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TMI Blog2018 (4) TMI 711X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome in A.Y 2014-15 is found to be in order, then the said amount shall not be treated as the income of the assessee under Sec. 11 for the year under consideration i.e A.Y 2012-13. - ITA No. 6571/MUM/2017 - - - Dated:- 11-4-2018 - Shri G. S. Pannu, AM And Shri Ravish Sood, JM Assessee by : Shri Rajesh P. Shah, CA. Department By : Ms. N. Hemalatha, Sr. DR ORDER Per Ravish Sood, Judicial Member The present appeal filed by the assessee is directed against the order passed by the CIT(A), Mumbai-1, dated 28.08.2017, which in itself arises from the order passed by the A.O under Sec.143(3) of the Income-tax act, 1961 (for short Act ), dated 23.03.2015 for A.Y. 2012-13. The assessee assailing the order of the CIT(A) had raised before us the following grounds of appeal:- 1. On the facts and under the circumstances of the case and in law, the ld. CIT(A) erred in upholding the Assessing Officer s action of not considering the TDS amount of ₹ 13,28,823/- as application of income under section 11(1)(a) of the I.T. Act 1961 in the assessment order. 2. On the facts and under the circumstances of the case and in law, the ld. CIT(A) erred in mentioning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year immediately following, to the extent the same did not exceed the said amount. It was observed by the Assessing Officer that as the assessee had failed to exercise the aforesaid option, therefore, the claim of the assessee seeking treatment of the amount of TDS of ₹ 13,28,823/- as an application of income under section 11(1)(a) of the Act, was not to be accepted. The A.O on the basis of his aforesaid deliberations re-casted the taxable income of the assessee at ₹ 14,92,760/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions raised by the assessee before him, being of the view that the deduction of tax at source could not be held as application of income, thus, dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(A), had carried the matter in appeal before us. The ld. Authorised Representative (for short, 'A.R') for the assessee at the very outset took us through the facts of the case and the observations of the lower authorities. The ld. A.R at the very outset of the hearing of the appeal relied on the judgment of the Hon'ble High Court of Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... higher. 7. In the case before us, the assessee has spent in the relevant accounting period, the entire amount of dividend that it had actually received for charitable purposes. There is no dispute about this. A sum of ₹ 76,974 had been deducted from the dividend income on account of income-tax. Any amount that has been deducted from the dividend income is deemed to be income received by the shareholder under the provisions of s. 198. Sec. 11(1) lays down that the income derived from property held under trust for charitable or religious purposes shall not to the extent indicated in that section be included in the total income of the previous year of the person in receipt of the income. The question is whether income in s. 11(1)(a) will include the amount of tax that has been deducted at source and is deemed to be income received by s. 198 of the Act. 8. 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 a sensible meaning to them. The words ought to be construed ut res magis valeat quam pereat. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that has been granted to the income of a charitable trust cannot be denied on the ground that the deemed income under s. 198 has not been actually spent for the purpose of charity. 9. The Madras High Court, in the case of CIT vs. Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485 (Mad) : TC23R.965, held that taking into account the purposes for which the conditions of s. 11(1)(a) were imposed, it would be clear that the income to be considered will be that which is arrived at in the context of what is available in the hands of the assessee subject to 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 s. 11 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 IT Act, subject, of course, to what is provided in sub-s. (4) of s. 11. We are in respectful agreement with the view expressed by the Madras High Court. This judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the word income in s. 11(1)(a) must be understood in a commercial sense. The entire income of the trust, in the commercial sense, has been spent for the purpose of charity. There is no reason to deny the benefit of exemption granted by s. 11 to that portion of the income which has been taken away by deduction at source on the ground that the amount has not been spent or accumulated for the purpose of charity. 7. We have perused the aforesaid judgment of the Hon ble High Court of Calcutta and find that the High Court had observed that though the income that has not been applied for charitable purpose or accumulated beyond the prescribed limit for charitable purpose will not enjoy the immunity from taxation, but however, the exclusion from the immunity that has been granted by s. 11 must be confined to the real income of the trust. We though are not oblivious of the fact that Sec. 198 provides that the amounts deducted by way of income-tax shall be deemed to be income received , but then, as observed by the Hon ble High Court, the amount of income which is taken away by deduction of tax at source, can neither be spent nor accumulated for charitable purpose, as applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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