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INCOME TAX APPELLATE TRIBUNAL, PUNE
T.A. BUKTE, M.A. AJINKYA, JJ.
Income-tax Officer -Appellant
Versus
Maharashtra State Warehousing Corporation Karamchari Welfare Fund -Respondent
IT APPEAL NOS. 444 AND 448 (PN) OF 1985 [ASSESSMENT YEARS 1977-78 AND 1979-80 TO 1982- 83]
Decided On : 19-08-1986
Advocates Appeared:
K. Srinivasan,S. C. Bhatia, G. B. Gadgil
K. Srinivasan,S. C. Bhatia, G. B. Gadgil
ORDER
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M.A. Ajinkya, Accountant Member - These are departmental appeals against the consolidated order of the AAC of IT, Pune Range Pune, for the assessment years 1977-78, 1980- 81, 1981-82 and 1982-83. The effective ground raised in these appeals is that the AAC erred in directing the ITO to assess the income of the assessee at Nil for all the assessment years concerned after holding that the assessee is entitled to benefits of exemptions under sections 11 and 12 of the Income-tax Act being a public charitable trust. It is the case of the Department that the Trust is created for the welfare of the employees of Maharashtra State Warehousing Corporation and their relatives and, therefore, an element of profit is involved in the objects of the Trust and, therefore, the assessee trust is not a charitable trust within the meaning of section 2(15) of the Income-tax Act. The facts in this regard may briefly be stated.
2. Maharashtra State Warehousing Corporation Karamachari Welfare Fund was established for the benefit of the employees of Maharashtra State Warehousing Corporation. The employees of the Corporation used to contribute out of their salary income and the fund so created is spent for the welfare of the employees. There was, according to the AAC a complete identity of the interest between the contributors and the participants. Quoting the decision of the Andhra Pradesh High Court in the case of Commissioner v. Merchant Navy Club (1974) 96 ITR 261 (AP), the AAC held that no person can trade with himself and make a profit. The AAC also relied on the decision of the Delhi High Court in the case of Truck Operators' Union v. Commissioner (1981) 132 ITR 62 (Del.). The AAC held that what is required is that the members as a class should contribute to the fund and as a class they must be made to participate in the surplus. He further held that the application of the principles of mutuality is not destroyed of the presence of transactions with profit derived from non-members. Similarly, the maintenance of the combined account for all the transactions does not affect the claim. He took note of the fact that the ITO had excluded the members contribution from the taxable income for the assessment years 1975-76 and 1976-77 and there was no change in circumstances of in the years under appeal justifying the change in the mode of assessment. The fund also received contributions from Maharashtra State Warehousing Corporation for the welfare of its employees. This contribution was given for purposes of such as giving loan to the needy employees for the marriage, medical expenses, etc. The AAC accepted the argument that the contribution did not constitute income in the hands of the Karmachari Welfare fund. This was a charity from customary collection and there was no process of carrying of any activity for profit. For this proposition the AAC relied on the decision of the Punjab & Haryana High Court in the case of Nathu Ram Shiv Narain v. Commissioner (1982) 134 ITR 625 (P & H) and pointed out that the Punjab & Haryana High Court had derived support from decision of the Supreme Court in the case of Commissioner v. Bijli Cotton Mills (P.) Ltd. (1979) 116 ITR 60 (SC). The AAC also relied on the decision of the Madhya Pradesh High Court in the case of Chunnilal Onkarlal (HUF) v. Commissioner (1982) 135 ITR 580 (MP) and the decision of the Bombay High Court in the case of Commissioner v. E.H. Kathawala and Company (1982) 135 ITR 384 (Bom.). He, therefore, held that on the one hand the ITO should not have disallowed the expenses of Rs. 6,255.00 and Rs . 4,766 and should not have treated the sum of Rs. 30,000 received from the Corporation as the income of the Welfare Fund. These figures related to the assessment year 1977-78 and similar decision has been given for the assessment years 1979-80, 1980- 81, 1981-82 and 1982-83. The Department has come in appeal against this order of the AAC.
3. Shri Srinivasan, for the Department, argued that the AA
