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TMI Blog1983 (11) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 51,920, which was shown in the return of income, was as under : TDS Gross Rs. Rs. "Income from other sources : 1. Interest on FD 20,762 2. Interest on SB account with AB 511 3. Dividends --- Tata Iron 201 E 384.00 1,285 Tata Iron 201 E 384.00 1,284 ACC 1826 E 5,880.00 25,564 Modern Mills 1000 E 575.00 2,500 The AMCP Company 1 E 3.45 15 ----------------- ---------------- Total 7,226.45 51,921" ----------------- ---------------- The break up of the actual receipts of Rs. 38,362 was as under : Rs. Rs. "1. Interest on FD 20,762 2. Interest on SB account with AB 511 3. Dividends---ACC 7,592.40 Modern Mills 1,925.00 AMCP Company 12.00 Indian Rayons relating to the 7,560.01 assessment year 1975-76 ---------------- 17,089.41 17,089 ----------------- ---------------- Total 38,362" ---------------- The break up of the amount said to have been expended of Rs. 35,140 was as under : "Amounts utilised and spent for Rs. Rs. the purposes of the trust ----Scholarships paid 21,600 Income-tax (disputed) paid 13,300 Challan for revised petition 25 Expenses for the auditor to go to Vijayawada to get the stay order from the Commissioner for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich we are arriving at. 7. First of all, we will assume that the assessee is not a trust to which the provisions of section 11 apply. We have set out the break up of the income of Rs. 51,921. This includes gross dividend income received from ACC of which two items were deferred dividends payable after the close of the accounting period and of which we have given particulars earlier. Normally, a question would have arisen whether the deferred dividends could be assessed in this year having regard to the ratio of the judgments of the Supreme Court in J. Dalmia v. CIT [1964] 53 ITR 83 and Ramesh R. Saraiya v. CIT [1965] 55 ITR 699. This is because it can be contended that deferred dividends were not unconditionally made available to the assessee in the year of account in which they were declared. However, in view of certain provisions of the Companies (Temporary Restrictions on Dividends) Amendment Act, the entire dividends would become assessable. Section 4 of the aforesaid Act provides that the provisions of the Act apply in relation to the whole of the dividend declared as they apply in relation to dividend which is declared but payment of no part of which is deferred. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the person in receipt of the income --- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India ; and, where any such income is accumulated for application to such purposes in India, to the extent to which the income so accumulated is not in excess of twenty-five per cent of the income from the property or rupees ten thousand, whichever is higher ; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India ; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twenty-five per cent of the income from the property held under trust in part . . . . (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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted. But, as, contended by Mr. Anjaneyulu, only to the limited extent of finding out the mode of determination of the income of the trust, by way of contrast, reference can be had to this sub-section. Undoubtedly, sub-section (4) of section 11 of the Act, specifically lays the mode of determination of the income of the business undertaking of a trust. A similar provision is not to be found with regard to the other income of the trust. By an inferential process, it can be said that that mode of determination by the ITO is only restricted to the income of the business undertaking . . . . Impliedly excepting the income with regard to the business undertaking as would be assessed by the ITO, the income that has to be computed with regard to a trust is one based on the accounts of the trust. Thus, giving the full effect of sub-section (4) of section 11 under which the power to determine the income by the ITO is limited only to business undertakings of a trust, the income of the trust to be determined could be based only on the accounts of the trust ......" [Emphasis supplied] Their Lordships have clarified the import of the provisions of section 11(4) vis-a-vis the other sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and Rs. 25 for a revision petition. The balance is only Rs. 3,221. As far as the item of Rs. 21,600 is concerned, the AAC has already allowed a deduction and the revenue is not in appeal. Regarding the amounts of Rs. 215 and Rs. 25 there can be no dispute that they were spent for the purposes of the trust. The amount remaining is only the tax payment of Rs. 13,300. Here again, we have the direct authority of the judgment of the Andhra Pradesh High Court already referred to, wherein their Lordships have observed : ". . . It is true that payments on account of income-tax and wealth-tax are not expenditure by themselves for the purpose of the trust. But it can hardly be disputed that such expenses are incidental to the carrying out of charitable purposes. It is an incidence of the income or the accumulation of the income of the trust . . . ." Therefore, the tax payment of Rs. 13,300 is also application of income for charitable purposes in India. The assessee has, therefore, applied Rs. 35,140 out of income derived from property in the year as computed for purposes of section 11 of Rs. 38,361. We may clarify, the amount of deferred dividends cannot represent income 'derived' fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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