TaxTMI 
TaxTMI 
2021 (1) TMI 224
X X X X Extracts X X X X
X X X X Extracts X X X X
....nst the Appellant. The Appellant prays that the order passed under section 263 of the Act be set aside. 2. On the facts and under the circumstances of the case and in law, the learned CIT(E) erred in holding that the assessment order passed by the Deputy Commissioner of Income-tax (Exemptions) - 2(1) ('the learned Assessing Officer') was erroneous as due verification was not undertaken by the learned Assessing Officer. The Appellant prays that it be held that the assessment order passed was not erroneous since adequate verification had been undertaken by the learned Assessing Officer. 3. On the facts and under the circumstances of the case and in law, even assuming the assessment order was erroneous, the learned CIT(E) erred in exercising jurisdiction under section 263 of the Act by holding the assessment order was prejudicial to the interest of the Revenue without appreciating that there is no tax effect of the proposed directions given by the CIT(E). The Appellant prays that it be held that assessment order was not prejudicial to the interest of the Revenue since there is no tax effect of the proposed directions/verifications. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act, was completed on 30th December 2016 determining 'Nil' taxable income. Subsequently, however, learned Commissioner of Income-tax (Exemptions) [hereinafter referred to as 'the Commissioner '] issued a show cause notice requiring the assessee to show cause as to why this order not be subjected to revision under section 263 of the Act.... (Paragraphs 4,5 and 6 are not relevant in the present context, as the issues on which this show-cause notice was initially issued do not exist in this appeal) 6. Rather than yielding to these submissions, learned Commissioner issued a further show cause notice on 15th March 2019 which was as follows: 1. On verification of records, it is noticed that there is an investment of funds of assessee in shares which is in a prohibited mode of investment prescribed in the section 11(5) r.w.s. 13(1)(d) of the Act, unless it is covered by exceptions. Further the same may result into denial of exemption if such investment is not covered by exceptions. This important aspect, however, has not been verified as it comes out from the following: (a) Vote letter dated 2-12-2016, the AO asked certain details of i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of section 11 or 12 would cease so as to exclude it from the total income. Despite, your holding of 27.98% shares of Tata Sons Ltd. and close relationship of trustees with the above company, the Assessing officer has not examined the applicability of provisions of section 13(2)(h) of the Act. 3. The AO during the assessment proceedings raised issue of holding & controlling shares of Tata Sons Ltd. by you and also your control in the business of the company. He also gathered certain information & evidences from third parties but failed to make proper verification & investigation and to reach to proper conclusion. (a) In view of close relationship of trustees and investee company i.e. Tata Sons Ltd., the AO vide notice dated 2-12-2016 asked you about Veto/Special Right of benefits derived by the trustees from any of the investee companies and ought the subsidiaries. It was replied that the trustee of the assessee trust jointly with trustee of Sir Ratan Tata Trust only have power to appoint directors of board and Tata Sons Ltd. With reference to the query regarding benefit having derived by the trustee from the investee company. It was submitted that information is n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r u/s.143(3)) referring letter dated 29-12-2016 of assessee by noting that the assessee has filed form 10 and copy of Resolution along with it, for exercising its option u/s.11(2). However, neither there is reference of Form 10 in assessee's letter dated 29-12-2016 nor it was found on record. Thus it appears that the benefit of exemption u/s.11(2) has been allowed without proper verification. 5. On perusal of records of A.Y.2014-15, it is also noticed that you have received interest of Rs. 33,58,30,979/-. However, the AO has not obtained any details of investment despite the related details/schedule being not available on records from which it could have been ascertained that whether the interest income earned is from deposit in banks or from the investment in some companies. Further, as the income from dividend was being claimed as exempt, therefore, assessee has not claimed application of the same in its return of income. The assessing officer has not asked you to demonstrate that entire income of the trust was applied or being applied for the object of the Trust. The above facts also indicate that the Assessing Officer has not made some basic verifications on facts ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fellowships in any branch of science or art in assisting students to study abroad either by payment of lump sum or by payment of periodical sums or in giving further aid to any other charitable institutions or objects endowed by the Settlor in his lifetime or by the grandfather father and brother of the Settlor." Since its inception, the Trust has played a pioneering role in transforming traditional ideas of charity ad introducing the concept of philanthropy to make a real difference to communities. Through grant-making, direct implementation and co-partnership strategies, the Trust supports and drives innovation in a variety of areas. The Trust engages with competent individuals and government bodies, international agencies and like-minded private sector organisations to nurture a self-sustaining eco-system that collectively works across all these areas. The Trust has over 336 grants under execution for a financial outlay of Rs. 714 crs. In addition, the Trust is also supporting a variety of cancer care initiatives for an outlay of Rs. 66 crs. The Trust has also played a pioneering role in the vision of the Government in Nation building and in partnershi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts mentioned in the notice under section 263 of the Act. All the information required by the Learned AO was submitted during the course of the proceedings. Thus, the Learned AO had complete information during assessment proceedings. It was only after considering the information that he had passed the order under section 143(3). Merely because the AO has not discussed Or commented upon the information/details given in the order, it cannot be said to be covered by section 263. Without prejudice to the above, the assessee's detailed response to the alleged omissions and errors of the Learned AO (as mentioned in the notice) is as under. Applicability of section 13(1)(d) of the Act (1) The Learned AO during the course of assessment proceedings had sought details about the investments held by the Trust vide, his notice dated December 2, 2016 of The Trust responded to this notice vide its letter dated December 9, 2016 details of the shares held by the assessee along with the year of each bonus/sub-division of such shares and the final number of shares hold by the Trust as on March 31, 2014 (copies enclosed as Annexure 2 and 3). (2) As can be seen f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....led to make bass but necessary verification on this issue. In this connection, the assesses submits that: (a) The AO during the course of assessment proceedings had sought details about the investments held by the Trust, (b) The Trust duly replied and filed for all the details and information. (c) Thus, the AO has made enquiries and it cannot be said that the AO has failed to make basic but necessary verification on the issue. In fact, it is submitted that the AO made detailed verification of the claim and was satisfied by the contention of the Trust. (8) Therefore the assesses prays that no revision under section 263 is warranted on this issue. (9) In any case considering the fact that the details relate back to more than 45 years the assesses craves leave to produce further information and documents to substantiate its position, if required. Applicability of provisions of section 13(2)(h) (10) At the outset, the assesses submits that your goodselfs allegation that the Learn. AO had not examined the applicability of provisions of section 13(2) de-spite the assesses holding 27.98% shares of TSL and close relationship of....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., in assessee's view there is no infirmity in the verification undertaken by the Learned AO. The assessee respectful submits that if after due inquiries, the Learn. AO has not held that the assessee is controlling the business of TSL in his assessment order, it cannot be regarded as erroneous under section 263 and hence, it would not warrant a revision under section 263. Exercise of option under section 11(2) As regards pars 4 of the notice, the assessee submits that even as per the assessment order dated December 30, 2016 as against the income of Rs. 132.32 crs, the assessee has applied an amount of Rs. 122.27 crs i.e. more than 85, of the income. Thus, there is no question of surplus to be carried forward. Interest income earned - mode of investment (18) As regards pars 5, the assessee submits that all the information in relation to interest earned was available with the Learn. AO on record i.e Form 26AS and hence we would believe that he would have carried out his appropriate verification. In any case, the assessee submits that the interest earned is from the following permissible investments Particulars Rs. As per section 11(5) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Learned AO is neither erroneous nor prejudicial revenue to warrant any revision. Without prejudice, in any event, even if the Learned AO has not verified certain details this would not result in any prejudice to the revenue or the sections 11 to 13. The assessee therefore prays that the current proceedings initiated be dropped. Should your goodself require any further clarifications, please let us know. 8. None of these submissions, however, impressed the learned Commissioner. 9. (Not relevant in the present context) 10. As regards investments of funds in shares in a prohibited mode of investment prescribed in section 11(5) r.w.s. 13(1)(d) is concerned, the conclusions arrived at by the learned Commissioner are as follows: 8.3 I have considered the arguments of the assessee and also the records referred by it. It is observed that: (a) Vide letter dated 2-12-2016, the AO asked certain details of investment in shares. (b) Vide letter dated 9-12-2016, it was stated that none of the investment are covered by section 13(1)(d) of the I.T. Act, Further, the details of investment in shares have been submitted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 [(ia)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;] From the plain reading of above provision also, it is clear that the investment in shares held by the assessee after 30th November 1983 are exempt only if they are covered under proviso (i) or (ia). As per the condition prescribed in proviso (i), such shares shall be part of the corpus. However, the only fact which come out from the submissions of assessee is that the shares were held as on 1-6-1973, but it does not become clear as to whether the same were held as 'corpus', which was necessary to be verified because only the shares held in corpus and accretion of bonus to them are exempt from provisions of section 13(1)(d). To sum up, the above reply and details on records do not show as to whether the above investments in shares are covered by exception provided in proviso (i) & (ia) to sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to substantiate it position before the Assessing Officer, who is being directed to give assessee sufficient opportunity and reach to a conclusion in accordance with law, after going through the documents/evidence and explanation, which assessee can furnish before him. 11. As regards the examination of application of provisions of section 13(2)(h) in view of continuing investment of the assessee in shares in the concerns in which persons referred to in section 13(3) have substantial interest, learned Commissioner concluded as follows: 9.3 After receiving assesee's reply, I have given perused the assessment records as well as the questionnaires of Assessing Officer and the documents referred by the assessee. Annexure-4 to its reply to the show cause notice dated 26/12/2016 has no reference of the applicability of provisions of section 13(2)(h) of the I.T Act. Similarly, assessee's reply dated 28/12/2016 (Annexure-5 of assessee's reply) also does not have any reference of applicability of provisions of section 13(2)(h). Both these documents are about the control and management of business of Tata Sons Ltd. Therefore, assessee's contention that this is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ious Article of Association of the company. This notice was issued to the company as well as by e-mail to 4 directors. The details were received from Tata Sons Ltd. on 21-12-2016 and also from one of the directors on 22-12-2016. Further, the details and information received from one of the Directors, Shri Cyrus Mistry on 22/12/2016 was however not confronted to the assessee by the Assessing Officer. (ii) The Assessing Officer vide show cause notice dated 26-12-2016 raised the issue of close relationship of trustees of the trust and Tata Sons Ltd. through appointed directors seeking reply as to whether the activities are in accordance with the objects of the trust, what kind of control trust is exercising on business of Tata Sons Ltd. and also the issue that the trustee who were earlier directors/employees of Tata Sons Ltd. are taking benefit from the company through the control of directors appointed by the trust. But it was done without mentioning the facts or evidence on the basis of which the above preliminary inference was drawn by the Assessing Officer. (iii) In the reply besides giving some explanation to the queries of Assessing Officer, the material/factua....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s are having control over the affairs of Tata Sons Ltd., the Assessing Officer has failed to take the issue to any logical conclusion. The above indicates that examination of such material was necessary in order to ascertain the facts as also whether any direct or indirect benefit as stated in section 13(l)(c) of the Act is being taken by the connected persons as referred in section 13(3) of the I.T. Act. 13. As regards the alleged non-verification of investment details in which the interest has been earned, learned Commissioner's conclusions were as follows: 12.3 The first part of the reply of assessee quoted above makes it clear that the Assessing Officer has not obtained details of investment as the Schedule was not available on record. It was therefore, not possible for him to make verification from Form 26AS. The details submitted by assessee before this office in its reply dated 27-3-2019 were not there before the Assessing Officer, Therefore, it would be in the fitness of things that the same are verified by the Assessing Officer. 12.4 Regarding the application of exempt income of dividend towards the object of the Trust, it is pertinent to men....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. "] The assessee's case is clearly covered by clause (a) of above explanation (2) to section 263 of the I.T. Act. 15.2 The Hon'ble Supreme Court in the case of Sundaram Filial v. Pattabiram reported in (1985) 1 SCC 591, culled out from earlier cases the following as objects of an explanation to a statutory provision (Reference Page 214-215, Principles of Statutory Interpretation by Justice G.P. Singh, 13th Ed.):- (a) To explain the meaning and intendment of the Act itself, (b) Where there is any obscurity or vagueness in the main enactment to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) To provide an additional support to dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act by insertion of Explanation 2 to Section 263 is declaratory in nature and is inserted to provide clarity. 15.3 Earlier also, the Hon'ble Supreme Court has time and again declared various explanations in certain statute as declaratory in nature. For example: In CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625/92 Taxman 541 (SC), the Hon'ble Supreme Court held that amendment introduced by the Finance Act, 1987 in so far the related to Section 27(iii), (iiia) and (iiib) which redefined the expression 'owner of house property', in respect of which there was a sharp divergence of opinion amongst the High Courts, was clarificatory and declaratory in nature and consequently retrospective. Similarly, in Brij Mohan Das Laxman Das v. CIT [1997] 223 ITR 825/90 Taxman 41 (SC), explanation 2 added to section 40 of the Act was held to be declaratory in nature and, therefore, retrospective.(Reference Page 569-570, Principles of Statutory Interpretation by Justice G.P. Singh ,13th Ed.). 15.4 The Ld. Jurisdictional ITAT, Mumbai in the case of Anuj Jayendra Shah 67 taxmann.com 38, relying on above judgments and after analyzing explanation & Memoran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the revenue. Therefore, order is set aside to the file of the A.O. for making a de- novo assessment after proper examination of various issues including the aforesaid issues. Needless to mention, the Assessing Officer must decide the issue after affording reasonable opportunity of being heard to the assessee and must pass a speaking and well reasoned order dealing with all the submissions of the assessee. 16. Aggrieved by the stand so taken by the learned Commissioner, the assessee is in appeal before us. 17. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 18. We find that the case of the Commissioner hinges on, what he perceives as, lack of inquiry, the inadequacy of inquiry, or taking up the pertinent line of inquiry but not following it to its logical conclusion. Learned Departmental Representative has also been very gracious to submit that none doubts the philanthropic work being done by the assessee trust but the short question before us really is whether or not the due verifications have been carried out by the Assessing Officer. The stand o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder can be subjected to revision proceedings; all that will be necessary is the recording of the Commissioner's view that "the order is passed without making inquiries or verification which should have been made ". Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authority has the power to do something in aid of enforcement of a right of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right-public or private-ofa citizen. [L Hirday Naran v. Income-tax Officer [(1970) 78 ITR 26 (SC)]. As a corollary to this legal position, when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise the powers, to help anyo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the light of his expert knowledge and experience, which areas, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further inquiry but, as observed by Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. ACIT [(1195) 99 ITR 375 (Del)], "it is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. (Emphasis, by underlining, supplied by us). It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real- life situations. What Justice Lopes said, in the case of Re Kingston Cotton Mills [(1896) 2 Ch 279, 288)], in respect of the role of an auditor, would equally apply in respect of the role of the Assessing Officer as well. His Lordship had ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. On a similar note, a coordinate bench of the Tribunal, in the case of Narayan T. Rane v. ITO [(2016) 70 taxmann.com 227 (Mum)] has observed as follows: 20. Clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. ClT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions are not done, and that, in the absence of this exercise by the Assessing Officer, a conclusive finding is not possible one way or the other. That is perhaps the situation in which, in our humble understanding, the Commissioner, in the exercise of his powers under section 263, can set aside an order, for lack of proper inquiry or verification, and ask the Assessing Officer to conduct such inquiries or verifications afresh. 23. Let us, in this light, take up the learned Commissioner's allegations regarding deficient inquiries and our findings thereon, vis-a-vis each specific issues. (Paragraphs 24 to 29 are not relevant for the present purposes) 30. The next issue raised by the learned Commissioner is with respect to the alleged failure of the Assessing Officer in not examining whether investments held by the assessee are in conformity with the provisions of Section 11(5) of the Act, and in not examining whether the assessee is covered by the exceptions carved out under proviso to Section 13(1)(d). 31. So far as this aspect of the matter is concerned, we have noted that the Assessing Officer has extensively examined the compliance with th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder section 13(1)(d), and it is Assessing Officer's not looking into this aspect of the matter that rendered the subject assessment order erroneous and prejudicial to the interests of the revenue. 32. There is no dispute with the proposition that in terms of the provisions of Section 11(1)(d)(iii) the assessee trust could not have invested in the shares of a company, other than in shares of a public sector company or shares prescribed as a form or mode of investment under clause (xii) of Section 11 (5), after 30th November 1983. None of these conditions are satisfied in the present case. However, proviso to Section 13(1) (d) states that nothing in the clause, containing aforesaid provision, will apply to, inter alia, " (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; and (ia)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 ". Therefore, as long as the shares are part of the corpus, as on 1st June 1973, or the shares are received as accretion to the shares being held to be part ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sued by the Government of India notifying the assessee trust under section 10(23C). These facts, which are set out on page 17 of the second compilation filed before us, do show that the assessee trust was accepted to be holding these shares as part of the corpus by the CBDT itself. When an issue has been decided in a certain way by the CBDT, it cannot normally be open to the field officers to question the correctness of that position- particularly when it's a factual aspect, and this factual aspect has been found in a particular manner, and no interference in these settled facts is warranted on account of any particular reason. 34. While it is indeed true that there is no res judicata in the assessment proceedings, the principle of consistency, nevertheless has its firm roots in the income tax jurisprudence. Hon'ble Supreme Court's has, in the case of Radhasoami Satsang v. CIT [(1992) 193 ITR 321 (SC)] held that, while strictly speaking, res judicata does not apply to income-tax proceedings but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other, and the parties have allowed that position to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi-judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision of where the earlier decision is per incuriam. However, these are fetters only on a coordinate Bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a Bench of superior strength or in some cases to a Bench of superior jurisdiction. " (emphasis supplied) 9. The principle accepted by the Revenue for 10 earlier years and 4 subsequent years to the Assessment Years 2007-08 and 2008-09 was that the entire expenditure is to be allowed against business income and no expenditure is to be allocated to capital gains. Once this principle was accepted and consistently applied and followed, the Revenue was bound by it. Unless of course it wanted to change the practice without a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... form part of permissible investment under section 11(5) shall be disposed of within one year from the end of the previous year in which such asset is acquired or by 31-3-1993, whichever is later. In the present case, the assessee was required to dispose of the shares under the said proviso by 31-3-1993 [See the judgment of this Court in IT Appeal No. 81 of 1999 dated 14-9-2000]. The shares have not been disposed of even during the assessment year in question. Now, under section 164(2), it is, inter alia, laid down that in the case of relevant income which is derived from property held under trust for charitable purposes, which is of the nature referred to in section 11(4A), tax shall be charged on so much of the relevant income as is not exempt under section 11. Section 164(2) was reintroduced by the Direct Tax Laws (Amendment) Act, 1989 with effect from 1-4-1989. Earlier it was omitted by the Direct Tax Laws (Amendment) Act, 1987. However, the Legislature inserted a proviso by the Finance Act, 1984 with effect from 1-4-1985. By the said proviso, it is, inter alia, laid down that where whole or part of the relevant income is not exempt by virtue of section 13(1)(d), tax shall be c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in total income whereas section 11 deals with income from property held for charitable or religious purposes. We have not found anything in the language of the two provisions nor was Mr. Malhotra able to point out as to how when certain income is not to be included in computing total income of a previous year of any person, then, that which is excluded from section 10 could be included in the total income of the previous year of the person/assessee. That may be a person who receives or derives income from property held under trust wholly for charitable or religious purposes. Thus, the income which is not to be included in computation of the total income is a matter dealt with by section 10 and by section 11 the case of an assessee who has received income derived from property held under trust only for charitable or religious purposes to the extent to which such income is applied to such property in India and that any such income is accumulated or set apart for application for such purposes in India to the extent of which the income so accumulated or set apart in computing 15% of the income of such property, is dealt with. Therefore, it is a particular assessee and who is in rece....
X X X X Extracts X X X X
X X X X Extracts X X X X
....)] has observed as follows: 11. The word 'corpus' is not defined under the Act. We do not find any judgment explaining the meaning of 'corpus'. In the Chambers 21st Century Dictionary, the meaning of the word 'corpus' has been given as under: (i) body of writings, e.g: by a particular author, on a particular topic, etc.; (ii) a body of written and/or spoken material for language research; (iii) anatomy any distinct mass of body tissue that may be distinguished from its surroundings. Latin: meaning- 'body'. 12. In the Law Lexicon of P. Ramanatha Aiyar, 2nd Edition reprint-208 the meaning of the word 'Corpus' is given as under: "A Body; human body; an artificial body created by law; as a corporation; a body or collection of laws; a material substance; something visible and tangible; as the subject of a right; something having legal position as distinguished from an incorporeal physical substance as distinguished from intellectual conception; the body of estate; or a capital of on estate". 13. The word 'Corpus' is used in the context of Income-tax Act. We have to und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nor and (ii) how the recipient-assessee treat the said income. If the intention of the donor is that the amount/donation given is to be treated as capital and the income from that capital has to be utilised for the charitable purposes, then the said voluntary contribution is towards the part of the corpus of the trust. Similarly, the assessee after receiving the amount, keeps the amount in deposit and only utilise the income from the deposit to carry out the charitable activities, then also the said amount would be a contribution to the corpus of the trust and the nomenclature in which the amount is kept in deposit is of no relevance as long as the contribution received are kept in deposit as capital and only the income from the said capital which is to be utilised for carrying on charitable and religions activities of the institute/corpus of the trust, for which Section 11(i)(d) of the Act is attracted and the said income is not liable for tax tinder the Act. [Emphasis, by underlining, supplied by us] 41. What essentially follows is that it's not the declaration of an investment being a corpus investment but the fact of its being treated as capital and rather....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of which the above preliminary inference was drawn by the Assessing Officer". What essentially follows is that not putting the material on the basis of which this preliminary inference was drawn rendered the inquiry insufficient. It is difficult to understand this approach. The issue is admittedly looked into by the Assessing Officer and the Assessing Officer has come to certain conclusions. No infirmities are pointed out in this process. The deficiency is said to be that the material, on the basis of which preliminary inference was drawn, is not confronted. How does it make inquiry deficient or order erroneous and prejudicial to the interest of the revenue? If at all nondisclosure of this material is prejudicial to the interest of someone, that is to the interests of the assessee, but that is not relevant inasmuch as the matter has been looked into. We, therefore, see no merits in the stand of the learned Commissioner on this point. It is then noted that "In the reply besides giving some explanation to the queries of Assessing Officer, the material/factual basis of allegations in the show cause notice was sought by the assessee from the Assessing Officer. In the assessee's r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner's stand is that these observations "clearly shows that the Assessing Officer did not use the material available with him to take the matter to the logical conclusion and has acted against his own prima facie opinion " and that "this note itself makes the order of Assessing Officer on this issue erroneous and prejudicial to the interest of revenue." 46. Let's not lose sight of the legal position that so far as the exercise of powers under section 263 is concerned, these powers can only be exercised when the subject order is erroneous and prejudicial to the interest of the revenue. The fundamental fact that we must examine is whether the action of the Assessing Officer, on the given set of facts, could be said to be erroneous at all. The Assessing Officer receives some complaint against the assessee, and additional material against the assessee, at the fag-end of the assessment proceedings, and based on this additional last-minute material he is not able to come to a definite conclusion withing the statutory time limit for completing the assessment. He, therefore, records an office note to the effect that these allegations may be looked into later, and, if requ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... receipt of some inputs at the last minute from a third party cannot result in an extension of time for completion of assessment under section 143(3) directly, it cannot be done by way of invoking Section 263 either. 38. It is well known that Cyrus Mistry, a former Chairman of the Tata Group, was removed from his position in the Tata Group on 24th October 2016, and within eight weeks of his removal, he sends this material, against the trusts in the Tata group- including the assessee before us, to the Assessing Officer. The objectivity of the averments made by Cyrus Mistry, in such a situation and to say the least, seems to be extremely doubtful. His action of supplying documents to the income tax department, without any authorization of the company even though which were apparently obtained by him in the fiduciary capacity, almost immediately after being removed as Chairman of the Tata Sons Ltd parallels, cannot be said to be influenced by call of a pure conscious and high ground of morality. He was Chairman of Tata Sons Ltd since 2013 and its director since 2006, but apparently, knowing everything very well, he keeps quiet all along. Just as he is expelled from the office....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e question that the learned Commissioner has raised apprehensions about, whether any direct or indirect benefit as stated in section 13(l)(c) is being taken by the connected persons as referred in section 13(3). However, as we do so, it is important that we understand the scheme of the Income-tax Act, 1961, in this respect. 42. Section 13(1)(c) provides that "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.... in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied. directly or indirectly for the benefit of persons referred to in sub section (3) ". In plain words, the benefit of exemption under section 11 will not be available in respect of income....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... persons hold more than 20% equity shares, carrying not less than 20% voting powers, in a company in which the trust has made investments, such an investment can be treated, to be an application of trust funds for the benefit of the specified persons, disentitling itself of the benefits of section 11 accordingly. 43. As noted by the learned Commissioner in para 9.4 of his order, "the assessee has submitted that none of the trustees as on 31-3-2014 hold substantial interest in Tata Sons Ltd and, therefore, the provisions of Section 13(2)(h) of the Income-tax Act, 1961 are not applicable ". His objection, however, is that "the submission of the assessee, however, requires verification because in section 13(3), there are different clauses the application of which needs to be examined to find out whether the investment is with any connected person" and that the assessee itself has more than 20% equity investment in Tata Sons Ltd. Learned Commissioner has also relied upon a decision of the Tribunal, in the case of Jamshedji Tata Trust v. JCIT (ITA No. 7006/Mum/2013; AY 2010-11), to justify the need for greater probe into the matter. These objections are, however, devoid of any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... have any substantial interest in Tata Sons Ltd, and when there is nothing on record to even suggest incorrectness of this averment of the assessee, the question of direct or indirect benefit under section 13(1)(c) read with section 13(2)(h) does not arise, and, as is well settled, provisions under section 263 cannot put into service to make some roving and fishing inquiries. 44. As repeated references are made to assessee's shareholding of more than 20%, approximately 23.5%, to be more precise) in the Tata Trust Limited, and its control over the Tata Sons for that reason, it is necessary to deal with that aspect of the matter in some detail. The assessee before us is one of the shareholders in Tata Sons Ltd, a company incorporated over a century ago, which is the holding company of the Tata Group of companies. Sir Dorabji Tata, founder shareholder of Tata Sons Ltd, had endowed his personal shareholdings in Tata Sons in favour of the charities, and he set up this Trust in 1932, and he left most of his personal wealth to this Trust. Similarly, many other Trusts, including Sir Rata Tata Trust and J R D Tata Trust, were set up from time to time. If the shareholdings of al....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as these were at that point in time, and there is, thus, no occasion to revisit those factual findings. The application of Section 13(2)(h), in such a situation, is wholly academic. It is so for the reason that, as held by Hon'ble Bombay High Court in the case of CIT v. Trustees of Mrs Kasturbai Walchand [(1990) 181 ITR 47 (Bom)] the benefit given by proviso to section 13(1)(c) cannot be taken away by invoking section 13(2)(h). By the same logic, in our considered view, the benefit given proviso to Section 13(1)(d) cannot be taken away by invoking Section 13(2)(h). Be that as it may, even on merits, there is nothing on record, barring some suspicion lurking in the mind of the learned Commissioner, to even suggest that the provisions of Section 13(2)(h) can be invoked on the facts of this case. In response to a question by us, the learned Departmental Representative could not even point out as to which specified person under section 13(3) needs to be probed for holding a substantial interest in the companies in which investments are made by the assessee trust. All that he has emphasized is that the matter needs to be probed in more detail and that submission is no more than a s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of Tata Sons Ltd has, in recognition of this ownership model, granted certain rights to these charitable institutions on a collective basis- as long as these charitable institutions collectively hold not less than 40% of the shareholdings in Tata Sons. It is important to bear in mind the fact that these rights have been granted to these charitable trusts, and the assessee before us is only of these trusts, on a collective basis, and not to this assessee alone. Therefore, these rights, even if material, are not relevant in so far as control by this assessee is concerned. The assessee trust cannot, therefore, be said to be having control over the affairs of Tata Sons. In any case, as held by Hon'ble Supreme Court in the case of Arcelor Mittal India Pvt Ltd v. Satisk Kumar Gupta & Ors [(2019) 2 SCC1], the expression 'control' implies a 'positive and proactive ' power and not 'merely a negative or reactive power'. Undoubtedly, by virtue of article 104 B of the articles of association, the Tata Trusts can collectively nominate one-third of the prevailing number of directors, but these directors on their own cannot pass the resolutions, they can at best st....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... detailed reasons we have set out earlier, cannot meet our judicial approval. 51. We are, therefore, of the considered view that learned Commissioner was not justified in subjecting the assessment order to revision proceedings on the ground that the Assessing Officer did not examine the matter regarding assessee's control over Tata Sons Ltd, and whether, by virtue of such alleged control, any of the specified persons under section 13(3) received any benefits, and whether the investments made by the assessee trust were in violation of Section 13(2)(h). 52. That brings us to the Commissioner's stand that non-verification of accumulation of unspent surplus under section 11(2) was wrongly stated to be allowed though the same was neither asked nor required as the surplus was less than 15%. Learned Commissioner has been fair enough to state that though the order is erroneous on this issue, it is "not prejudicial to the interest of the revenue ". He has, however, also added that "the claim of deduction of 15% of income under section 11(1)(a) is subject to verification of other issues". That, however, is irrelevant inasmuch as once it is not a legitimate ground on....