- (1.) ON an application filed under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for our opinion ; "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that even if the assessee-trust is assumed to be a valid charitable trust at the inception, in any case, it ceased to be a charitable trust, as it indirectly carried on a profit earning activity by having let out the first floor to a firm in which one of the trustees was a partner and, therefore, it was not entitled to exemption under Sections 11 and 12 of the Income-tax Act, 1961 ?" None appeared for the assessee. Heard Mr. Singhi, learned counsel for the Revenue.
(2.) THE relevant assessment year is 1969-70. A trust was created by one Shri Ramchander Johari vide trust deed dated November 8, 1962. THE assessee-trust claimed exemption under Sections 11 and 12 the Income-tax Act, 1961. THE Income-tax Officer refused the exemption on various grounds including the ground that the settlor of the trust had exclusive control on the subject-matter of the trust property and a portion of the property was let out to a firm at a meagre amount of rent, in which one of the trustees was a partner in the firm and that the property of the trust was also utilised by the members of the family of the settler. THE Income-tax Officer was of the view that the rent of the first floor of the trust property let out to the firm only for Rs. 200 per month, while the rent of that portion has been estimated at Rs. 16,000, therefore, this comes under the exception of Section 13(2)(b) read with Sub-section (3) of the Income-tax Act, 1961. Section 13(2)(b) read with Sub-section (3) of the Income-tax Act, 1961, which reads as under : "if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in subsection (3) for any period during the previous year without charging adequate rent or other compensation." Finally, the exemption claimed under Section 11 of the Income-tax Act, 1961, has been refused by the Assessing Officer. In appeal before the Appellate Assistant Commissioner, the Appellate Assistant Commissioner has also confirmed the view taken by the Assessing Officer. In appeal before the Tribunal, the Tribunal also found that the property has been let out to a firm on a meagre amount of rent, i.e, Rs. 200 in which one of the trustees is a partner and that the Income-tax Officer has rightly estimated the rent of that part of the building at Rs. 16,000, therefore, it comes under the exception and is hit by the provisions of Section 13(2)(b) of the Act, When the consistent finding of the three authorities, i.e., the Assessing Officer, Appellate Assistant Commissioner and Tribunal, is there that the rent of that portion of the building, which has been given to a firm, in which one of the trustees is a partner, is an inadequate amount, therefore, the assessee is not entitled to exemption under Section 11 of the Income-tax Act, 1961, in this view of the matter, we find no infirmity in the order of the Tribunal.
(3.) IN the result, we answer the question referred in the affirmative, i.e., in favour of the Revenue and against the assessee. The reference so made stands disposed of accordingly.;