Commissioner of Income Tax vs Sri Baldeo Ji Maharaj

M.C. Agarwal, J.—The Tribunal, Allahabad, has referred the following question, stated to be of law and to arise out of its order dated 26-8-1978, passed in income tax Appeal Nos. 2625 and 2626 (All.) of 1977-78 for the assessment years 1975-76 and 1976-77, for the opinion of this Court: Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was legally justified in holding that the provisions of section 13 are not applicable in this case and that the assessee-trust is entitled to exemption under sections 11 and 12 of the income tax Act?

We have heard Shri Rajesh Kumar Agarwal, the learned standing counsel for the revenue. No one appeared on behalf of the assessee-respondent.

The question was whether any part of the income or property of the assessee-trust was during the concerned previous years used or applied directly or indirectly for the benefit of any person referred to in sub-section (3). One Shri Padampat Singhania was the trustee of the assessee-trust. He held over 20 per cent profit sharing rights in J.K. Bankers with whom the assessee-trust had deposited money in a current account carrying interest at 91/2 per cent.

The ITO took the view that the interest charged was lower and the loan was not adequately secured. He, therefore, took the view that the trust had violated the provisions of section 13(1)(c)(ii) and was not entitled to exemption. The Tribunal has discussed the matter in all necessary details and held that there was no evidence to show that the loan was not adequately secured and the interest charged was also adequate in the facts and circumstances of the case. The Tribunal, therefore, concluded that there was no violation of the aforesaid provision of law and the trust was entitled to exemption u/s 11 of the Act. As is evident, the findings of the Tribunal about the adequacy of the security and the interest are findings of fact. It is not the revenue''s case that these findings are not based on any material. These findings are, therefore, binding on us in proceedings u/s 256(2) of the Act. On the aforesaid findings, we answer to the question as referred by the Tribunal saying that the Tribunal was right in holding that the provisions of section 13 are not applicable in this case and that the assessee-trust is entitled to exemption under sections 11 and 12 of the Act. We answer the aforesaid question accordingly in the affirmative, in favour of the assessee and against the revenue.