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Issues Involved:
1. Assessability of dividend income as real income. 2. Liability of dividend income assessment due to overriding statutory charge u/s 14 of the Estate Duty Act, 1953. 3. Exemption of dividend income u/s 11(1)(a) of the Income-tax Act, 1961. 4. Partial exemption (25%) of dividend income u/s 11(1)(a) of the Income-tax Act, 1961. 5. Right of appeal against the levy of interest u/s 215 of the Income-tax Act, 1961. 6. Right of appeal against the levy of interest u/s 217 of the Income-tax Act, 1961. Summary: 1. Assessability of Dividend Income as Real Income: The Tribunal held that the dividend income did not constitute the real income of the assessee-trusts due to a statutory charge created by section 74(2) of the Estate Duty Act, 1953. However, the High Court disagreed, stating that the charge under section 74(2) did not extend to the income from the estate, and thus, the income was not diverted by an overriding title. Consequently, the dividend income was assessable as real income. 2. Liability of Dividend Income Assessment Due to Overriding Statutory Charge: The Tribunal's view that the dividend income was diverted by an overriding statutory charge was rejected by the High Court. The Court emphasized that the charge created by section 74(2) of the Estate Duty Act did not extend to the income from the estate. Therefore, the dividend income was liable to assessment in the hands of the assessee. 3. Exemption of Dividend Income u/s 11(1)(a): The High Court examined the conditions of section 11(1)(a) of the Income-tax Act, 1961. It concluded that the income was not applied for charitable purposes in India, and thus, the exemption under section 11(1)(a) was not applicable. The Court also noted that the income was not diverted by an overriding title and was available for application. 4. Partial Exemption (25%) of Dividend Income u/s 11(1)(a): The High Court clarified that for the 25% exemption under section 11(1)(a), there must be a conscious accumulation of income for application to charitable purposes in India. Since there was no evidence of such accumulation, the Court held that the income was not eligible for the 25% exemption. 5. Right of Appeal Against the Levy of Interest u/s 215: The High Court referred to the Supreme Court decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, which held that the levy of interest under section 215 is part of the assessment process. The assessee can dispute the levy in an appeal only if they argue that they are not liable to the levy at all. Since the assessee's contention was for waiver or reduction of interest, the appeal was not competent. 6. Right of Appeal Against the Levy of Interest u/s 217: Similarly, the High Court held that the levy of interest under section 217 is part of the assessment process, and the appeal was not competent as the assessee's contention was for waiver or reduction of interest, not for non-liability. Conclusion: All six questions were answered in the negative and in favor of the Revenue. No order as to costs.
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