. 2,30,748 which was payable by M/s. W.H. Horton & Co. Ltd. to the assignor and that this fact had been duly discussed and observed by the ITO in the assessment order itself. The Dy. Commissioner (Appeals) agreed with the assessee's contention that though it had become the absolute owner of the fund for Rs. 2,30,748, the said amount did not represent its own investment for the purpose of Section 13(1)(d), that it got this fund by way of donation which remained unrealised from the debtor concern and that, therefore, it would be wrong to say that the assessee-trust had either made this investment or allowed the investment to continue as such. The Dy. Commissioner, therefore, held that there was no violation of the provisions of Section 13(1)(d) of the Act by the assessee. He further relied on the fact that even for the assessment year 1985-86, the ITO had accepted the assessee's contention and granted exemption to the assessee-trust under Section 11 of the Act on the identical facts and circumstances. The Dy. Commissioner, therefore, held that the assessee was entitled to get exemption under Section 11 of the Act. Accordingly, he directed the ITO to allow benefit of such exemption under Section 11 and recompute the income accordingly in both the assessment years and allowed the appeals. This is being objected to by the Revenue in the present appeals before the Tribunal on the ground quoted above.
4. After hearing Shri Mukhopadhyay, the learned Departmental Representative and Shri R.P. Sharma, the learned counsel for the assessee, I see no reason to interfere with the order of the Dy.
Commissioner (Appeals) which, in my view, is perfectly right and in conformity with law. It was argued by the learned Departmental Representative that it was a case of purchase of the debt by the assessee-trust and, therefore, it was a case of investment in violation of Section 11(5) of the Act which would fall within the mischief of Section 13(1)(d) and that, therefore, the ITO was justified in rejecting the assessee's claim for exemption under Section 11 of the Act. I find myself unable to appreciate this line of argument urged on behalf of the Revenue. The assessee's learned counsel has placed before me a copy of the deed of assignment dated 17-5-1983 executed by Ramlal Golchha, the settlor of the trust assigning the amount of Rs. 2,30,748 due from M/s. W. H. Harton & Co. Ltd. in favour of the assessee-trust.
A perusal of the deed of assignment shows that the assignor had sold various quantities of raw jute to the said M/s. W.H. Harton & Co. Ltd., Calcutta between November, 1977and l-7-1978and had submitted bills for payment to the said company and that a sum of Rs. 2,40,748.04 P.remained due and payable by the said company to the assignor, the details of which were set out in the schedule, that the said M/s. W.H.Harton & Co. Ltd. paid only a sum of Rs. 10,000 to the assignor on 31-8-1982 leaving a balance of Rs. 2,30,748 with interest thereon at the rate of 15 per cent per annum up to 15-2-1982 and thereafter at the rate of 18 per cent per annum. The reason for making the assignment in favour of the assessee- trust is set out in the preamble of the assignment deed itself. The settlor had become old and was not in a position to take active part to realise any further amount from the said company. As he had created a charitable trust in the assessee-trust on 3-7-1979, he had assigned the said account balance due from M/s. W.H. Harton & Co. Ltd. viz., Rs. 2,30,748.04 P. to the assessee-trust for the purpose of augmenting its funds so that it could carry on its charitable objects. This the assignor had done by taking a nominal amount of consideration of Rs. 100 from the assignee. Thus, it would be clear on a fair reading of the deed of assignment that what the assessee obtained by means of this deed of assignment was an actionable claim to realise the sum of Rs. 2,30,748 which was due to the assignor. Therefore, it would further be clear that there was no investment or deposit of any of the funds of the assessee-trust in the said M/s. W.H. Harton & Co. Ltd. as assumed by the ITO. On the contrary, the facts set out in the assessment order clearly established that the assessee was gradually realising the amount due under the actionable claim as this would be clear from the fact that the outstanding amount due was reduced to Rs. 1,65,748 as on 12-11-1985 and to Rs. 1,25,748 as on 31-10-1986. There is no dispute that on the identical facts, the ITO had granted exemption to the assessee-trust for the assessment year 1985-86, as could be seen from of the copy the assessment order dated 22-2-1988. In this order, there is a specific reference to the copy of the deed of assignment and there is discussion about it also. Further, the learned counsel for the assessee relied on the decision of the Madras High Court in Auditor Dasaradka Rami Reddy Charities v. CIT[ 1989] 177 ITR 2491 to contend that the assessee had not invested any of its funds in a prohibited asset. In my view, this decision of the Madras High Court fully supports the assessee's case. I may point out that his decision follows the decision of the Calcutta High Court in CIT v. Birla Charity Trust [ 1988] 170 ITR 1502. I may further point out that the Finance (No. 2) Act, 1991 has inserted the following Clause (iia) in Section 13(1)(d) of the Act with retrospective effect from 1-4-1983 : (iia) any asset, not being an investment or deposit in any of the forms or modes specified in Sub-section (5) of Section 11, where such asset is not held by the trust or institution, otherwise than in any of the forms or modes specified in Sub-section (5) of Section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later; This would show that even if it is to beheld that there is a violation of Section 13(1)(d) as alleged by the ITO, there was still time for the assessee-trust to change its investment pattern and put it in assets specified in Section 11 (5) of the Act till 31-3-1992. I, therefore, respectfully follow the decisions of the Calcutta and Madras High Courts, referred to above and hold that the Dy. Commissioner (Appeals) was right in his conclusion that there was no violation of Section 13(1)(d) of the Act by the assessee-trust in these two years and that it is entitled to exemption under Section 11 of the Act. Accordingly, I confirm his order and dismiss the appeals.