RAMAPRASADA RAO J. - These writ petition are connected. It is agreed that it is sufficient if the facts in W.P. No. 3445 of 1967 are noticed. The petitioner is a public and charitable trust called M. CT. Trust. The trust was constituted under a duly drawn up instrument dated dated 4th June, 1951, and its income prior to 1952 was exempt from income-tax, as that was the provision at that time. But later, certain amendment which I shall presently refer to resulting in the change of the situation in 1952, enabled the petitioner to acquire an exemption from payment of income-tax only if they satisfied certain prescribed statutory conditions. It is not in dispute that, till the assessment year 1961-62, the petitioner secured such exemption. But, for the year 1962-63, the petitioner was faced with certain difficulties, as according to the revenue the non-observance of certain statutory formalities and prescriptions would not enable the petitioner to seek and obtain relief in tax for the assessment year in question.
What happened in the instant case was that, on March 1, 1963, the board of trustees resolved to accumulate the income of the trust for a period of 10 years from 1961 to 1970 so as to make it into a sizable fund for the sole purpose of being utilised in major projects of a charitable nature. It is not seriously disputed that the objects of the trust are to benefit a charity as defined under the Act. After the board so resolved to accumulate the income, the petitioner gave a notice in Form 10 of the Income-tax Rules, 1962, to the Income-tax Officer, Salaries, Circle, Madras, on March 14, 1963, notifying the text of the resolution of the board. On March 26, 1963, the petitioner wrote to the Commissioner of Income-tax stating that the amount kept with the trust was invested in the Madras Industrial Investment Corporation Ltd., and sought for a clarification that if the income of the trust derived from the investment in the Madras Industrial Corporation Ltd. would satisfy the requirement of law and in particular section 11 of the Income-tax Act, 1961. The Commissioner informed the petitioner that, as the Madras Industrial Investment Corporation Ltd. has not been notified as an institution, securities of which are approved by the Government of India, such an investment was irregular. In the meantime, the petitioner was corresponding with the Madras Industrial Investment Corporation Ltd. whether they would regularise the situation by obtaining the necessary permission from the Government of India. It should be noted that, during this period, the entire trust fund was invested and continued to be invested with the Madras Industrial Investment Corporation Ltd., whose activities were guaranteed by the Government of Tamil Nadu. The Madras Investment Corporation Ltd. failed, surprisingly enough, to satisfy the Government of India that their investment would satisfy the character of public security and, therefore, they returned a sum of sum of Rs. 2,56,857.06 to the trustees on 28th August, 1964, as they could no longer keep it in the above circumstances. The petitioner made expeditious efforts to purchase approved Government securities and reinvest the said fund during September and November, 1964. The case of the petitioner is that the trust income for the year ending December 31, 1961, relevant to the assessment year 1962-63 was thus completely invested in Government securities as required by section 11(2) of Act. In the circumstances, when the trust income was scrutinised by the revenue, the Income-tax Officer would not concede the request of the petitioner that there was a proper investment of the trust funds, as required by law, and he was also of the view that as the investment was not made within the time indicated in Form 10 read with the rule 17 of the tax relief within the meaning of section 11(2) of the Act. The order of assessment contains several other particulars with which we are not concerned in this case. As against the order of the Income-tax Officer negativing the relief to which the petitioner claims that they are entitled under section 11(2) of the Income-tax Act, 1961, the petitioner filed three writ petitions, W.Ps. Nos. 3443 to 3445 of 1967 and another Writ Petition 436 of 1969. At the time when the writ petitions were filed in this court, the petitioner contemporaneously filed appeals as against the order of assessment made by the Income-tax Officer. During the pendency of the above writ petitions, the Appellate Assistant Commissioner disposed of the said appeals concurring with the original authority that the petitioner was not entitled to the privilege, concession or benefit under section 11 of the Income-tax Act, 1961. As the original order has become practically merged with the appeallate order, W.Ps. Nos. 535, 536 and 537 of 1969 have been filed and writs of certiorari are asked to quash the order of the appellate authority on the grounds to be set out herein. Incidentally it may be stated that, under a circular issued by the Government of India, as rule 17 of the Income-tax Rules, 1962, and the form prescribed thereunder came at a time which made it not convenient to the assessee to gain statutory advantage or concession under section 11, the first requirement that investment of trusts funds should be made before the expiry of one month commencing from the end of each relevant previous year was reversed (revised) and time for such investment was extended till 30th September, 1962.
The contention of the learned counsel for the petitioner is that section 11 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), vests in the petitioner a quasi-right in the nature of tax relief provided certain prescriptions and mandates under the provisions are stisfied. Such a right cannot lightly be disturbed by the rule making authority prescribing a form thereto and fixing for the first time a time limit to gain the entitlement envisaged in section 11 of the Act. On merits it is stated that every possible effort was taken by the trust to invest the trust fund within the prescribed time and the trust, therefore, cannot be denied the statutory concession because of non-compliance of text of Form No. 10 prescribed by the rule-making authority. The contention of Mr. Balasubrahmanyan, the learned counsel for the revenue, is that rule 17 of the Income-tax Rules, 1962 (hereinafter called 'the rules') reads with Form No. 10 and both in conjunction with section 11(2) of the Act, leads to a reasonable inference that all these provisions must be read together and, therefore, the rule of limitation, though appearing impliedly in Form 10, ought not to be brushed aside lightly. On the other hand, it is stated, that as the intention of the Act is to give a privilege which is in the nature of a statutory right to an investor of property expressly for charitable purposes, such a right or privilege should not be disturbed by the delegated authority under its rule making power.
Before the arguments are considered, the relevant provisions and a short historical development of the same may be noticed.
The earliest Acts dealing with the levy of income-tax did not provide for any exemption for income derived from investment intended for public charitable purposes. In the Act of 1918 a slight inroad was made into this. Under section 3(1) of the said Act, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes and, in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto were excluded from assessable income. When the Act was amended in 1922, the provision with a slight modification for carrying out the same purpose, was continued. It may be noticed that it was only in 1922 that the Income-tax Act was not only amended but also consolidated. Thereafter, the said section remained in the statute book almost in the same fashion till conspicuous amendments were made in 1952. Incidentally, it may be mentioned that only in 1939 it was made clear that such concession in the matter of levy of income-tax can be gained by a charitable institution, provided that the objects of that institution serve the community of the public at large. Therefore, the acid test to gain a privilege is that not only the institution should be charitable institution but also the charities should be for the public benefit. In 1952 certain changes were effected. For the first time, an exemption was sought to be given to income even if it is not applied to religious or charitable purposes in the accounting year, but it is applied to religious or charitable purposes subsequently. The other limbs of the section are unnecessary for our discussion. The result is that in 1952 there was a possibility of charitable institutions accumulating their income for application for religious and charitable purposes. This came up for serve comment in what is ordinarily known as Tyagis Report. They were called upon to report on direct tax administration and make suggestion to amend the law. In Commissioner of Income-tax v. Walchand Diamond Jubilee Trust the court noticed that a trust which stipulated an accumulated income for a period of 18 years was held to be an act which was conceivable and acceptable in accordance with the law then in force. The Tyagi Committee felt that this ought not to be the position and suggested various methods to plug the loopholes so that leakage of revenue through avoidance may as far as possible be checked. The final result is that the present section 11 of the Act of 1961 was enacted.
Section 11 is subject to the provisions of section 60 to 63. It says that the income mentioned therein shall not be included in the total income of the previous year of the person in receipt of such income. In the instant case we are concerned with section 11(1)(a). It consists of two parts. The first part deals with income derived from a charitable trust to the extent to which such income is applied to such purposes in India. This part, therefore, deals with the factual situation of utilisation and application of income for charitable purposes. The second part deals with accumulation. It contemplates a case where such income is accumulated for application to the approved charitable purpose to the extent to which the income so accumulated is not in excess of 25 per cent. of the income from the property or Rs. 10,000, whichever is higher. An exception to this is provided in section 11(2). Section 11(2) is better reproduced for the purposes of understanding the same.
'(2) Where the persons in receipt of the income have complied with the following conditions, the restriction specified in clause (a) or clause (b) of sub-section (1) as respects accumulation or setting apart shall not apply for the period during which the said conditions remain complied with -
(a) such persons have, by notice in writing given to the Income-tax Officer in the prescribed manner, specified the purpose for which the income is being accumulated or set apart, and the period for which the income is to be accumulated or set apart, which shall in no case exceeds ten years;
(b) the money so accumulated or set apart is invested in any Government security as defined in clause (2) of section 2 of the Public Debt Act, 1944 (XVIII of 1944), or in any other security which may be approved by the Central Government in this behalf.'
Section 11(2) contemplates that a person, to gain the statutory concession envisaged therein, has to comply with two conditions. The first one is that he should inform in writing to the Income-tax Officer concerned in the prescribed manner and specify therein the purpose for which the income is accumulated or set apart and the period for which the income is to be accumulated or set apart, which in no case exceed ten yeras. The second one is that the accumulated income is invested in approved securities. Section 11(2)(a) speaks of notice in writing being given to the Income-tax Officer in the prescribed manner. Rule 17 is one of the rules framed under the rule-making power of the delegated authority under section 295 of the Act. Rule 17 says that the notice should be given to the Income-tax Officer under sub-section (2) of section 11 in Form No. 10. Form No. 10 deals with more than one situation. No doubt, the earlier part of Form No. 10 satisfies the statutory mandate in section 11(2)(a). But, paragraphs 2, 3 and 4 appear to be an appendage prescribed by the rule-making authority independent of any prescription or guidance from the statute itself in the matter of investment of income from charitable funds. Paragraph 2 says that a person in management of the charities should invest the accumulated income within four months (it is stated in one month in the beginning) commencing from the end of each relevant previous year, in approved securities. Paragraph 3 is a matter in detail connected with the furnishing of further information to the Income-tax Officer in the matter of investment and utilisation of such income. Here also, the obligation is that such annual accounts should be furnished before the expiry of four months commencing from the end of each relevant previous year. Paragraph 4, which is obviously a creature of the rule-making authority, provides as if it were a substantive provision which is not set out or contained in section 11(2) itself. Paragraph 4 in Form 10 runs as follows :
'It is requested that in view of our complying with the conditions laid down in section 11(2) of the Income-tax Act, 1961, the benefit of that section may be given in the assessments of the trust in respect of the incomes accumulated or set apart as mentioned above.'
Thus, on a scrutiny of Form No. 10, it will be seen that Form No. 10 which itself is a product of rule 17 which in turn is based upon section 295, created a situation whereunder the grant of the statutory privilege or concession to the assessee who complies with the conditions under section 11 depends upon an order of the Income-tax Officer who might or might not grant the relief. Again, the rule of time which is embodied in Form No. 10 is a rule which was never in contemplation of Parliament when it thought of granting a privilege or concession to a charitable institution. But, this rule of limitation is for the first time introduced into the anvil by the subordinate legislation. The question posed is whether the subordinate legislation, in exercise of its powers as such, can make a rule or append a form thereto so as to create a situation which is either contradictory or conflicting with the main intendment and purpose of section 11 of the Act.
The role of subordinate or delegated legislation and the part it could play as an ancillary body to the primary legislative authority is very well channelised by rules of interpretation. Any such delegated power being essentially subordinate in its nature, is limited by the terms of the enactment whereunder it is delegated. It is, therefore, necessary that the delegated authority must be exercised strictly in accoordance with the powers creating it and in the light and spirit of the parent or enabling statute. It cannot be postulated that the right of delegation can be unlimited in its scope. As the device of subordinate legislation or delegated legislation is adopted since the parent body has not the time to apply its mind to all meticulous details connected with its due implementation the mechanics of delegation is thought of as an ancillary measure. It is for the parent legislature, which is essentially vested with the legislative function, to lay down the law, the policy and the standard which they want to maintain in the application and enforcement of the legislative enactment. It, therefore, follows that an ancillary channel, at any rate like delegation, cannot abridge rights or privileges granted by the statute itself. All rules or forms which are creatures of such rules, prescribed for the purpose of effectuating the policy of the statute, must be read in the light of the statutory provisions in the main enactment under which they are made and, therefore, such rules or forms cannot contradict or create an irreconcilable position resulting in an anomalous situation. The primary and the only object of the Income-tax Act is to tax, tax and tax the income. If the legislature in its wisdom grants a concession and by creating a concession a reciprocal right or privilege is vested in an assessee, such a reciprocal right cannot be wildly dealt with so as to negate its usefulness by making a rule which cannot be reconciled with the main statutory provision. The object of the subordinate legislature is to carry out the statutory provision. The object of the subordinate legislature is to carry out the statutory provisions effectively and not to neutralise or contradict them. The rules made under the rule-making power should strictly conform with the intendment of the main provisions of the statute and be consistent therewith. No doubt, courts ought not to be astute to invalidate a rule on technical grounds. But that does not mean that, if the rule or the form prescribed therein which no doubt gets itself built into the structure of the Act is to create a situation and which, if accepted, would divest a vested right in an assessee to obtain a statutory privilege, then such a form which is prescribed in accordance with the mandate of the main provisions should be held to be ultra vires and not enforceable. As it is the duty of the court to reconcile each and every provision in any enactment read as a whole, I am of the view that the prescription of time, which was never thought of by the legislature ever since 1918 and which by itself is an essential legislative act cannot be introduced in a form by necessary implication so as to override, abridge or totally extinguish certain privileges accorded by the parent enactment itself.
It is in the above view that Form 10 which projects a rule of time to enable an assessee placed in the position as the petitioner to obtain a statutory concession to which he is otherwise entitled and which is equable to a right, should be understood and disregarded. The parent Act must prevail under all circumstances. The Act says that, if an investment is made and a notice of the same is given in writing, then the person is entitled to certain benefits. This cannot be given the go-by by prescribing a time limit for such a notice of investment, when the main Act is silent about it. The object of the legislature is to bring the total income of such an assessee to tax, if it is found that he cannot gain the concession by reason of the non-utilisation of that income for charitable purposes or for non-accumulation of such income for the same purposes in accordance with the statutory prescription. We are now concerned with the case of accumulation of income. The minutes disclosed that there was a resolution of the board to accumulate such income for ten years. If it is discovered at any time by the revenue that the assessee did not accumulate the same for the sole and whole purpose of utilising the income for charitable purposes, then the arms of law are long enough to reach such misapplication of the funds so as to bring to book the assessee in default and treat his total income as well in accordance with the provisions of the Act. As the main object is to refrain from taking a part of the total income of a particular assessee, that cannot be thwarted by the subordinate legislation by introducing a rule of time to obtain that statutory right or privilege. Even so, it cannot be said that a concession depends upon the discretion of the Income-tax Officer is contemplated in paragraph 4 of Form 10.
In Sales Tax Officer, Ponkunnam v. K. I. Abraham, the Supreme Court was considering a similar situation. Under the Central Sales Tax Act, an assessee gains certain tax concession if he furnishes what are usually known as 'C' Forms in the manner prescribed. The rule-making authority prescribed a rule to the effect that only such of those assessee who furnish such 'C' Forms along with their returns would be entitled to the said statutory concession. Striking out the rule, the Supreme Court said :
'It was contended on behalf of the appellants that the assessee had not filed the declaration in Form 'C' before February 16, 1961, according to the third proviso to rule 6(1) and in view of the breach of this rule the assessee was not entitled to take advantage of the lower rate of assessment under section 8(1) of the Act. The opposite viewpoint was put forward on behalf of the assessee and it was argued that the third proviso to rule 6(1) was ultra vires of section 8(4) read with section 13(4)(e) of the Act. The decision of the question at issue therefore depends on the construction of the phrase in the prescribed manner in section 8(4) of the Act only confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they are sold, and to which a authority the form is to be furnished. But the phrase in the prescribed manner in section 8(4) does not take in the time-element. In other words, the section does not authorise the rule-making authority to prescribe a time-limit within which the declaration is to be filled by the registered dealer.'
With utmost respect, adopting the language of the Supreme Court, in my opinion, the expression in the prescribed manner occurring in section 11(2)(a) confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the purpose for which the income is to be accumulated and the period for which such income is to be accumulated, especially when it was intended to be utilised for public and charitable purposes. But the prescription will not, in any view, take the time factor. If that were to be authorised, then the rule-making power practically creates a contradictory situation. Whilst the body of the Act enable the assessee to gain the concession, the rule-making power denies him the same, because he has not applied to it within the time prescribed by the time prescribed by the rule-making authority.
It is not in dispute before me that the Income-tax Act read as a whole prescribes various time factos and time limits, to wit, the time within which the return has to be filed, the time within which the advance tax has to be paid etc., and, if the very same Parliament, while creating for the first time a concession which amounts to a relief in tax and which in turn tantamounts to a quasi-right, did not circumscribe the situation by imposing a time-limit to enable the assessee to a gain the privilege, then it follows that it is deliberate act of theirs and such intendment cannot be whittled down by the rule-making authority in the form made by it for the purpose. Reference may also be made to the decision in Solar Works v. E.S.I. Corporation, Madras, wherein the learned judges constituting a Division Bench said that, where an Act itself does not provide limitation with reference to a particular matter and the delegation of power to make rules is conferred by a section of the Act which does not expressly or impliedly relate to the power to prescribe time, the authority to which the power is delegated cannot make rule prescribing limitation Mr. Balasubrahmanyan, however, relying upon section 295 of the Act, says that such an inference as to vesting of power to create a rule of limitating in the subject under consideration can be assumed. He refers to section 295(1) which is the general section governing the provision as to rule-making and says that the Board, subject to the control of the Central Government, by notification in the Gazette of India, can make rules for the whole or any part of India for carrying out the purposes of the Act. Therefore, if rule 17 has been framed and with it Form No. 10 has come into existence, then both the rule and Form No. 10 serve the purpose of the Act and they are intra vires of the delegated authority. I am unable to agree. As I stated already, far from serving the purpose of the Act, it is to create a situation which is diametrically opposite to the intendment of the Act. A hesitant reference was also made to section 295(2)(i) which deals with particular situations in the matter of rule-making. Section 295(2)(i) contemplates making of rules in the matter of the form and manner in which any application, etc., can be made. As already stated, the form and manner prescribed cannot militate against the essential object of the Act. In the instant case, the purpose and intendment of the Act is to give a statutory concession and tax relief of an assessee under certain stated circumstances. If those circumstances exist, eo instanti the concession is gained and there can be no question of divesting of such privilege or concession by a rule followed up by a form made by the rule-making authority.
I am, therefore, of the view that paragraph 2 and 4 in Form No. 10 are ultra vires in that the rule-making authority has exceeded its limit in including in the Form the said two paragraphs.
On the other part of the case, it is urged by Mr. Ramakrishnan, the learned counsel for the petitioner that the petitioner took all possible and reasonable steps to invest the trust funds in securities believing that such investment was proper as they thought that the investment in the Madras Industrial Investment Corporation Ltd., whose activities were guaranteed by the Government of Tamil Nadu, would be taken to be an investment in approved security. But it transpires that the Central Government, for reasons better known to them and it is not clear to me, have not approved the Madras Industrial Investment Corporation Ltd. as a body in which an investment made can be catalogued as approved security. It appears to me that all steps were taken within the time to invest the trusty funds in an institution which for all purposes must be taken to be a public institution and which cannot be lightly brushed aside as not a public Institution. Even otherwise, it cannot be said that in the instant case there was an unreasonable delay in the matter of investment of the trust funds in approved securities as well. But, this is a matter for the revenue to consider and it is expected that they would be reasonable. The result is that W.Ps. Nos. 3443 to 3445 of 1967 are dismissed as they have become infructuous. Rules nisi in W.Ps. Nos. 436 and 535 to 537 of 1969 are made absolute and the writ petitions are allowed. There will be no order as to costs in any of the writ petitions.
At the hearing of the petitions, the learned counsel for the revenue represent ed that he should be permitted to appear for the Income-tax Officer, the original authority, who passed the impugned order, as the appellate authority who is the only authority in W.Ps. Nos. 535 to 537 of 1969, may not be considered as interested party for all purposes and as he is an authority who function under the Act as a quasi-judicial Tribunal. This objection is well-founded and under rule 6 of the rules of this court regulating proceedings under section 226 of the Constitution, I allowed Mr. Balasubrahmanyan to represent the original authority, namely, the Income-tax Officer, as well in all these petitions. To make the record complete, I have directed the petitioner to file petitions to implead the Income-tax Officer as a party in these writ petitions. These petitions have since been ordered.