DIRECTOR OF INCOME TAX EXEMPTIONS Vs. THANTHI TRUST

JUDGEMENT

(1.) IN these tax case petitions, the Department requested to direct the Tribunal to refer the following common questions of law said to arise out of the common order of the Tribunal for the assessment years 1975-76 and 1976-77 for our opinion under section 256(2) of the INcome-tax Act, 1961 :

(2.) THE assessee is a trust deriving income from the running of a newspaper called Dina Thanthi. As a result of the search in the premises of the assessee, the Income-tax Officer was of the view that the income chargeable to tax has escaped assessment. Accordingly, he issued notice under section 148 of the Act for the assessment years 1975-76 and 1976-77. THE assessee filed a return for the assessment year 1975-76 showing loss and claimed that if any positive income is assessed it would be exempted under section 11 of the Act and for the assessment year 1976-77, the assessee claimed that the chargeable income was "nil". THE Income-tax Officer denied the exemption under section 11 of the Act on the ground that the assessee had violated the provisions of section 13(1)(c) of the Act by allowing the trust to have the benefit of the funds of the assessee, since the assessee had allowed its godown to be used for keeping stocks of Rani Publications which was the proprietary concern of the trustee. THE Income-tax Officer also invoked the provisions of section 11(4) of the Act and held that the excess income determined by him was deemed to be applied for purposes other than charitable or religious in nature. On appeal, in so far as the application of section 11(4) of the Act is concerned, the Commissioner of Income-tax (Appeals) agreed with the Income-tax Officer. But, in respect of certain quantum of additions, the Commissioner of Income-tax (Appeals) thought it fit to remit back the issue to the Income-tax Officer for verification. However, on further appeal, the Tribunal considered that the additions made in respect of the excessive waste, sale of waste, trade discount and cash credit are not sustainable. This conclusion was arrived at by the Tribunal on an appraisal of facts arising in respect of the abovesaid four items. Accordingly, the Tribunal held that section 11(4) of the Act is not applicable to the facts of the case and the additions made in respect of the abovesaid four items were deleted.