COMMISSIONER OF INCOME TAX vs. AMBALAL SARABHAI CHARITY TRUST

ITR/8/1987HC GujaratGJHC24011741198707 February 2002Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE K.A.PUJ6 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court declined to answer the first part of Question No. 1, concerning whether Ahmedabad Mfg. & Calico Prtg. Co. Ltd. is a concern where persons under Section 13(3) have substantial interest. This was due to a lack of specific material and contentions before the court, and prior decisions in related cases (CIT vs. Insaniyat Trust, Sarabhai Foundation, and the assessee's own earlier reference ITR No. 142/85) not fully addressing this aspect. The court noted that in the earlier reference, this question was not pressed due to small tax effect. For Question No. 2, the court held that Section 13(3) was not applicable to the Rs. 68,942 diverted to Smt. Saraladevi Sarabhai or M/s. Karamchand Premchand Pvt. Ltd., as the shares were donated subject to the condition of discharging this liability, meaning the assessee did not voluntarily divert its funds. Therefore, exemption under Section 11 could not be denied. For Question No. 3, the court held it to be consequential to Question No. 2; if income is exempt under Section 11, expenditure for trust objects is deductible. The court answered Question No. 3 in the affirmative. The dividend income from shares donated or received as bonus was held exempt, while dividend from purchased shares was subject to Section 13(2)(h). The court left it to the Tribunal to ascertain the break-up of dividend amounts.

What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income Tax, Ahmedabad, against the Ambalal Sarabhai Charity Trust. The High Court of Gujarat was directed by the Tribunal to refer three specific questions for its opinion concerning the assessment years under review. The procedural history indicates that the Tribunal had previously drawn up a Statement of Case in 1984, and the present reference was intended to be heard alongside a previous reference (ITR No. 142/85). However, due to oversight, ITR No. 142/85 was decided without considering the present reference. The court proceeded to decide the current reference based on the Statement of Case and the judgment in ITR No. 142/85, as neither party had the full paper book of the disposed reference.

What were the issues?

The High Court was asked to decide three questions of law: 1. Whether the Tribunal was correct in holding that Ahmedabad Mfg. & Calico Prtg. Co. Ltd. is not a concern in which persons referred to in Section 13(3) of the Income Tax Act, 1961 have substantial interest, thus making dividend income exempt under Section 11. 2. Whether the Tribunal was correct in holding that Section 13(3) is not applicable to funds diverted to Smt. Saraladevi Sarabhai or M/s. Karamchand Premchand Pvt. Ltd. to the extent of Rs. 68,942, and therefore, exemption under Section 11 cannot be denied. 3. Whether the Tribunal was correct in holding that since exemption under Section 11 was available, the assessee was entitled to a deduction of Rs. 86,473 spent for the objects of the trusts. Assessee's contentions were not explicitly recorded. The Revenue's contentions were implicit in the questions referred. The Tribunal's findings, as reflected in the questions, were that the company was not a concern of substantial interest and Section 13(3) was not applicable to the specific diversions of funds.

Which sections of the Income-tax Act were involved?

Section 13,Section 11,Section 13(3),Section 13(2)(h),Section 256(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 8 of 1987

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI

and Hon'ble MR.JUSTICE K.A.PUJ

========================================================= 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 13

All 783 judgments and leading authorities on Section 13 →

Recent GST High Court judgments

Search GST case law →