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TMI Blog2018 (4) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... s been offered for taxation in the A.Y. 2014-15." 2. Briefly stated, the facts of the case are that the assessee which is a trust registered with the DIT (Exemptions), Mumbai under section 12A had filed its return of income for A.Y 2012-13 on 27/09/2012 along with its income and expenditure account, balance sheet and audit report in Form No. 10B, declaring total income at Rs. 1,63,933/-. The case of the assessee was taken up for scrutiny assessment under section 143(2) of the Act. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had in its computation of income claimed TDS of Rs. 13,28,823/- as application of income under section 11(1)(a) of the Act. The Assessing Officer not being satisfied with the aforesaid claim, thus, called upon the assessee to justify the same. The assessee in its reply submitted before the Assessing Officer that its claim of TDS as an application of income under section 11(1)(a) was in terms of CBDT Circular No. 5- P/LXX-6, dated 19/05/1968, as per which, the term 'income' used in section 11(1)(a) was to be understood in a commercial sense, and as such the deemed income (i.e. tax deducted at source) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had observed that as the amount of tax deducted at source would not be available with the assessee for application or accumulation, therefore, the same was not to be treated as income for the purposes of Sec. 11. The ld. A.R further to fortify his aforesaid claim also took support of an order passed under Sec. 263 by the Ld. CIT (Exemptions), Mumbai-12 in the case of M/s. Madhavi Raksha Sankalpa, wherein it was observed by the Ld. CIT that as the amount of TDS when received by the assessee as refund is shown as income, therefore, the claim of the assessee that such amount of TDS was to be held as an application of income was to be accepted. 6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find substantial force in the reliance placed by the ld. A.R on the judgment of the Hon'ble High Court of Calcutta in the case of CIT vs. Jayashree Charity Trust (1986) 159 ITR 280 (Cal). We find that the High Court specifically addressing the issue as regards the treatment to be accorded to tax deducted at source for the purpose of Sec. 11 of the Act, had observed that the same could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, is confined "to the extent to which such income is applied to such purposes in India." The exemption will be denied if the income is not actually applied for charitable purpose. Only 25 per cent of the income or Rs. 10,000, whichever is lower, can be accumulated for application to charitable purpose. If a portion of the income of a charitable trust is not applied for charitable purposes or is accumulated beyond the permitted limit, that portion will not qualify for the immunity from taxation which has been granted by s. 11. In other words, the income that has not been applied for charitable purpose or accumulated beyond the prescribed limit for charitable purpose will not enjoy the immunity from taxation. This exclusion from the immunity that has been granted by s. 11 must be confined to the real income of the trust. The amount of income which is taken away by deduction at source under s. 194 is not available to the trust for application to charitable purposes. Sec. 198 provides that the amounts deducted by way of income-tax shall be deemed to be "income received". What is deemed to be income can neither be spent nor accumulated for charitable purpose. "Application" or "accum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... izam's Supplemental Religious Endowment Trust (1981) 127 ITR 378 (AP) : TC23R.983. 10. It also appears that the view we have taken has also been adopted by the Central Board of Direct Taxes in Board's Circular No. 5-P (LXX-6) dt. 19th May, 1968. It was stated in that circular, inter alia (see [1969] Indian Tax Laws, Appx. II, p. lxxxv): "2. Section 11(1) provides that subject to the provisions of ss. 60 to 63, the following income shall not be included in the total income of the previous year...' The reference in sub-s. (1)(a) is invariably to „income ' and not to „total income'. The expression „total income' has been specifically defined in s. 2(45) of the Act as „the total amount of income...computed in the manner laid down in this Act.' It would, accordingly, be incorrect to assign to the word „income', used in s. 11(1)(a), the same meaning as has been specifically assigned to the expression „total income', vide s. 2(45).... 4. Where the trust derives income from house property, interest on securities, capital gains, or other sources, the word "income" should be understood in its commercial sense, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, such portion of income that has been taken away by way of income-tax deducted at source, would not be available to the assessee for application or accumulation. We are of the considered view that as observed by the Hon'ble High Court, Sec. 11 cannot be interpreted to mean that the amount which has been deducted at source by way of income-tax shall be included in the "total income" of the trust and brought to tax. We find that the High Court had rather observed that though Sec. 198 provides that the sums deducted by way of income-tax shall be deemed to be income received, but, the deeming provisions of s. 198 should not be construed in a way to frustrate the object of s. 11. We thus respectfully following the view taken by the High Court, are of the considered view that in the case of the assessee before us, the immunity from taxation that has been granted to the income of the said charitable trust cannot be denied on the ground that the deemed income under sec. 198, i.e tax deducted at source under Sec. 194A of Rs. 13,28,823/- had not been actually spent for the purpose of charity during the year. The ld. A.R had averred that the tax deducted at source of Rs. 13,28,823/- f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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