COMMISSIONER OF INCOME TAX Vs. NIRMALA BAKUBHAI FOUNDATION

JUDGEMENT

(1.) THE Tribunal has referred the following questions for the opinion of this Court.

(2.) SO far as IT Ref. No. 161 of 1984 is concerned, the following two questions are referred for the opinion of this Court :

(3.) THE assessee is a charitable trust and the relevant year for the assessment is 1978 79. The previous year ended on 31st March, 1978. B.M. Institute is also a charitable entity to which out of the amounts paid Rs. 2,12,970 were claimed under S. 11 of the IT Act, 1961 (hereinafter referred to as "the Act"). It appears that on 1st April, 1977 in the books of account of the assessee, there was an outstanding debit balance of Rs. 5,29,678.08 and on 31st March, 1978 there was a debit balance to the tune of Rs. 7,36,359.78. During the year Rs. 4,85,008.25 have been paid to B.M. Institute by the assessee. On 31st March, 1978, the assessee passed a resolution resolving that out of the total amount of Rs. 9,87,743.50 advanced to B.M. Institute the amount of Rs. 2,12,969.54 be treated as contribution from the foundation to B.M. Institute and the same be earmarked for meeting the excess expenditure, in the income and expenditure account of the Institute as on 1st April, 1977. The amount be adjusted against the deposit balance in the income and expenditure account of the Institute as on 1st April, 1977. Thus, it appears that during the year the assessee has paid in all Rs. 4,58,008.25. The CIT(A) upheld the ITO's action in disallowing deduction of Rs. 2,12,970 under S. 11 of the Act. Against which, on appeal, the Tribunal held "once the assessee had shown that it had earned income of Rs.2,16,304 in the previous year relevant to the assessment year under appeal, we are not prepared to accede to the stand taken on behalf of the Revenue that the assessee would not be entitled to claim exemption under S. 11 of the Act in respect of contribution of Rs. 2,12,970 made to B.M. Institute merely because the assessee had not paid in cash the said amount to the said Institute but it had passed necessary resolutions as well as entries in its books of accounts. For all these reasons, we have no hesitation in upholding the assessee's claim for exemption under S. 11 of the Act in respect of contribution of Rs. 2,12,970 made to B.M. Institute. The ITO is, therefore, directed to modify the assessment accordingly." Thus, on record there is a finding that the assessee earned income of Rs. 2,16,304 in the previous year relevant to the assessment year under appeal and a sum of Rs. 4,85,008.25 has been paid during the year to B.M. Institute which includes the income earned by the assessee. The copy of account produced on the record clearly indicates that by different cheques or pay orders, the amount has been paid to B.M. Institute and a decision was taken that out of the total amount, only Rs. 2,12,967.54 be treated by way of contribution from the foundation to B.M. Institute. In our view, it would attract the provisions contained in S. 11 of the Act and in the facts and circumstances of case, the Tribunal is justified in taking the view and therefore, with regard to that question, we answer in favour of the assessee and against the Revenue.