TMI Blog1984 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... 74 for which the accounting period ended on March 31, 1972. The assessee held a large number of shares. The gross dividend income from the shares was Rs. 3,49,696. The net dividend received by the assessee after deduction of tax at source during the relevant accounting period was Rs. 2,72,722. The assessee, in his return of income, did not include the amount of the tax deducted at source. The assessee's case was that the amount deducted at source had not been received by the assessee and could not be applied by the assessee for the objects of the trust. The entire amount that was received by the assessee after deduction of tax at source had been spent for charitable purposes. The Income-tax Officer rejected the assessee's contention and included a sum of Rs. 76,974 being the amount of tax deducted at source as the taxable income of the assessee. The Appellate Assistant Commissioner, however, relying upon a clarification made by the Commissioner of Incometax, Delhi, by his letter dated June 2, 1974, held that the tax deducted at source could not be treated as income of the trust for the year in which it was not actually received by the assessee. The Tribunal, on further appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the total income of the previous year of the person in receipt of the income ". The question is whether " income P" in section 11(1)(a) will include the amount of tax that has been deducted at source and is deemed to be " income received " by section 198 of the Act. To resolve this controversy, regard must be had to the language that has been employed and also to the object of the statute. It is well settled that, if possible, the words of a statute must be construed so as to give sensible meaning to them. The words ought to be construed ut res magis valeat quam pereat. The entire object of section 11 is to grant immunity to the income of a charitable trust from income-tax. The immunity, however, 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% 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an adjustment of any expenses extraneous to the trust. It was held that the income from properties held under trust would have to be calculated in the commercial manner. It was observed that section II contemplates an application of the income for charitable purposes. The charity can accumulate 25 per cent. of the income. The application as well as the accumulation has necessarily to be of the income as accounted for in the accounts and not as computed under the Income-tax Act, subject, of course, to what is provided in sub-section (4) of section 11. We are in respectful agreement with the view expressed by the Madras High Court. This judgment is also in consonance with the view taken by the Andhra Pradesh High Court in the case of CIT v. Trustees of H.E.H. the Nizam's Supplemental Religious Endowment Trust [1981] 127 ITR 378. 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) dated May 19, 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 sections 60 to 63 'the following income sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of dividends attributable to profits and gains from industrial undertakings. There is no dispute that the deduction under section 80K is available only if the qualifying dividend forms part of the gross total income of the assessee. The dispute, however, is whether the deduction is to be computed with reference to the gross amount of the dividend. The assessee had received gross dividend income of Rs. 57,834 and claimed relief under section 80K on the gross dividend. The Income-tax Officer was of the view that under section 80K, the assessee was entitled to get relief on that portion of the dividend which was included in the gross total income and not on the gross dividend income. The gross total income of the assessee as assessed by the Income-tax Officer was Rs. 1,07,553. The Income-tax Officer found that the assessee got a relief of Rs. 6,65,191 under section 11. The Income-tax Officer was of the opinion that a portion of the dividend income of Rs. 57,834 must be taken to have enjoyed relief under section 11. The Income-tax Officer calculated that the exempted portion of the dividend under section l1 came to Rs. 49,784 and held that only Rs. 8,050 out of Rs. 57,834 had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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