BHRIGURAJ CHARITY TRUST Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE IT references raise the question of the entitlement of Bhriguraj Charity Trust, New Delhi, to exemption from income -tax for the asst. yrs. 1965 -66 to 1969 -70 and 1971 -72 under the provisions of S. 11 of the INCOME TAX ACT, 1961.

(2.) THE question involved is whether the trust is a charitable trust within the meaning of Ss. 11 and 12 of the INCOME TAX ACT, 1961. The claim of the assessee has been that it was a public charitable trust. The Revenue was of the opinion that it is a private charitable trust not entitled to exemption provided under Ss. 11 and 12 of the Act. The ITO after examining the trust deed held that the objects of the trust were not wholly and exclusively charitable but only partly charitable. Following the same view, which had been taken in the earlier assessment years, where exemption was claimed and was not allowed, the ITO brought the income to tax for the assessment years in question. The assessee's appeals were dismissed by the AAC after following the decision of this Court in CIT vs. Jaipur Charitable Trust (1971) 81 ITR 1 (Del) : TC 23R.1109. An appeal was preferred by the assessee before the Tribunal. The assessee filed additional documents for consideration of the Tribunal, which included a copy of the plaint, judgment and decree in a suit filed for rectification of the trust deed in question under the provisions of the Specific Relief Act. The assessee's suit had been decreed on 5th Oct., 1972, by the civil Court permitting rectification of the trust deed with retrospective effect from 9th March, 1949. The Tribunal admitted the additional documents. The order of the AAC was set aside by the Tribunal. The cases were remanded with directions to dispose of the appeals on the merits in accordance with law. The AAC again dismissed the appeals. He observed that the decretal order passed by the sub -judge would not be binding upon the IT authorities and held that the judgment of this Court in Jaipur Charitable Trust's case (supra) will apply with full force to the facts of the case and that the assessee was not entitled to exemption under Ss. 11 and 12 of the IT Act. The assessee preferred appeals to the Tribunal. The Tribunal also dismissed the appeals. The Tribunal agreed with the view expressed by the AAC holding that the compromise decree passed by the civil Court could not have a binding effect on the IT authorities and the IT authorities are entitled to go behind the decree to get the real facts particularly when the decree was a consent decree. The Tribunal also considered the retrospective nature of the amendment of the trust deed and held that rectification deed cannot have any effect on the deeds already done in good faith by the trustees in the relevant assessment years. The Tribunal also held that the decision of the Delhi High Court in Jaipur Charitable Trust's case (supra) would fully apply to the facts of the case in respect of the amendment to the trust deed and the trust was not entitled to exemption. The following question has been referred to this Court for opinion in these references :

(3.) ON the ratio of the decision of Kamla Town Trust's case (supra), since the decree was passed by the civil Court on 5th April, 1972, (sic) the same will have only prospective operation and will not affect the assessment years in question, which are prior to the date of the civil Court's decree.