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TMI Blog2001 (4) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... amount is taxable under s. 11(3) of the Act as deemed income of the assessee. There is no grievance about the applicability of deeming provision s. 11(3) of the Act, in the instant case. However, the assessee claimed that such deemed income should be included as the income earned by the assessee in the relevant previous year and on such total income assessee should be allowed to accumulate under s. (2) of the Act in addition to deduction of 25 per cent of the unutilised amount. This claim was not accepted by the AO. He, therefore, completed the assessment on a total income of ₹ 1,98,756. It may be noted that he allowed accumulation under s. 11(1)(a) of the Act to the extent of ₹ 1,08,740 only which is arrived as under : Rs. Income from other sources as declared 7,54,861 Less : 6,46,121 1,08,740 4. Aggrieved assessee, challenged the order of AO before of the CIT(A). The CIT(A) confirmed the action of the AO. The operative portion of his order reads as under : CIT(A)'s order : 3. I have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Bom) 358: (1993) 202 ITR 375(Bom); (ii) CIT vs. Surat Cotton Spg. and Wvg. Mills (P) Ltd. (Bom) (1993) 114 CTR (Bom) 382: (1993) 202 ITR 932(Bom), at 940; and (iii) A.S. Glittre D/5 I/S Garonne Ors. vs. CIT (1997) 140 CTR (SC) 97: (1997) 225 ITR 739(SC) On the strength of the aforesaid judgments, learned counsel submitted that the income as computed by the assessee deserves to be accepted. The mode of assessee's computation is extracted here for immediate reference : Income from other sources as declared 7,54,861 Add : 1,98,756 9,56,617 Less : 1,54,127 7,99,490 Less : 1,99,872 5,99,618 Less : 4,91,994 1,07,625 Less : 1,07,624 Total income NIL Claim under dispute 6. On the other hand, learned, De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consequences if the amount accumulated is not utilised for the specified purposes. Sec. 11(3) is extracted here for immediate reference : Sec. 11(3) : Any income referred to in sub-s. (2) which' (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-s. (5), or (c) is not utilised for the purposes for which it is so accumulated or set apart during the period referred to in cl.(a) of that sub-section or in the year immediately following the expiry thereof, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or, as the case may be, of the previous year immediately following the expiry of the period aforesaid. [underline, italicised in print, is ours] 8. It may be noted that wherever the legislature intended to confer any benefit to the assessee under s. 11 of the Act, the benefit was restricted to the 'income derived fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome can be accumulated or set apart for an application to some specified purposes in India which means such amount should be available with the assessee for application. In the case of deemed income where the amount is already spent by an assessee (for the purposes other than charitable purposes) it cannot be said that the assessee accumulates with an intention to apply it for a rightful purpose. Thus, even on the limited count the assessee cannot claim the benefit of accumulation because the accumulation is allowed only if the intention of the assessee is to apply the same for a specific purpose. Thus, assessee cannot claim the benefit of accumulation with respect to the deemed income. In the case of Director of Income-tax vs. G. Shewnarain Tantia (1993) 199 ITR 215(Cal), the Hon'ble High Court of Calcutta analysed the meaning of the word 'income' used in s. 11 of the Act. The Hon'ble Calcutta High Court observed that the 'income' contemplated by the provisions of s. 11 is the real income and not income as assessed or assessable. They have also followed the earlier decision of the same High Court in the case of CIT vs. Jayshree Charity Trust (1985) 47 CTR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be carried to its logical conclusion. We fully agree with this proposition that a legal fiction no doubt has to be carried to its logical conclusion but at the same time it cannot be stretched to an extent that frustrates the object of the particular provision. In the instant case, we have highlighted one possibility where an assessee might have applied the income for the purposes other than charitable purposes and thus there is no money available with the assessee in which event it cannot be said that the assessee can accumulate deemed income for some specified purposes. Such an interpretation would lead to anomalous situation which is not contemplated under s. 11(1)(a) and 11(2) of the Act because an assessee is entitled to exemption only on such income which is either applied for charitable purposes or intended to be applied for charitable purposes and not otherwise. 13. The circular issued by the CBDT (supra) is in consonance with the intention of the legislature and also the plain meaning that can be ascribed to s. 11 of the Act. Under these circumstances, we do not find any infirmity in the orders of tax authorities. We, therefore, dismiss the appeal filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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