1. On an application under section 256(2) of the Income-tax Act, 1961, this court has directed to refer the following question for our opinion:
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that there was no violation of any of the provisions of section 13 of the Income-tax Act, 1961, by the assessee-trust in advancing money amounting to Rs. 98,000 to the two employees to warrant denial of the benefit of section 11?”
2. In compliance with the direction of this court the aforesaid question has been referred for our opinion.
3. The assessee is a charitable trust. During the course of assessment and on an examination of the accounts, the Income-tax Officer found that a sum of Rs. 98,000 has been shown, as refundable aids in the assets side of the balance-sheet.
4. On further scrutiny of details filed during the course of the hearing, the Assessing Officer further found that the said sum of Rs. 98,000 was paid to one Sri N.K Kothari and K.D Soni. Rs. 63,000 was paid to N.K Kothari and Rs. 38,000 was paid to K.D Soni as loan. The Assessing Officer took the view that as Sri Kothari was a manager in the trust therefore the advance of loan of Rs. 60,000 to him is indirect accommodation to a person referred to in section 13(3) of the Act. Therefore, it is hit by the mischief of the provisions of sections 13(1)(c) and 13(2)(a) of the Income-tax Act.
5. In appeal before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) found that the appellant-trust cannot be said to have used any part of its income directly or indirectly for the benefit of any person referred to in section 13(3). Therefore, the provisions of section 13(1)(c) are not applicable. In appeal by the Revenue before the Tribunal, the Tribunal has also confirmed the view taken by the Commissioner of Income-tax (Appeals) that the assessee is a trust and not an institution. Therefore, the loan advanced to Mr. Kothari cannot be treated as benefit to persons falling within the provisions of section 13(3) of the Act.
6. Learned counsel for the Revenue submits that when there is no dispute that money has been advanced to a manager of the trust, the manager falls within the provisions of section 13(3) of the Act.
7. Mr. Khaitan, learned counsel for the Revenue, brought to our notice that the apex court in the case of Asst. CIT v. Thanthi Trust, [2001] 247 ITR 785, has considered one of the questions whether the word and phrase “trust” and the “institution” referred to entities differently constituted.
8. Sub-section (3) of section 13, clause (cc) provides that any trustee of the trust or manager (by whatever name called) of the institution that comes within the persons referred in clause (cc) of sub-section (1) and sub-section (2) for the purpose of exemption provided under section 11 of the Act but the pertinent question is whether a manager of the trust can be treated as manager of the institution referred to in clause (cc) of sub-section (3) of section 13. Their Lordships in the case of Thanthi Trust, [2001] 247 ITR 785 (SC), at page 795, observed as under:
“Trusts and institutions are separately dealt with in the Act (section 11 itself and sections 12, 12A and 13 for example). The expressions refer to entities differently constituted. It is thus clear that the newspaper business that is carried on by the trust does not fall within sub-section (4A). The trust is not only for public religious purposes so it does not fall within clause (a). It is a trust not in institution, so it does not fall within clause (b). It must, therefore, be held that for the assessment years in question the trust was not entitled to the exemption contained in section 11 in respect of the income of its newspaper.”
9. When the trust and institution referred to in section. 13 are not one and the same thing and they are different entities clause (cc) of sub-section (3) of section 13 refers to the manager of the institution and not the manager of the trust and in the case in hand the advance has been given to the manager of the trust and not the manager of the institution. In view of these admitted facts, no interference is called for in the order of the Tribunal.
10. In the result, we answer the question in the affirmative, i.e, in favour of the assessee and against the Revenue.
11. The reference so made stands disposed of.