# > COMMISSIONER OF TAXES, ASSAM v. M/S. JALANNAGAR SOUTH ESTATE LTD. & ORS

- **Citation:** [1972] 1 S.C.R. 17
- **Court:** Supreme Court of India
- **Decided:** 1971-08-04
- **Bench:** K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-taxes-assam-v-m-s-jalannagar-south-estate-ltd-ors-5342
- **Pages:** 5

## Headnote

17
Assam Agricultural Income-tax Act (Assam Act 9 of 1939) and
Rules made thereunder, s. 8 and r. 2-Contribution to a charily trust-
!/ exemption can be claimed with respect to amount.
Exemption granted by Assistant Commissioner-Larger deduction
claimed by assessee in appeal to Board-Jurisdiction~( Board to express
opinion on correctness of finding of Assistant Commissioner as to the
right to claim exemption.
The assessees made donations to a Charity Trust and claimed that
the amount should be considered as "amounts actually spent for charitable purposes" under r. 2 of the. rnles frame,d under the Assam Agricultural Ince me-tax Act, 1939, and therefore exempt from assessment
to tax. The Income-tax Officer rejected the claim but on appeal, the
Assistant Commissioner granted exemption to the extent of 60 % of
the amounts donated. The Department had no further right of appeal,
but the assessees exercised their right of appeal to the Board of Revenue
claiming full exemption .. The Board of Revenue held that, (I) the
assessees were not entitled to any exemption under the Act, but as the
order of the Assistant Commissioner had become final, the assessees
were entitled to retain the exemption granted; and (2) even if they
were entitled to some exemption, what was granted was more than what
they were entitled to.
The High Court, on reference, held that: (I) the Board was
not competent in the assessees' appeal to question the finding of the
Assistant Commissioner that the amounts donated to the Charity
Trust were actually spent for charitable purposes and (2) the Board
was not justified in holding that only 60 % of the amounts donated,
were admissible as deduction
Allowing the appeals,
HELD : (I) Since there was no right of appeal to the Department an exemption granted by the Assistant Commissioner could not
be interfered with by the Board, but while considering whether the
assessees were entitled to the full exemption claimed, the Board had to
examine the true legal position under the Act and the rules for the
purpose of deciding the matter in issue. Therefore the Board was
competent to determine whether the Assistant Commissioner took
the correct view in law. [20B-DJ
(2)
Under r. 2 (I) read with s. 8 (g) of the Acl an assessee is
entitled to deduct from his income only the sum actually spent by
him for charitable purposes as defined in the rule. Assuming that
;\n assessee may rely on an expenditure through an agency and not
18
SUPREME COURT REPORTS
[ 1972j 1 S.C.R.
by himself, and that the objects of the Charity Trust are charitable
purposes as defined, it had to be established to the satisfaction of the
assessing authority that the amounts were actually spent for such
chantable purposes. Mere contribution to a charity fund would not
entitle an assessee to the exemption when it was not proved that the
Charity Trust had in fact expended the amounts donated for any such
charitable purpose. [20G,H;21'A-E]
CIVIL APPELLArE J1m1so1cT10N : Civil Appeals No.
1873 to 1876 of 1967.
Appeals by special leave from the judgment and order
dated August 8, 1966 of the Assam and Nagaland High
Court in Ref. Nos. 2 to 4 of 1965.
S. T. Desai, Naunit Lal and Sirnranjit Sodhi, for the
appelJant (in all the appeals).
M. C. Chagla, S. C. Majumdar and R. K. Jain, for
the respondents (in all the appeals).

## Text

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>
COMMISSIONER OF TAXES, ASSAM
v.
M/S. JALANNAGAR SOUTH ESTATE LTD.
& ORS.
August 4, 1971
[K. S. HEGDE AND A. N. GROVER, JJ.]
17
Assam Agricultural Income-tax Act (Assam Act 9 of 1939) and
Rules made thereunder, s. 8 and r. 2-Contribution to a charily trust-
!/ exemption can be claimed with respect to amount.
Exemption granted by Assistant Commissioner-Larger deduction
claimed by assessee in appeal to Board-Jurisdiction~( Board to express
opinion on correctness of finding of Assistant Commissioner as to the
right to claim exemption.
The assessees made donations to a Charity Trust and claimed that
the amount should be considered as "amounts actually spent for charitable purposes" under r. 2 of the. rnles frame,d under the Assam Agricultural Ince me-tax Act, 1939, and therefore exempt from assessment
to tax. The Income-tax Officer rejected the claim but on appeal, the
Assistant Commissioner granted exemption to the extent of 60 % of
the amounts donated. The Department had no further right of appeal,
but the assessees exercised their right of appeal to the Board of Revenue
claiming full exemption .. The Board of Revenue held that, (I) the
assessees were not entitled to any exemption under the Act, but as the
order of the Assistant Commissioner had become final, the assessees
were entitled to retain the exemption granted; and (2) even if they
were entitled to some exemption, what was granted was more than what
they were entitled to.
The High Court, on reference, held that: (I) the Board was
not competent in the assessees' appeal to question the finding of the
Assistant Commissioner that the amounts donated to the Charity
Trust were actually spent for charitable purposes and (2) the Board
was not justified in holding that only 60 % of the amounts donated,
were admissible as deduction
Allowing the appeals,
HELD : (I) Since there was no right of appeal to the Department an exemption granted by the Assistant Commissioner could not
be interfered with by the Board, but while considering whether the
assessees were entitled to the full exemption claimed, the Board had to
examine the true legal position under the Act and the rules for the
purpose of deciding the matter in issue. Therefore the Board was
competent to determine whether the Assistant Commissioner took
the correct view in law. [20B-DJ
(2)
Under r. 2 (I) read with s. 8 (g) of the Acl an assessee is
entitled to deduct from his income only the sum actually spent by
him for charitable purposes as defined in the rule. Assuming that
;\n assessee may rely on an expenditure through an agency and not
18
SUPREME COURT REPORTS
[ 1972j 1 S.C.R.
by himself, and that the objects of the Charity Trust are charitable
purposes as defined, it had to be established to the satisfaction of the
assessing authority that the amounts were actually spent for such
chantable purposes. Mere contribution to a charity fund would not
entitle an assessee to the exemption when it was not proved that the
Charity Trust had in fact expended the amounts donated for any such
charitable purpose. [20G,H;21'A-E]
CIVIL APPELLArE J1m1so1cT10N : Civil Appeals No.
1873 to 1876 of 1967.
Appeals by special leave from the judgment and order
dated August 8, 1966 of the Assam and Nagaland High
Court in Ref. Nos. 2 to 4 of 1965.
S. T. Desai, Naunit Lal and Sirnranjit Sodhi, for the
appelJant (in all the appeals).
M. C. Chagla, S. C. Majumdar and R. K. Jain, for
the respondents (in all the appeals).
The Judgment of the Court was delivered by
Hegde J,-These appeals by special leave arise from
the decision of the High Court of Assam and Nagaland
A
B
c:
D
in Tax References Nos. 2 to 4 of 1965 on its file wherein
the High Court of Assam and Nagaland answered the two
questions of law referred to it by the Assam Board of ReE
venue under s. 28(2) of the Assam Agricutural Income-tax
Act, 1939 (Assam Act IX of 1939) (to t e hereinafter referred to as the Act) in the negative. The two questions
referred for the advisory opinion of the High Court are
0) Whether on the facts and in the circumstances of the case the Board was competent
in course of appeals preferred by the assessee to
question the finding of Assistant Commissioner
of Taxes to the effect that the amount donated
to Jalan Charity Trust were amounts actually
spent for 'Charitable purposes' within the meaning of Assam Agricultural l ncome-Tax Act.
(2) Whether on the facts and in the circumstances of the case the Board was justified in holding that only 60 per cent of the amounts actually
spent by the assessee for 'Charitable purposes'
from the Agricultural income was admissil le as
deductio1~ under Rule 2(2) of the Rules framed
under the Assam Agricultural Income-Tax Act.
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H
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COMMR. TAXES v. JALANNAGAR ESTATE (Hegde, J.)
19
A Aggrieved by the decision of the High Court Commissioner of Taxes, Assam has brought this appeal.
We shall now briefly set out the facts necessary for deciding the points in controversy in these appeals.
Each of the three assessees with whom we are concerned
8 in these appeals had given certain donations to t~e .Jalan
Charity Trust in the relevant assessment years, which m the
case of two the assessees is 1955-56 and in the case of the
third is 1955-56 and 1957-58. The question for considertion is whether those donations can be considered as
c "amounts actually spent for charitable purposes under
rule 2(1) of the rules framed under the Act.
The agricultural income of the assessee was computed
at 60 per cent of the total net income ascertained by the
Income-tax Officer under the Indian Income-tax Ac;t, 1922.
Before the Income-tax Officer the assessees claimed exempD tion under s. 15-B of the Indian Income-tax Act in respect
of the donations made by them to the Jalan Trust, but
that Officer did not grant the exemption asked for but reserved that question for decision to a latter date as he wanted
to examine the nature of those donations. He determined
E the income of the assessees for the years in question without
taking into consideration those donations. Thereafter the
Agricultural Income-tax Officer proceeded to assess the
agricultural income of the assessees. Before th~t Officer
the assessees again claimed exemption under rule 2(1) of the
Rules, of the donations given by them to the Jalan Charity
F Trust. That Officer refused to grant the exemption asked
for. Thereafter the assessees took up the matter in appeal
to the Assistant Commissioner. The Assistant Commissioner granted to each of the assessees exemption to the
extent of 60 per cent of the amounts donated. Then the
assessees took up the matter in appeal to the Board of ReG venue.The Department had no right to appeal against the
order of the Assistant Commissioner. The Board of Revenue came to the conclusion that the assessees were not
entitled to any exemption under the Act but all the same as
. the order of the Assistant Commissioner had become final
H m resP_Cct of exemp~ion given, the assessees were entitled
t? retam the exe~pt101:1 granted by the Assistant Commiss10ne~. Alternatively It also came to the conclusion that
even If the assessees were entitled to any exemption under
20
SUPREME COURT REPORTS
(1972] l S.C.R.
the Act and the Rules, the exemption granted to them by
A
the Assistant Commissioner was more than what they were
entitled to. Thereafter the assessees moved the Board to
refer to the High Court for its opinion the two questions
mentioned eerlier.
There is no substance in the first question referred to
B
above. It is true that the exemption granted by the Assistant Commissioner could not be interfered with by the
Board of Revenue. But all the same while considering
whether the asscssees were entitled to the further exemption
claimed by them the Board of Revenue had to examine the
true legal position under the Act and the Rules for the purC
pose of deciding the matter in issue before it. In our opinii:m the High Court was wholly in error in opining that
the Board of Revenue was not competent to determine the
true position under Jaw in view of the decision of .the Assistant Commissioner. The High Court overlooked the fact
that pronouncing on the claim made by the assessees before
D
the Board of Revenue, the Board had to examine the legality
of the claim. It is one thing to say that the Board could not
reverse the decision of the Assistant Commissioner, which
had become final but it is entirely a different thing to say
th~t the Board was not competent to consider whether the
E
Assistant Commissioner took a correct view of the law
or not when the true position in law is necessary to be determined for deciding the issue before it.
Now coming to the second question unlike s.
15~B
of the Indian Income-Tax Act, 1922, which exempts any
F
sums paid to an institution or a fund coming within the
scope of that section upto the prescribed limit, under Rule
•
2(1) read with s. 8(g) of the Act, the assessee is entitled to
deduct from his income only those sums actually spent by
him for charitable purposes. Charitable purpose under
that rule is defined as including relief to the poor, education,
G
medical relief and the advancement of any other object
of public utility,
Under rule 2(i) read with s. S(g) ~efore a.n assessee can
claim any exemption, he has to establish that 111 the relevant
year, he had actually spe~t for. one or the other of t~e H
charitable purposes ment10ned 111 that rule the am<:mn~ 111
~
respect of which he claims exemption.
Mere . contn~utlon
to a fund would not entitle him to the exemption claimed.
-
tCOMMR. TAXES v. JALANNAGAR ESTATE (Hegde, /.)
21
A It is true that the assessees in these cases are proved to have
contributed certain amounts to the Jalan Trust Fund. It
may also be true-about which we express no opinion-that
the objects of Jalan Trust are similar to those mentioned
in rule 2(i). But there is no proof in these cases that the
B Jalan Trust had expended the amounts donated by the assessees to that fund for any charitable purpose during the relevant years. From the materials placed before the Court,
it appears that Jalan Trust had spent :in the years in question
some amounts for charitable purposes. But the amount
spent is much less than the donations received. Further
c the assessees have not established anycor-relationship between the amounts spent by the Jalan Trust and the amounts
donated by them to the Trust. Under these circumstances
it is not necessary for us to decide whether the actual spend·
ing referred to in rule 2(i) must be by the assessees themselves
or it may also be through some other agency.
Tn our opiD nion before the assessees can c\aim exemption under rule
2(1) in regard to any amount, they have to establish to the
satisfaction of the assessing authority that they had actually
spent that amount for charitable purposes. No such proof
is forthcoming in these cases.
E
For the reasons mentioned above these appeals are
a II owed and the answers given by the High Court are revoked
and in place of those answers we answer both the questions
in the affirmative and in favour of the Revenue. The assessees to pay costs of the Commissioner-one hearing fee.
V.P..S.
Appeals allowed.