Commissioner of Income Tax vs Hawbai Trust

T. Kochu Tommen, J.—Pursuant to the directions of this court in O.P. Nos. 3435, 3436 and 3466 of 1977, the Income Tax Appellate Tribunal, Cochin Bench, has referred to us the following questions :

"1. Whether, on the facts and in the circumstances of the case, one-fourth of the income set apart for augmenting the trust properties of the assessee is entitled to exemption u/s 11 of the Income Tax Act, 1961 ?

Whether, on the facts and in the circumstances of the case, there are materials for the Tribunal to hold that allocation for augmentation of the properties is for the furtherance of other objects and is not, by itself, an object, and is not the above finding wrong and unreasonable in law ?

Whether, on the facts and in the circumstances of the case, giving preference to poor relatives militates against the charitable nature of the objects and disentitles the assessee to exemption u/s 11 of the Act ? "

In the light of the decision of this court in COMMISSIONER OF AGRICULTURAL Income Tax, KERALA Vs. ABDUL SATHAR HAJI MOOSA SAIT., , as confirmed by the Supreme Court in Abdul Sathar Haji Moosa Sait Dharmastapanam Vs. Commissioner of Agricultural Income Tax, Kerala, , question No. 3 has to be answered in favour of the Revenue and against the assessee. We do so.

As regards question No. 1, it has to be stated that on the facts stated by the assessee, it is clear that one-fourth of the income set apart for augmenting the trust properties did not attract the provisions of Section 11(2) of the Income Tax Act, 1961, because that money was invested for acquisition and construction of properties and buildings and not for investment and deposit in specified securities as mentioned in the subsection. In the circumstances, question No. 1 is answered in favour of the Revenue and against the assessee.

In the light of our answer to question No. 1, we decline to answer question No. 2. That question is accordingly not answered.

We direct the parties to bear their respective costs in these tax referred cases.

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