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Predominant object of the activity involved in carrying out the object of the general public utility is to sub serve the charitable purpose or to earn profit
March, 08th 2007

IN THE INCOME TAX APPELLATE TRIBUNAL

(SPECIAL BENCH B : NEW DELHI) 

BEFORE SHRI R.V. EASWAR, VICE PRESIDENT,

SHRI P.N. PARASHAR, JUDICIAL MEMBER and

SHRI P.M. JAGTAP, ACCOUNTANT MEMBER 

ITA No.4623/Del/1982

ASSESSMENT YEAR : 1977-78 

M/s. Samaj Kalyan Parishad, Modinagar.

Vs.

Income-tax Officer,

Central Circle-XXVI,

New Delhi.

ITA Nos.5491/Del/1984
ASSESSMENT YEAR : 1980-81 

M/s. Samaj Kalyan Parishad, Modinagar.

Vs.

Income-tax Officer,

Central Circle-XXV,

New Delhi.

ITA Nos.2676/Del/1984

ASSESSMENT YEAR : 1981-82 

M/s. Samaj Kalyan Parishad, Modinagar.

Vs.

Income-tax Officer,

Central Circle-XXV,

New Delhi.

(Appellant)

 

(Respondent)

Assessee by :    Shri Ajay Vohra, Advocate with Shri Rohit Jain, C.A.

Revenue by:      Smt. Sangeeta Gupta,  CIT DR 

 
The test which has now to be applied is whether the predominant object of the activity involved in carrying out the object of the general public utility is to sub serve the charitable purpose or to earn profit.  If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust.  Even if there is no such express provision in the terms of the trust deed, the nature of the charitable purpose, the manner in which the activity for advancing the charitable purpose is being carried on and the surrounding circumstances may clearly indicate that the activity is not propelled by a dominant profit motive.  The mode adopted to carry out the charitable purpose would include a business engaged in for that purpose.  In the light of these principles laid down by the Supreme Court, we are unable to say that the predominant object in carrying on the business of Shilp Kala Kendra is to make profits.( Para 6) 
 
O  R   D  E  R 
 
PER R.V. EASWAR, VICE PRESIDENT :

These appeals have been placed before us pursuant to the directions of the Honble Delhi High Court made on 20th March 2004 in ITR Nos.237 of 1985, 36 of 1991 and 37 of 1991.  These references related to the assessment years 1977-78, 1980-81 and 1981-82.  The question referred to the Honble High Court for the assessment year 1977-78 was as under : 
 
Whether on the facts and circumstances of the case, the Tribunal was right in holding that assessee societys income from insurance business and Shilp Kala Kendra was not exempt from tax under section 11 of I.T. Act? 
 
The common question referred to the Honble High Court for the assessment years 1980-81 and 1981-82 was as under : 
 
Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the predominant object of the activity of Mahila Shilp Kala Kendra was to carry out the charitable purpose and not to earn profit and, therefore, the assessee was entitled to claim exemption under sec.11 for both the assessment years 1980-81 and 1981-1982 in question ? 
 
The Honble High Court has remanded the cases back to the Tribunal for adjudication in accordance with law by observing as under : 
 
Prima facie, we are of the view that the findings are based on the facts.  However, at the bar, learned counsel appearing for the parties were not in a position to state that the Tribunal has examined the question in proper perspective or not and, more particularly, in view of later decisions of the Supreme Court reported in 225 ITR 1010 and 247 ITR 785.  Obviously, the judgments were not there at the relevant time, but as the Tribunal in both the references have given contradictory findings, it would be in the interest of justice to remand the matters back to the Tribunal for adjudication in accordance with law.  The References are disposed of accordingly. 
 
This is how the matter is now before us.  We have heard the rival contentions at length. 
 
2.The brief history of the case may be traced.  The assessee has been constituted as a society registered under the Societies Registration Act.  It was registered on 10.5.1956 with the following objects : 
 
(a)To establish and maintain children homes, clubs, libraries, social-study centres for children and ladies of all creeds and castes. 
 
(b)To establish and maintain centres for adult-education, shilp-kala, sewing for widows or destitute ladies of all creeds and castes. 
 
(c)To establish and maintain dispensaries hospitals, maternity homes for the use of poor persons of all creeds and castes. 
 
(d)To establish and maintain centres for social welfare of children of all creeds and castes. 
 
(e)To help with stipends, fooding, clothing or by other means poor or dumb or blind or such other helpless and needy girls, children and ladies of all creeds and castes. 
 
(f)To establish and maintain institution or institutions for imparting general, vocational industrial, moral and physical education to the children and girls and women of all creeds and castes. 
 
(h)To establish and maintain Dharmshalas, widow-home or any other such charitable institution for the benefit of all classes. 
 
(i)To establish and maintain any charitable institution with a philanthropic purpose which may be in the general interest of the poor of all classes and creeds. 
 
(j)To promote science, literature or fine arts, for instruction and diffusion of useful knowledge of foundation or maintenance of libraries or reading rooms for general use. 
 
(k)To ameliorate the condition of poor women and children of all classes and creeds. 
 
The sources for the above objects consisted of grants in aid from the Social Welfare Board, Lucknow and surplus in Mahila Shilp Kala Kendra at Modi Nagar, Kedarpura, Modipuram and Umesh Park.  At these centres, uniforms etc. of the employees of the various companies of the Modi group were stitched and tailoring charges were earned.  The tailoring work was done by the wives of the workers of the group.  The other source of income was commission from insurance business, but this was only up to 15-12-1976 from which date the business was discontinued by making necessary resolution.  For the assessment year 1977-78, the assessees claim for exemption under section 11 was denied by the Assessing Officer and CIT (Appeals).  The Tribunal to whom an appeal was taken by the assessee examined whether the income earned from the activity of running shilp Kala Kendra and earning insurance commission would be exempt under section 11 and for this purpose, the Tribunal was required to examine the applicability of section 13 (1)(bb).  This section was inserted with effect from 1.4.1977 and provided that the exemption given by sec.11 will not apply to income derived from business carried on by a charitable trust or institution for the relief of the poor, education or medical relief, unless the business is carried on in the course of the actual carrying out of a primary purpose of the trust or institution.  The Tribunal held that neither the activity of shilp kala Kendra nor the activity of insurance agency was carried on in the course of carrying out the primary purpose of the trust and that at best it could only be said that the income from insurance agency business fed the charity which does not satisfy the provisions of sec.13(1)(bb).  The Tribunal noted that the provision in the trust deed enabling the carrying on of the insurance agency business was itself deleted from 15-12-1976, relevant to the year ended 31-3-1977 (assessment year 1977-78).  The Tribunal also held that the shilp kala Kendra was not an activity carried on in the course of carrying out the primary purpose of the trust, and that the said activity was being carried out on commercial lines and the carrying out of the primary purpose of the trust was a very insignificant part of the said activity as is clear from the fact that the tuition fees of Rs.3380 were earned during the year 31-3-1977 as against the receipts of Rs.10,00,232 earned from the insurance agency business, the purchase of cloth of Rs.7 lakhs and odd and the payment of cutting, sewing and printing charges of Rs.1.21 lakhs.  A contention had been taken before the Tribunal on behalf of the assessee that sec.13(1)(bb) was applicable only to a trust or institution which existed for relief of the poor, education and medical relief whereas the assessee-trust was one which was engaged in the advancement of any other object of general public utility and hence the aforesaid provision was not applicable.  Vis--vis this contention, the Tribunal held that even accepting that the words not involving the carrying on of any activity for profit qualified only the last object mentioned in sec.2(15), viz., the advancement of any other object of general public utility and not the first three objects viz., relief of the poor, education and medical relief, still the activity of shilp kala Kendra did involve the carrying on of an activity for profit as indicated by the accounts of the Kendra.  The Tribunal also considered the decision of the Supreme Court in Surat Art Silk Manufacturers Association (121 ITR 1) in which it was held that it was the dominant object of the activity that should be considered to ascertain whether the trust was involved in an activity for profit, and held that profit-making was the dominant or only object in carrying on the insurance agency business or the activity of the shilp kala Kendra.  Thus the Tribunal ultimately held that the assessee was not entitled to the exemption under section.11. 
 
3.The position for the assessment years 1980-81 and 1981-82 was however different.  In these years, the matter was decided by a Special Bench consisting of three Members as it was felt that the earlier order of the Tribunal (Division Bench) for the asst.year 1977-78 required reconsideration.  After considering the legal position expounded by several authorities including the judgments of the Supreme Court in Surat Art Silk Manufacturers Association (supra) and Andhra Pradesh Road Transport Corporation (159 ITR 1) in which the meaning of the words in sec.2(15) viz., not involving the carrying on of an activity for profit was authoritatively laid down, and after examining the factual position with regard to the two activities viz., the insurance agency business and the shilp kala Kendra, the Special Bench recorded the following findings: 
 
(a)The Kendra does not advertise for its products, has no sales managers nor does it search for customers.  Its establishment expenses are low because of this. Tailoring charges are moderate. 
 
(b)The quantum of surplus generated, by itself cannot be a guide to the dominant motive behind the activity because it depends upon the quantum of work done.  The income tax authorities have not placed on record the market rates for tailoring the uniforms for comparison purposes.  There is nothing on record to show that the tailoring charges are fixed on commercial lines. 
 
(c)The degree and extent of profits are not of such nature that it can be inferred that the predominant motive is to make profit. 
 
(d)The assessee accepts orders only from limited number of companies or institutions of Modinagar who place orders on the basis of lowest of the quotations.  This also shows absence of profit motive. 
 
(e)The surplus from the activity necessarily feeds the charitable purpose and this is not disputed by the CIT(A). 
 
(f)The CIT has granted certificate to the trust under section.80-G for the period 1-4-78 to 31-3-82.  He also dropped proceedings initiated under section.263 for withdrawing the exemption granted for the assessment years 78-79 and 79-80. 
 
(g)The decision of the Supreme Court in Surat Art Silk Manufactures Association (supra) shows that sec. 13(1)(bb) cannot be applied to a case where the trust pursues the last head of charity mentioned in sec.2(15) viz., the advancement of any other object of general public utility.  The present case falls under this category. 
 
In the light of the aforesaid findings, the Special Bench held that the assessee was entitled to the exemption under section 11. 
 
4.Both the orders of the Division Bench for the assessment year 1977-78 and the Special Bench for the assessment years 1980-81 and 1981-82 were taken in reference to the Honble Delhi High Court and the Honble High Court has passed the order which we have already extracted in the beginning of this order. 
 
5.In the light of the directions of the Honble High Court and in respectful obedience to them, we have heard the rival submissions.  The parties before us did not dispute the basic factual position that the assessee trust pursued an object of general public utility, which is the fourth head of charitable activity stated in section 2 (15) of the Act.  If that is so, the provisions apply only to a trust which carries on the activity of relief of the poor, education or medical relief.  In the light of this position, if we consider the applicability of the judgment of the Supreme Court in the case of Assistant Commissioner of Income-tax vs. Thanti Trust (and other appeals) (2001) 247 ITR 785, it is seen that this judgment was concerned with the question regarding the applicability of section 13(1)(bb).  It was held by the Supreme Court, reversing the judgment of the Madras High Court partly that if the business of the trust is not carried on in the course of the actual carrying out of the primary purpose of the trust as required by the aforesaid section, its income would not be exempt from tax.  In that case, the trust called the Thanti Trust was established with the objects of giving relief to the poor and education.  The Supreme Court therefore held that the income from the newspaper, which business was held under trust, did not directly accomplish, wholly or in part the objects of the trust and that the income from the business only fed the activity.  The ruling in this case is not applicable to the present case where admittedly the object of the trust is the advancement of an object of general public utility.  In the assessment year 1977-78, the CIT (Appeals) had recorded a finding to the effect that the objects of the assessee were education and advancement of any other object of general public utility.  The Tribunal did proceed on the basis of this finding though in its order in paragraph 6 it observed that there was no material to find out whether education in the form of imparting training in tailoring, sewing and embroidery for qualifying for the two year certificate course was being pursued by the assessee and further observed that in the annual report the break up of the quantum of commercial and educational activity in this regard was not available.  Even so an opinion was expressed, on the basis of the expenditure of Rs.25,467/- incurred on condensed courses of education that the assessee was carrying on the activity of education.  However, the assessee itself did not put its claim under the head education and had in fact filed a letter dated 19.1.1980 that the main object of the trust was not education or relief of the poor, but was an object of general public utility but this claim was rejected by the ITO.  In the order of the Special Bench for the assessment years 1980-81 and 1981-82, there is reference to the argument of the assessee that the main object was one of general public utility and the word education appearing in section 2 (15) connotes the process of training and developing the knowledge and skill and character of students by normal schooling and it has not been used in a wide and extensive sense, in the sense of acquiring any further knowledge.  The argument of the Department did not proceed on the footing that the assessee was pursuing education as its main object.  The argument was only that the predominant object of the assessee was that of profit making since the mahila Shilp Kala Kendra was run on commercial lines.  This argument, as we have already noted, was rejected by the Special Bench.  We are quite aware that the orders of the Tribunal (both the Division Bench and the Special Bench) have been set aside by the Honble High Court and, therefore, can no longer be regarded as holding the field and the matter has to be looked into afresh.  Even so, on the question of whether the assessee can be said to have pursued education as one of the charitable objects, we have the assessees own admission in its letter referred to above that it did not pursue the object of imparting education but pursued an object of general public utility.  One of its objects was to establish and maintain centres for adult education, shilp kala, sewing for widows or destitute ladies of all creeds and castes.  Another object is to establish and maintain institutions for imparting general, vocational, industrial, moral and physical education to the children and girls and women of all creeds and castes.  However, these two objects mentioned in the trust deed cannot be relied upon to contend that the assessee was pursuing the imparting of education as one of its objects.  In this context, it is important to advert to the ruling of the Supreme Court in the case of Sole Trustee, Loke Shikshana Trust vs. CIT (1976) 101 ITR 234, a judgment of a Bench consisting of three Judges.  In that case, it was held that the word education in section 2(15) connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling and has not been used in the wild and extensive sense according to which every acquisition of further knowledge constitute education.  In the light of this judgment and the law laid down therein, it is not possible for us to hold that the assessee pursued the object of imparting education as one of its objects.  The learned CIT DR, Mrs. Sangeeta Gupta put forth the argument that the assessee imparts adult education and vocational training to destitutes and under-privileged women.  This is a mere reproduction of clause (b) of the Memorandum of Association and there is no evidence to show that the assessee did impart formal education in a school run for this purpose.  The assessee merely got the uniforms stitched in its tailoring schools by wives of the workers of the group companies and in the process they could learn stitching, but this does not amount to imparting education to them within the meaning of the word education as interpreted by the Supreme Court in the case of Sole Trustee, Loke Sikshana Trust (supra).  In paragraph 7 of the assessment order for the assessment year 1980-81, the Assessing Officer has stated that the main activity of the trust was providing aid to various educational institutions and, therefore, its main object is education.  Similarly, in the assessment order for the assessment year 1981-82 also the same finding has been given by the Assessing Officer.  However, in the light of the judgment of the Supreme Court cited above, the assessee cannot be stated to have pursued the imparting of education as one of its main objects merely by providing financial aid to educational institutions. 
 
6.The result of the above discussion is that the assessee must be held to have carried on an object of general public utility, which is the fourth head mentioned in sec.2(15) and not that of imparting education.  The consequence will be that section 13 (1)(bb) is not attracted.  However, the assessee has to still satisfy the condition that the carrying on of the object of general public utility does not involve the carrying on of any activity for profit.  The words not involving the carrying on of any activity for profit appearing in section 2 (15) were omitted by the Finance Act, 1983 only with effect from 1.4.1984.  Therefore, for the years under consideration, these words were present in the sub-section and, therefore, it is necessary for the assessee to establish that the charitable object pursued by it does not involve the carrying on of any activity for profit.  We have already noticed that with effect from 15.12.1976, the insurance agency business was discontinued.  Therefore, for the assessment years 1980-81 and 1981-82, the only activity carried on by the assessee was the Mahila Shilp Kala Kendra.  So far as this activity is concerned, the main argument of the learned
CIT DR was that the assessee was making huge surplus from this activity which did not go for the benefit of the women and destitutes who were making the uniforms.  In this connection, we must advert to the statement of income and application thereof during the assessment years 1977-78 to 1981-82 filed before us by the learned counsel for the assessee.  The statement is reproduced below : 

Assessment Year

INCOMES

75% of the income to be applied

APPLICATION OF INCOMES

 

Insurance

Surplus from Shilp Kala Kendra

Others

Total

 

Purpose

A. Year

Amount (RS.)

1977-78

108,315

185,805

21,884

316,004

237,003

Grant in aids

 

Condensed course education

 

Building & other capital exp.

 

Others

 

 

 

 

 

#Application made for accumulation of the balance

1977-78

 

1977-78

 

 

 

 

1977-78

 

 

 

 

1977-78

 

Total

 

45,680

 

 

25,467

 

 

 

 

 

41,053

 

 

 

 

 

24,475

 

136,675

 

1978-79

-

195,973

25,050

221,023

165,767

Grant in aids

 

Condensed course education

 

Building & other capital exp.

 

Others

1978-79

 

1978-79

 

 

 

 

1978-79

 

 

 

 

1978-79

 

Total

 

88,013

 

 

30,196

 

 

 

 

 

26,588

 

 

 

 

 

95,178

 

240,515

 

1979-80

-

337,223

30,820

368,043

276,032

Grant in aids

 

Condensed course education

 

Building & other capital exp.

 

Others

1979-80

 

1979-80

 

 

 

 

1979-80

 

 

 

 

1979-80

 

Total

 

 

159,449

 

 

 29,658

 

 

 

 

 

154,453

 

 

 

 

 

 20,000

 

363,560

1980-81

-

511,262

28,905

540,067

405,125

Grant in aids

 

Condensed course education

 

Building & other capital exp.

 

Others

1980-81

 

1980-81

 

 

 

 

1980-81

 

 

 

 

1980-81

 

Total

 

125,085

 

 

 27,034

 

 

 

 

 

281,487

 

 

 

 

 

105,344

 

539,700

 

1981-82

-

583,201

15,305

598,506

448,880

Grant in aids

 

Condensed course education

 

Building & other capital exp.

 

Others

1981-82

 

1981-82

 

 

 

 

1981-82

 

 

 

 

1981-82

 

 

Total

 

 

165,248

 

 

  28,585

 

 

 

 

 

187,046

 

 

 

 

 

131,193

 

 

512,072

 

The aforesaid figures will show that for the assessment year 1977-78, though the application falls short of 75% of the income to be applied for charitable purposes in India, it would make no difference to the assessees claim because the assessee had applied to the Assessing Officer for accumulation of the income as permitted by section 11 (2) and, therefore, the deficiency in the application of the income has been accumulated and carried forward for future application.  So far as assessment years 1980-81 and 1981-82 are concerned, the assessee has applied more than 75% of its income towards charitable purposes in India.  It must be noted that in these years, the major source of income is the surplus from Shilp Kala Kendra and this has been applied entirely in giving grants-in-aid, condensed course education, buildings and other capital expenditure and other applications.  There is no dispute that these are applications towards charitable purposes.  The judgment of the Supreme Court in the case of Surat Art Silk Manufacturers Association (supra) applies to the case.  In this case, it was held by majority that the test which has now to be applied is whether the predominant object of the activity involved in carrying out the object of the general public utility is to sub serve the charitable purpose or to earn profit.  If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust.  Even if there is no such express provision in the terms of the trust deed, the nature of the charitable purpose, the manner in which the activity for advancing the charitable purpose is being carried on and the surrounding circumstances may clearly indicate that the activity is not propelled by a dominant profit motive.  The mode adopted to carry out the charitable purpose would include a business engaged in for that purpose.  In the light of these principles laid down by the Supreme Court, we are unable to say that the predominant object in carrying on the business of Shilp Kala Kendra is to make profits.

7.In the case of Thiagarajar Charities vs. Addl. CIT and Anr. (1997) 225 ITR 1010, the Supreme Court was considering the difference between the objects of a trust and the powers given to the trustees to achieve the object.  In the case before the court, the objects of the trust were charitable.  The trustees were given the power to carry on the business in cotton yarn, cloth etc.  The business constituted the corpus or the property held under trust.  The assessee claimed exemption under section 11 in respect of the income from the business.  The Supreme Court uphold the claim holding that the business was only a means of achieving the objects of a trust and since the profits from the business was spent for the objects of a trust and since the profits from the business was spent for the objects of the trust, the trust was entitled to the exemption.  The decision of the Madras High Court holding to the contrary was reversed.  In doing so, the Supreme Court applied its earlier judgment in Surat Art Silk Manufacturers Association (supra).  This judgment (i.e., Thiagarajar Charities supra) has been directed to be considered by us by the Honble Delhi High Court while disposing of the references.  In this case (Thiagarajar Charities supra) the finding of the Tribunal was that the assessee carried on an object of general public utility, but held that since the assessee carried on an activity namely the business in purchase and sale of cotton yarn, for profit, it concluded that the income derived from the business, though held under trust, was not exempt under section 11 of the Act.  On reference, the High Court upheld the decision of the Tribunal.  The assessee filed an appeal to the Supreme Court which held that the main purpose and objects of the trust are education, medical relief and relief of the poor and in order to carry out the objects the trust has been authorized to establish and run educational institutions and other technological institutions for the welfare and uplift of the general Indian public, to run hospitals and clinics, to erect houses for the poor and to give relief to them in times of distress.  The Supreme Court noticed that the clause in the trust deed which authorized the trust to carry on the business of cottage industry and rural reconstruction work was only a power to enable the trust to achieve its objects, and not an object by itself.  In this view of the matter, the Supreme Court held that the Tribunal and the High Court erred in construing the clause in the trust deed which enabled it to carry on a business as having a profit motive.  The Supreme Court also approached the case from a different angle and in the alternative held that the business in purchase and sale of yarn, cloth etc. was itself held in a trust and it is the corpus of the trust in reality and the relevant clause in the trust deed which authorized the carrying on of the business was not an object of the trust and, therefore, it cannot be said that the trust was carrying on an activity for profit.  All that has happened was that the business which was the property held under trust produced income just like any other property.  It was observed that the business was only a means of achieving the object of the trust and a medium through which the object was accomplished.  The relevant observations of the Supreme Court are contained in pages 1024 and 1025.  This case establishes the proposition that there is a difference between the objects of the trust and the powers vested in the trustees to achieve the objects of the trust.  In addition, this case also establishes the proposition that if the carrying on of the activity of profit, namely, the business, is itself held as corpus of the trust, it is only a means of achieving the object of the trust, provided that the profits earned in the business fed the charitable purposes specified in the trust deed.  In such a case, it cannot be said that profit-making was the real object of the trust.  In the present case, though it is not the assessees case that the business of Mahila Shilp Kala Kendra itself was held under trust, that would not make any difference to the ultimate result, because as laid down in the aforesaid judgment of the Supreme Court, the surplus from the Mahila Shilp Kala Kendra has been consistently applied for the charitable activities carried on by the assessee and to this limited extent, the aforesaid judgment applies to its case.  It should, however, be noted that the provisions of section 13 (1)(bb) were not under consideration before the Supreme Court since the assessment years involved in the case was 64-65, 65-66 and 66-67, during which years the provisions of section 13 (1)(bb) were not in the Act.  In the ultimate analysis, to the limited extent of saying that if the profits of the business carried on by the trust feed the charitable objects then it can be said that the activity carried on by the trust is not guided solely by a profit motive, the aforesaid judgment applies.  We may also add that even in the judgment of the Supreme Court in the case of Surat Art Silk Cloth Manufacturers Association (supra), the same principle was laid down.

8.The learned counsel for the assessee referred to the judgment of the Andhra Pradesh High Court in CIT vs. Hyderabad Race Club Charitable Trust (2003) (262 ITR 194).  In this case, the Race Club was created as a public charitable trust in 1976.  The trust obtained licence from the state government to conduct races.  The licence itself constituted property held under trust.  The assessee claimed exemption under section 11 which was upheld by the Tribunal on the ground that the activity carried on by the assessee did not constitute a business and even if it were business, it was not such business as would be hit by section 13 (1)(bb).  The CIT questioned the decision of the Tribunal before the Andhra Pradesh High Court which held that the income derived by the trust by conducting races was income derived from property held under trust because the licence to conduct races was itself property and was held under trust.  In the alternative, it was held that even if it is held to be income not derived from property held under trust, the contributions made by the race-goers could be treated as voluntary contributions under section 12 which were capital receipts in the hands of the race club and in this view of the matter, the provisions of section 13(1)(bb) cannot be applied.  Thus, on both counts, the assessees claim was upheld.  This case also supports the assessees case.

9.Moreover, the CIT took proceedings under section.263 to deny the exemption to the assessee-trust for the assessment years 1978-79 and 1979-80 but dropped the proceedings.  For the assessment years 1984-85 to 1999-2000 the Assessing Officer himself granted the exemption and these assessments have not been disturbed.  For the assessment years 1982-83 and 1983-84, the Tribunal allowed the exemption.  In such circumstances, following the rule of consistency also, apart from the reasons given by us earlier, the assessees claim has to be upheld.  The Honble Delhi High Court has taken the view in Commissioner of Income-Tax v. Lagan Kala Upvan 259 ITR 489 and Director of Income-tax v. Lovely Bal Shiksha Parishad 266 ITR 349 that the income tax authorities cannot take inconsistent views on the same set of facts.  Respectfully following theses decisions and applying the rule of consistency, the assessees claim requires to be upheld.  This reasoning of ours is independent of the other reasons given by us in the earlier paragraphs to uphold the assessees claim.

10.In the result, we accept assessees claim and allow all the assessees appeals. Decision pronounced in court on 12th January 2007.

 
 
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