2007-VIL-475-DEL-DT
Equivalent Citation: [2008] 299 ITR 406 (Delhi)
DELHI HIGH COURT
I.T.A.NO 1193 OF 2006
Date: 11.01.2007
BHARAT KALYAN PRATISTHAN
Vs
DIRECTOR OF INCOME TAX (EXEMPTION)
BENCH
MADAN B. LOKUR,V. B. GUPTA, J
JUDGMENT
1 The Assesses is aggrieved by an order dated 21st January, 2006 passed by the Income Tax Appellate Tribunal, Delhi Bench 'E', New Delhi in ITA No.1384/D/2002 relevant for the assessment year 1997-98.
2 After hearing learned counsel for the parties, we are of the view that the following substantial question of law arises for our consideration:-
"Whether the Income Tax Appellate Tribunal was justified in holding that the Assesses was not entitled to accumulate income for the objects of the Charitable Trust without specifying the purposes for which the income is accumulated?"
3 We are of the view that since the question can be answered at this stage because we have heard arguments of learned counsel for both the parties, we proceed to dispose of this appeal.
4 The Appellant is a charitable trust which has been set up for the following charitable purposes:-
1. for medical relief;
2. help to poor; and
3. educational purposes.
5 The Appellant accumulated a sum of Rs.11 lakhs and passed a resolution on 10th October, 1997 to the effect that the amount be utilized for the purposes of the trust, that is, for medical relief, help to poor and educational purposes. The Assessing Officer, the Commissioner of Income Tax (Appeals) as well as the learned Tribunal were of the view that the Assesses did not specifically indicate the purposes for which the amount was accumulated and, therefore, was not entitled to the benefit under Section 11(2) of the Income Tax Act, 1961.
6 Before us, learned counsel for the Appellant has pointed out that the learned Tribunal has considered three judgments in the impugned order. The first judgment is that of this Court in Commissioner of Income Tax vs. Hotel and Restaurants Association, (2003) 261 ITR 190; the second judgment is that of the Calcutta High Court in Director of Income Tax (Exemption) vs. Trustees of Singhania Charitable Trust, (1993) 199 ITR 819 and the third judgment is that of the Madras High Court in Commissioner of Income Tax Vs. M. Ct. Muthaiah Chettiar Family Trust and [2000] 245 ITR 400. (2000) 162 CTR 63. While the Tribunal is bound by the decision of the jurisdictional High Court, that is, this Court, it preferred to follow the decisions of the Calcutta and Madras High Court. Both of them say that the purpose of accumulation of income should be specific.
In Hotel and Restaurants Association,[2003] 261 ITR 190 (Delhi) the question of law that was considered, was as follows:- (page191) :
Whether, on the facts and circumstances of the case, the Tribunal is justified in holding that the accumulation of income by the Assesses under Section 11(2) of the Income Tax Act, 1961 (hereinafter referred to as `the Act') for all objects for which the trust was created and not for specific purpose was neither prejudicial nor erroneous to the interests of the Revenue?"(emphasis given).
8 The contention of learned counsel for the Revenue in that case was that the appellate authority had failed to appreciate that the Assesses did not indicate in the prescribed form the specific purpose for which the income was sought to be accumulated and, therefore, the statutory requirement had not been complied with thereby disentitling the Assesses from relief under Section 11 (2) of the Act. While rejecting this contention, this Court observed as follows:-
"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 assesses to achieve the object for which the assesses was incorporated. It is not the case of the Revenue that any of the objects of the assesses-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".
9 In other words, the conclusion of this Court was that if the accumulation was for one or more purposes and those purposes were the objects of the trust, then it was permissible for the assesses to accumulate income for utilization for all those objects of the trust.
10 The decision rendered by this Court was followed in Director of Income Tax (Exemption) vs. Daulat Ram Education Society, (2005) 278 ITR 260 (Delhi). The only distinguishing feature in the latter case is that out of 29 purposes/objects stipulated in the memorandum of association, the assesses had specified eight purposes and it was held that the assessee was entitled for exemption under Section 11 of the Act.
11 Learned counsel for the Revenue has contended that if the observations of this Court in Hotel and Restaurants Association are carefully read, then the purpose should be specified. We are of the view that given the question of law in Hotel and Restaurants Association, the conclusion of this Court was that the details of the purposes for which the income was accumulated need not be specified. For example, if the purpose of accumulation is educational, the assessee is not required to indicate or specify whether it is elementary education, primary education or secondary education etc. If the assessee's case is that the income was accumulated for utilization for educational purposes, it would not require specification as long as the educational purpose is one of the objects of the assesses.
12 In the present case, the Assesses has only three objects as far as its Trust Deed, a copy of which has been placed on record, is concerned. The Trust Deed requires the trust to utilize its funds for charitable purposes which are medical relief, education and relief to the poor. In the application seeking exemption, the Assesses has specified these three objects. We are of the opinion that it was not required for the Assesses to be more specific with regard to the utilization of the funds.
13 It is true that the Assesses has mentioned that it is accumulating funds for all the objects for which it was created, but as held by this Court in Hotel and Restaurants Association, [2003] 261 ITR 190 plurality of purposes is permitted and if it so happens that an assesses has only three objects or purposes, it may well utilize the funds for all the three objects and purposes.
14 In view of two Division Bench decisions of this Court, we see no reason to adopt the view taken by the Calcutta and Madras High Courts.
15 In the facts and circumstances, we answer the question in the negative and in favour of the Assesses. The appeal is, accordingly, disposed of.
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