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TMI Blog2007 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in observing that the provisions of section 11(2) are applicable to the Assessee's Trust 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in directing that the accumulation of the trust in previous years prior to the previous year relevant to the asstt. Year 1980-81 shall also qualify for deductions of 75% allowable u/s 11(2) of the Income-tax Act 3. Whether, on the facts and in the circumstances of the case, the ITAT was correct in law in treating a sum of Rs.50,000/- deposited with Shriram Centre for Art and Culture as application of income whereas it was a loan to the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of the year, the amount accumulated had been invested in government securities or with the banks in the form of three fixed deposits in the total sum of Rs.3,80,000/- including Rs.1 lakh placed with the Grindlays Bank on 17th May, 1996. 6. The ITO, while computing the assessment for the Assessment Year 1980-81 by his assessment order dated 4th August, 1983 rejected the contention that the accumulated amount had been set apart by way of investments in the manner indicated in Section 11(2) (b) of the Act. The ITO held that the Assessee had invested only Rs.2,80,000/- during the period 1st January, 1979 to 31st December, 1979. He allowed the accumulation only to that extent while finalising the assessment. Further he held that Rs.50, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11 should be held to have been complied with. The shortfall computed for the year in question as regards investment was Rs.81,509/-. The Tribunal observed as under: Without going into the merits whether the fixed deposit of Rs.1 lakh could be regarded as having accumulated out of the present year's income or not, if that amount of Rs.1 lakh also is regarded as a shortfall, then the total amount of Rs.1,81,509/- should be deemed to be the amount in respect of which the option was exercised. 9. The Tribunal further held that the amount of Rs.50,000/- which was advanced as a loan to Shriram Centre for Art and Culture, was an application of the income of the Trust for the purposes of the the Trust and therefore should be construed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. We accordingly answer question No.3 in the affirmative, that is, against the Revenue and in favour of the Assessee. 12. That bring us to the first two questions. As regards the issue whether the Assessee had in fact exercised its option, we are inclined to agree with the Tribunal that the wording of the letter dated 26 th June, 1980 cannot be said to be vague. The letter in fact says that the accumulation was being made in order to enable the trustees to accumulate sufficient funds for carrying out the following purposes of the trust..... . However, we are unable to read the letter to mean that the Assessee had exercised the option in relation to a sum of Rs.1,81,509. The Tribunal has held that even though it was said in the letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5). 14. The above portion in turn refers to Section 11(1)(a) and (b) which read as under: 11. Income from property held for charitable or religious purposes. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year 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 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss wording of the provision indicates that in order to satisfy the requirement of Section 11(2) (b), the investment must necessarily come out of the current year's income. An investment made in the past obviously cannot satisfy this requirement. There is no occasion to take a different view given the purposes and object of such a provision. It is not the Assessee's case that the deposit with the Grindlays Bank matured during the Assessment Year in question and was renewed soon thereafter. It appears that the fixed deposit already made with the Grindlays Bank more than two years earlier was simply continued. In those circumstances it cannot be said that there was an application of the income of the Assessee Trust. In the circumstances, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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