Cochin Chamber of Commerce and Industry vs Commissioner of Income Tax

K.S. Paripoornan, J.—At the instance of the assessee, the Income Tax Appellate Tribunal has referred the following questions of law in the five referred cases for the decision of this court :

"In O.P. Nos. 538 and 539 of 1979-L :

Whether, on the facts and in the circumstances of the case, the income from interest on Government securities, dividend from shares in companies and interest from bank deposits in respect of which no activity for profit is carried on by the assessee-Chamber of Commerce are exempt under the provisions of Section 11 of the Income Tax Act, 1961 ?

When no objection is raised by the assessing authority and the Appellate Assistant Commissioner that the assessee had not filed application in Form No. 10 for accumulation of income or that he had not applied for registration u/s 12A of the Act, was the Appellate Tribunal justified in holding for the first time that the assessee had not filed such application or had not applied for such registration ?

In O. P. Nos. 534 and 577 of 1979 :

Whether, on the facts and in the circumstances of the case, the income from interest on Government securities, dividends from shares of companies and interest from bank deposits in respect of which no activity for profit is carried on by the assessee-Chamber of Commerce is exempt under the provisions of Section 11 of the Income Tax Act, 1961 ?

In O. P. No. 573 of 1979-B :

Whether, on the facts and in the circumstances of the case, the income of the assessee-Chamber from interest on Government securities, dividends from shares in companies and interest from bank deposits in respect of which no activity for profit is carried on by the assessee-Cham-ber are exempt under the provisions of Section 11 of the Income Tax Act 1961 ?"

We are concerned with the assessment years 1970-71, 1971-72 and 1972-73 on the one hand and with the assessment years 1973-74 and 1974-75 on the other. The following questions have been referred for the years 1970-71, 1971-72 and 1972-73 ;

"1. Whether, on the facts and in the circumstances of the case, the income from interest on Government securities, dividends from shares of companies and interest from bank deposits in respect of which no activity for profit is carried on by the assessee-Chamber of Commerce is exempt under the provisions of Section 11 of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, the income of the assessee-Chamber from interest on Government securities, dividends from shares in companies and interest from bank deposits in respect of which no activity for profit is carried on by the assessee-Chamber are exempt under the provisions of Section 11 of the Income Tax Act, 1961 ?"

For the years 1973-74 and 1974-75, the following two questions have been referred for the decision of this court :

Whether, on the facts and in the circumstances of the case, the income from interest on Government securities, dividends from shares in companies and interest from bank deposits in respect of which no activity for profit is carried on by the assessee-Chamber of Commerce are exempt under the provisions of Section 11 of the Income Tax Act 1961 ?

When no objection is raised by the assessing authority and the Appellate Assistant Commissioner that the assessee had not filed application in Form No. 10 for accumulation of income or that he had not applied for registration u/s 12A of the Act, was the Appellate Tribunal justified in holding for the first time that the assessee had not filed such application or had not applied for such registration ?"

The questions referred for all the five years (and the first question for the years 1973-74 and 1974-75) are with regard to a common question of law. The assessee-applicant was in receipt of income from interest on Government securities, dividends from shares in companies and interest from bank deposits. The assessee is the Cochin Chamber of Commerce and Industry. It is a public trust as envisaged by Section 11 of the Income Tax Act, 1961 (in short, "the Act"). This court had held in the case of the same assessee that it is a public charitable trust entitled to exemption u/s 11 of the Act- Commissioner of Income Tax Vs. Cochin Chamber of Commerce and Industry, . But the said decision was overruled by the Supreme Court in Indian Chamber of Commerce Vs. Commissioner of Income Tax , West Bengal II, Calcutta, . Based on the said decision of the Supreme Court Indian Chamber of Commerce Vs. Commissioner of Income Tax , West Bengal II, Calcutta, , the Income Tax Appellate Tribunal held that the assessee is not entitled to exemption u/s 11 of the Act. Subsequent to the orders passed by the Appellate Tribunal for the above five years, the Supreme Court in Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association, , overruled the decision in Indian Chamber of Commerce Vs. Commissioner of Income Tax , West Bengal II, Calcutta, , which, in effect, restored the earlier decision of this court in Commissioner of Income Tax Vs. Cochin Chamber of Commerce and Industry, . It is fairly clear, in the light of the Supreme Court decision in Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association, , that the assessee which is a public charitable trust is entitled to the exemption of its income u/s 11 of the Act. Therefore, we answer the common question referred for all the five years in the affirmative, in favour of the assessee and against the Revenue. We hold that the applicant-assessee is entitled to exemption u/s 11 of the Act regarding its income from interest on Government securities, dividends from shares in companies and interest from bank deposits.

An additional question has been referred for the years 1973-74 and 1974-75. For these two years, the Appellate Tribunal passed its appellate order dated March 8, 1978, holding that the applicant-assessee is not entitled to exemption u/s 11 of the Act since it was not shown that the assessee had asked for registration u/s 12A or that it had filed the application in Form No. 10 asking for accumulation of the unexpended portion of income. Counsel for the assessee submitted that the above plea was neither taken by the assessing authority, nor at the first appellate stage, nor was it taken before the Appellate Tribunal. Counsel referred to us the certificate granted by the Commissioner of Income Tax dated August 18, 1975, which shows that the application filed by the assessee u/s 12A was admitted and that the application in Form No. 10A was received. The question as to whether the assessee filed the application in Form No. 10 for accumulation of income or had applied for registration u/s 12A of the Act is substantially a question of fact. The Appellate Tribunal has, in a cryptic order, dated March 8, 1978, observed that the assessee had failed to apply for registration u/s 12A of the Act and also had failed to file an application in Form No. 10 asking for accumulation. The records produced before us at pages 42 to 46 of the paper book show that this is not a correct statement. Anyhow, it is for the fact-finding authority to adjudicate the issue after proper notice and hearing of the assessee and the Revenue. We hold that the way in which the Appellate Tribunal has disposed of the matter is far from satisfactory. While we decline to answer question No. 2 referred to us for the years 1973-74 and 1974-75, we direct the Appellate Tribunal to restore the appeals for these two years to file and dispose of the appeals in accordance with law and in the light of the observations contained herein.

The Income Tax referred cases are disposed of accordingly.

A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.