HINDUSTAN CHAMBER OF COMMERCE Vs. INCOME-TAX OFFICER

JUDGEMENT

(1.) These two appeals filed by the assessee arise out of the orders dated 1-2-1982 of the learned Commissioner (Appeals).

(2.) The assessee is a company registered under section 25 of the Companies Act, 1956, as a charitable organisation. For the assessment years 1975-76 and 1976 in question, the assessee declared a total income of Rs. 1,400 and a total loss of Rs. 7,209, respectively. The gross receipts for these years were Rs. 28,502 and Rs. 35,442 which included incomes by way of weighbridge amounting to Rs. 26,331 and Rs. 33,644, rescpectively. Out of this, for the assessment year 1975-76, an amount of Rs. 16,101 was claimed to have been applied for charitable and religious purposes in India during the previous year and Rs. 11,000 were said to have been set apart for to charitable and religious purposes in India. The balance of Rs. 1,400 was offered for taxation by the assessee. The income and expenditure account for the assessment year 1975-76 showed an excess of income over expenditure to the tune of Rs. 11,176 after deducting income-tax paid at Rs. 8,002. The excess of income over expenditure was, therefore, Rs. 19,178. For the assessment year 1976-77 the excess of income over expenditure as per income and expenditure account was Rs. 19,552 (Rs. 19,000 having been set apart for to charitable and religious purposes in India). For the assessment years 1972-73 and 1973-74, the assessee had filed returns showing nil income and the receipts were claimed by the assessee to be exempt on the principle of mutuality. However, this contention was not accepted up to the stage of the Tribunal. The receipts from weighbridge were held to be not exempt. The interest income on fixed deposit was also taxed. For the assessment years in question, the assessee had claimed exemption on the ground that till then Surat Art Silk Cloth Mrs. Association, 1980 121 ITR 1 had not come. Therefore, it was claimed that the decision for the assessment 1972-73 and 1973-74 could not operate as res judicata against the assessee. It was claimed that the assessee was an institution established for charitable purposes as defined under section 2(15) of the Income-tax Act, 1962 (the Act). It was claimed that the case of the assessee was particularly covered under the expression advancement of any other object of general public utility not involving the carrying on of any activity for profit. Exemption was, therefore, claimed in respect of the income under section 11(1) of the Act. The assessee also claimed the benefit of section 11(1) (a) in respect of the accumulation set apart by the assessee as aforesaid for weighbridge. It was pointed out on behalf of the assessee before the ITO that the income from weighbridge was not out of any activity for profit but was from the use of its assets. However, the ITO held that the receipts from weighbridge represented income from activity for profit. The ITO held that section 11(1) does not distinguish between the activity for profit for advancement of charitable purposes or otherwise. The assessee had also claimed the benefit of section 11(2) (a) which applies to a case where the income of charitable institution is accumulated or set apart for to charitable or religious purposes. The income to accumulated or set apart if utilised for charitable and religious purposes in India during the previous year in which the income was derived would be exempt from tax provided the assessee exercise the option in writing before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139 of the act whether fixed originally or on extension, for furnishing the return of income. This is the combined result which flows from section 11(2) (a), read with rule 17 of the Income-tax Rules, 1962. The ITO held that no notice of option having been exercised had been given by the assessee. He noticed that for the assessment year 1975-76 such notice was given as late as 28-1-1978, whereas the same should have been given on or before 30-6-1975. No extension for filing of the return having been granted, the ITO rejected the assessees claim. He also held that the delay could not be condoned because he had no express power under the Act to condone such delay., Even otherwise, he held that the assessee had not been able to point out any cogent and solid reasons as to why the notices as required authority 11(2) (a) could not be given by the assessee within the time allowed. The ITO, therefore, held that the case of the assessee for claim of exemption fell authority 11(1) as well authority 11(2) (a). He relied upon the order dated 15-10-1975 of the Tribunal for the assessment years 1972-73 and 1973-74 and assessed the assessee in respect of the amounts of Rs. 19,178 and Rs. 19,552 for the assessment years in question as aforesaid.

(3.) The assessee being aggrieved, came up in appeals, before the Supreme Court (supra). The stand taken up on its behalf was :