ORDER
1. The Income Tax Appellate Tribunal, Delhi Bench, New Delhi has referred the following questions of law under Section 256(1) of the Income Tax Act, 1961 Income Tax Act for opinion to this Court:
1. Whether, in law and circumstances of the case, the IT AT was justified in holding that the assessee-trust was not hit by Clause (b) of Sub-section (2) of Section 13 read with Section 13(l)(c) of the Income Tax Act, 1961 ?
2. Whether, in law and circumstances of the case, the IT AT was justified in holding that assessee-trust was a public charitable and its income was exempt under Sections 11 and 12 of the Income Tax Act, 1961 ?
2. The reference relates to the years 1977-78, 1978-79 and 1981-82.
Briefly stated the facts giving rise to the present reference are as follows:
The assessment orders for the assessment years 1977-78 and 1978-79 are fresh assessment orders after the original assessment orders were set aside by the then Commissioner (Appeals) with the direction to consider the judgment of the Settlement Commissioner under Section 245D(4) for the assessment years 1967-68 to 1970-71 and 1972-73 to 1976-77. These orders were passed on 11-10-1984 holding that the income of the trust was exempt as public charitable trust. Subsequently, the Income Tax Officer passed fresh assessment orders holding that the income was not so exempt on the ground that a Special Leave Petition had been filed before the Hon'ble Supreme Court against the judgment of the Settlement Commissioner. The assessment for the assessment year 1981-82 is an original assessment, where the income has been held to be taxable and not exempt as a public charitable trust for the same reasons as for assessment years 1977-78 and 1978-79. The Commissioner of Incomes-tax (Appeals), after considering the facts and circumstances of the case, held that the provisions of Section 13(2)(b) were not applicable and the assessee cannot be denied exemption under Sections 11 and 12 due to this reason. As regards assessment years 1977-78 and 1978-79, the Commissioner (Appeals) found that his predecessor has set aside the assessment orders for the above years and directed the Income Tax Officer to take into consideration the judgment of the Settlement Commissioner and thus limited the scope of enquiry by the Income Tax Officer. The Commissioner (Appeals), therefore, held that the Income Tax Officer was not authorised to raise the issue of applicability of Section 13(2)(b) in the fresh assessments for these two years. He, accordingly, annulled the finding of the Income Tax Officer in this regard.
3. The department came in appeal to the Tribunal. After considering the submissions, the Appellate Tribunal dealt with the matter in the following words:
5. We have considered the submissions of the parties and have gone through the orders of the authorities below. We agree with the submissions of the Authorised Representative for the assessee that the assessee preferred appeals before the Commissioner (Appeals) and he has considered the implication of Section 13(2)(fe) of the Act for the assessment years under appeal. It is, therefore, not correct to say that the Commissioner (Appeals) has not considered the implication of Section 13 of the Act before allowing exemption. It is also true that the department has not taken specific ground to assail the finding of the Commissioner (Appeals) that he has not considered the implications and limitations as laid down in Section 13 of the Act. It is also clear from the order of the Commissioner (Appeals) that he has considered the provisions of Section 13(2)(fe), and the department cannot raise fresh plea at this stage without raising an additional ground. Since no additional ground has been taken, we refuse to consider the fresh plea taken by the departmental Representative. Now, the only point for adjudication before us whether the Commissioner (Appeals) was justified in holding that the assessee-trust is exempt as wholly charitable trust when the matter was still sub-judice and the S.L.P. was pending before the Hon'ble Supreme Court. The departmental Representative failed to state before us whether the S.L.P. was still pending or has since been decided. As already stated, since the additional plea raised by the departmental Representative cannot be agitated before us, therefore, we refuse to adjudicate upon the same. Now the remaining grounds taken by the department are squarely covered in favour of the assessee by the decision of the Tribunal dated 6-2-1988 in ITA No. 2280 (All.) of 1984 (supra). Respectfully following the aforesaid decision, we are of the opinion that there is no force in these appeals.
4. We have heard Sri R.K. Upadhyaya, learned standing counsel for the Brevenue. We may bring on record that this case was taken up by this Court on 21-8-2006 in the revised list and on hearing Sri Upadhyaya at length as Sri A.A. Khan, learned Counsel for the respondent-assessee was not present the matter was adjourned for today, i.e., 22-8-2006 with a direction to Sri Upadhyaya to inform Sri Khan in writing about this case being taken up today. His efforts to serve the notice on Sri Khan failed as his clerk refused to accept any notice. We are, therefore, proceeding on the basis of arguments advance by Sri R.K. Upadhyaya.
5. Sri Upadhyaya has produced before us a copy of the order dated 9-10-2001 passed by Hon'ble Supreme Court in Shervani Charitable Trust v. CIT (2002) 120 Taxman 496, wherein the Apex court has observed that a fraud was played by the rectification of the trust deed by altering the very object of the trust. The Apex court was satisfied that trust deed must beread as it originally stood and that, that is the manner in which the appellant-trust should now be assessed.
6. In the present case, we find from the trust deed that the income of the trust after defraying its expenses was to be spent equally, i.e., 1/3rd on genuine charitable objects; l/3rd on the maintenance and support of the members of the settlor's family and relatives and 1 /3rd on remuneration to the trustees. As only 1 /3rd of the income was to be spent on charitable objects, the trust ceased to be trust for charitable purposes. Therefore, exemption was not justified.
7. We, accordingly, answer two questions referred to us in the negative, i.e., in favour of the revenue and against the assessee. There shall be no order as to costs.