ARVINDKUMAR J SAHEBA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following three questions have been referred to us by the Tribunal, Ahmedabad, for our opinion :

(2.) THESE questions arise in the following circumstances : The assessment years with which we are concerned in this reference are 1962 63 and 1963 64, the previous years being S.Ys. 2017 and 2018 ending on 8th Nov., 1961, and 28th Oct., 1962, respectively. The assessee is a public religious and charitable trust and is registered under the provisions of the Bombay Public Trusts Act, 1950. A scheme for the said trust was originally framed by the District Judge, Ahmedabad, by his judgment and order of 23rd July, 1900. The scheme was amended by the District Court by its subsequent order of 4th Feb., 1916. A new scheme was framed by the District Judge by his judgment and order of 23rd Aug., 1960, in Civil Suit No. 2 of 1959, under the provisions of the Bombay Public Trusts Act, 1950. Under the relevant cls. 12, 13 and 14 of the present scheme, the trustees, after meeting with all the necessary out goings on account of rates, taxes, assessment and expenses incidental to the administration of the trust and worship of the deity of the temple known as "Karna Mukteshwar Mahadev Trust" of Ahmedabad and also on account of the current repairs and upkeep charges, are under obligation to distribute the surplus income by setting apart 50% thereof for reserve fund and the remaining 50% to be divided equally between the hereditary trustees and pujari, Kunjvihari K. Bhatt, and pujari, Harihar T. Bhatt, respectively, and such payments to the hereditary trustee cum pujaris to be treated as their absolute property. The amount standing to the credit of the reserve fund is to be invested according to the provisions of the Bombay Public Trusts Act but out of the annual contribution to the reserve fund, 20% is to be utilised for religious, educational and/or medical purposes with the sanction of the District Court.

(3.) BEING aggrieved with this order of the ITO, the trust carried the matter in appeal before the AAC, Ahmedabad, who, by his order of 21st Dec., 1971, confirmed the view of the ITO that the assessee's case would fall under S. 11(1)(b) of the said Act as in his opinion this was a case where the income was only partly applied to the religious purposes. He also rejected the alternative claim of the trust that the said payments must be treated as allowable expenditure. However, in his opinion, since the ITO had not properly computed the income which was exempt, he remanded the matter to the ITO for recomputation of the income which was actually exempted from the liability of tax.