Director of Income Tax vs Alarippu

Pasayat, C.J.—Prayer for reference u/s 256(1) of the income tax Act, 1961 (''the Act'') made by the revenue was turned down by the Tribunal, Delhi Bench ''C'', and, hence, this application u/s 256(2). Factual position so far as not in dispute is as follows.

The assessee is a society registered u/s 12A(a) of the Act. The dispute relates to the assessment year 1988-89. Prior to the said assessment period, all through assessments were completed u/s 143(1) at '' nil '' income. The assessee is a voluntary group which in association with other voluntary organizations stages plays to educate people on various social problems. During the assessment year in question, the assessee-society had given Rs. 50,000 to Mahila Haat to which the dispute relates. Application of income was held to be to the extent of Rs. 5,69,186 as against Rs. 7,94,200 claimed by the assessee. The Assessing Officer held that there was infringement in terms of section 13(1)(d), read with section 11(5), and as such benefit u/s 11 was denied. The Commissioner (Appeals)-XVI confirmed the denial of benefit u/s 11. The matter was carried in appeal to the Tribunal. Referring to the factual aspects brought on record, the Tribunal held that the expressions ''investment'' and ''deposit'' have no application to the facts of the case and the sum of Rs. 50,000 was not an investment or deposit to constitute infringement, as alleged by the revenue. As noted at the outset, an application u/s 256(1) was filed, which was rejected on the ground that no question of law arises as the issue was decided on appreciation of facts.

The learned counsel for the revenue submitted that the Tribunal''s conclusion though essentially factual, does not reflect the actual position in law and it ought to have held that the amount constituted a deposit even if for the sake of argument it is conceded that it did not amount to an investment.

At this juncture, it is to be noted that the Tribunal itself referred to the factual position in detail. It was observed that the assessee had given an amount of Rs. 50,000 to Mahila Haat (Rural) through Mahila Vikas Sangh, Patna, as directed by the donor agency, namely, Oxfam America. The latter by a letter dated 9-4-1987 informed the assessee that a sum of Rs. 2,15,400 had been sent to the society along with Rs. 2,24,000 sent to Mahila Haat. The assessee was requested to give a temporary loan up to Rs. 50,000 to Mahila Haat, in case there was delay in receipt of the money. Complying with the request, the assessee sent the amount to Mahila Haat as certified by Mahila Vikas Sangh. The amount was utilised for organizing a seminar for the Mahila Haat. Mahila Vikas Sangh has been granted exemption u/s 80G by the Commissioner, Patna. Bye-laws of Mahila Vikas Sangh are similar to those contained in the memorandum of association of the assessee-society. Since the amount was utilised for similar objects as available in the case of the assessee, its stand was that same constituted application of income. The Tribunal recorded a positive finding that the expressions ''investment'' and ''deposit'' do not cover a transaction of the nature involved at hand.

In order to appreciate the submissions made by the learned counsel for the revenue, it is necessary to quote sections 11(5) and 13(1)(d). They read as follows:

11(5). The forms and modes of investing or depositing the money referred to in clause (b) of sub-section (2) shall be the following, namely:-

(i) Investment in savings certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government;

(ii) Deposit in any account with the Post Office Savings Bank;

(iii) Deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of a banking (including a co-operative land mortgage bank or a co-operative land development bank);

(iv) Investment in units of the Unit Trust of India, established under the Unit Trust of India Act, 1963 (52 of 1963);

(v) Investment in any security for money created and issued by the Central Government or a State Government;

(vi) Investment in debentures issued by or on behalf of, any company or corporation both the principal whereof and the interest whereof are fully and unconditionally guaranteed by the Central Government or by a State Government;

(vii) Investment or deposit in any public sector company;

(viii) Deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long-term finance for industrial development in India and which is approved by the Central Government for the purpose of clause (viii) of sub-section (1) of section 36;

(ix) Deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36;

(x) Investment in immovable property;

(xi) Deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);

(xii) Any other form or mode of investment or deposit as may be prescribed.

Section 11 not to apply in certain cases.- (1)(d) Nothing contained in section 11 (or section 12) shall operate so as to exclude from the total income of the previous year of the person in receipt thereof-

(a)to (c) ****

(d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year-

(i) any funds of the trust or institution are invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or

(ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or

(iii) any shares in a company not being a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central State or Provincial Act are held by the trust or institution after the 30th day of November, 1983:

Provided that nothing in this clause shall apply in relation to-

(i) any assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on the 1st day of June, 1973;

(ii) any accretion to the shares, forming part of the corpus mentioned in clause ( i)by way of bonus shares allotted to the trust or institution;

The expressions used in both the provisions, quoted above, are ''investment'' and ''deposit''. Former expression means to lay out money in business with a view to obtain income or profit. Deposit, on the other hand, means that which is placed anywhere, as in any one''s hands for safe keeping, something entrusted to the care of another. These two expressions have been used in cognate sense and have to be understood as such. In order to constitute an investment, the amount laid out should be capable of and result in any income, return or profit to the investor and in every case of investment the intention and positive act on the part of the investor should be to earn such income, returns, profit. In order to constitute an investment, the monies shall be laid out in such a manner as to acquire some species of property which would bring in an income to the investor. Loan, on the other hand, is granting temporary use of money, or temporary accommodation. The words ''investment'', ''deposit'' and ''loan'' are certainly different. Section 11(5) refers to pattern of investment by the assessee. Section 11(5) was introduced by the Finance Act, 1983, with effect from 1-4-1983, i.e., for and from the assessment year 1983-84. It prescribes the forms and modes of investing and depositing money referred to in section 11(2)(6). Subsequently, new forms and modes have been added. Section 13(1)(d), as amended by the Finance Act, 1983, provides that the income of any charitable or religious trust or institution will not be entitled to exemption under sections 11 and 12, if certain conditions stipulated therein are not complied with. The word ''deposit'' does not cover transaction of loan which can be more appropriately described as direct bailment. The essence of deposit is that there must be a liability to return it to the party by whom or on whose behalf it has been made on fulfillment of certain conditions. In the commercial sense, the term is used to indicate the aforesaid transaction as deposit of money for employment, in business, deposits for value to initiate security for, deposit of title deeds, similar documents as security for loan, deposit of money bills in a bank in the ordinary course of business of current account and deposits a sum of interest on a fixed deposit in a bank. Amount given to Mahila Haat was neither for the purpose of investment nor for deposit, more particularly in the factual background as highlighted above. The transaction with which the present dispute is linked cannot be treated as investment or deposit as has been factually found by the Tribunal. The conclusion being essentially factual, no question of law arises out of the order of the Tribunal. Accordingly, the petition is dismissed.