TMI Blog1990 (8) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessee was the rightful owner thereof, being assessable on the dividend income arising from such shares and also entitled to tax credit under section 199 of the Income-tax Act ?" This question came up for consideration before us in Income-tax Reference No. 51 of 1980 (CIT v. Birla Janhit Trust) for the assessment year 1975-76, where the judgment was delivered on August 7, 1990. Following the said decision, we answer the question by saying that the transfer in favour of the assessee-trust was voidable but until it is avoided, and irrespective of the fact whether the assessee was the rightful owner of such shares, the income from dividend on those shares shall be assessed in the hands of the assessee-trust and, accordingly, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a figure after deducting administrative expenses from the gross income. The Tribunal upheld the decision of the Appellate Assistant Commissioner and dismissed the appeal of the Department. Before us, the contentions urged before the Tribunal have been reiterated. It appears from the order of the Appellate Assistant Commissioner that the assessee has incurred the expenditure on salaries and miscellaneous expenses for the purpose of carrying out the objects and purposes of the trust and not only to earn the income from dividend. It is now well-settled that in determining the portion of income applied or accumulated for charitable or religious purposes, regard should be had to the trust income in a commercial sense or according to the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying out of the objects of the trust. In CIT v. Estate of V. L. Ethiraj [1982] 136 ITR 12 (Mad), it was held that income from properties would have to be arrived at in the normal commercial manner without reference to the provisions which were attracted by section 14. In CIT v. Janaki Ammal Ayya Nadar Trust [1985] 153 ITR 159 (Mad), it was held that payment of tax is necessary to preserve the property of the trust when a demand is lawfully made. Therefore, the expenditure incurred by way of payment of tax out of the current year's income has to be considered as application for charitable purposes. In CIT v. Jayashree Charity Trust [1986] 159 ITR 280, this court held that the income to be considered will be that which is arrived at in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the full benefit of the exemption under section 11(1)." After quoting that circular, this court observed as follows: " This circular makes it clear that the word 'income' in section 11(1)(a) must be understood in a commercial sense. The entire income of the trust, in the commercial sense, has been spent for the purpose of charity. There is no reason to deny the benefit of exemption granted by section 11 to that portion of the income which has been taken away by deduction at source on the ground that the amount has not been spent or accumulated for the purpose of charity." In our view, therefore, the expenditure on salaries and miscellaneous expenses for the purpose of carrying out the objects and purposes of the trust must be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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