Janki Devi Bajaj Seva Trust vs Commissioner of Income Tax

This application u/s 256(2) of the I.T. Act, 1961, has been moved by the assessee on account of the refusal of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur, to make a reference to this court regarding questions of law arising out of the order of the Tribunal dated February 26, 1980.

The assessee is a charitable trust. In its return for the assessment year 1975-76, relatable to the accounting period from January 1, 1974, to December 31, 1974, the assessee, besides other expenditure, claimed the amount of Income Tax, wealth-tax and other taxes and payments made for rent and rates and for establishment expenses as allowable expenditure on the ground that the said amount was applied for charitable purposes. The ITO by his order dated August 29, 1977, disallowed the aforesaid claim of the assessee. On appeal, the AAC, Udaipur, by his order dated November 21, 1978, allowed the claim of the assessee on the ground that payments of Income Tax, wealth-tax and other taxes were made to meet the legal liabilities in respect of the charitable institution and should be treated as an application of income of the trust for charitable purposes. The same view was taken by the AAC in respect of other expenses incurred by the assessee relating to rent, rates and establishment expenses. On appeal by the Department, the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated February 26, 1980, reversed the decision of the AAC and held that application of the income of the assessee for payment of Income Tax or wealth-tax or other taxes or for payment of rent, rates or establishment expenses could not be treated as expenditure incurred for specific charitable purposes and so the same could not be held to be application of the income of the assessee for charitable purposes.

The assessee submitted an application u/s 256(1) of the I.T. Act, 1961, before the Appellate Tribunal requesting it to refer the question of law arising out of the order of the Tribunal dated February 26, 1980, to this court. But, as mentioned earlier, the Tribunal rejected the application on the ground that the decision of the Tribunal in respect of expenditure claimed to be allowable by the assessee was purely a finding of fact by the Appellate Tribunal because the payment of taxes and incurring other expenditure claimed by the assessee could not be held to have been made for the purpose for which the trust was created and so no question of law arose out of the order of the Tribunal dated February 26, 1980.

We have heard learned counsel for the parties. There is no dispute between the parties so far as questions of fact are concerned. It is not disputed that the amount claimed as allowable expenditure by the assessee related to expenditure incurred by the assessee for making payment of Income Tax, wealth-tax and other taxes and for payment of rent, rates and for incurring establishment expenses. Therefore, the question which arose was as to whether such expenditure could be treated as an application of income of the asscssee for charitable purposes. In our view, the following question of law clearly arises out of the order passed by the Appellate Tribunal dated February 26, 1980 :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that any expenditure incurred by the assessce trust for making payment of Income Tax, wealth-tax or other taxes or for payment of rents, rates or for establishment expenses during the period of three months referred to in the Explanation to Section 11 of the Income Tax Act, 1961, could not be considered as an application of the income of the assessce for charitable purposes ?"

We, therefore, direct the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur, to state the case and refer the aforesaid question of law arising out of its order dated February 26, 1980, to this court for its opinion.

The parties shall bear their own costs of these proceedings.