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TMI Blog2001 (2) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... which was originally registered as a society under the name "Sir Sri Ram and Sons Charitable Trust Society" under the Societies Registration Act, 1860, on May 7, 1941. The name of the trust was changed to its present name "Sir Sri Ram Foundation" as per a certificate of registration dated May 30, 1963, granted by the Registrar of Societies. There were seven subscribers to the memorandum of association of whom three, namely, Sir Sri Ram, L. Bharat Ram and L. Charat Ram constituted the board of trustees. On February 10, 1955, L. Charat Ram donated to the trust, 200 shares of Bharat Ram Charat Ram Pvt. Ltd. (hereinafter referred to as "BRCRP Ltd.") of the face value of Rs. 100 each. On the said date Smt. Bharat Ram also donated 90 shares of BRCRP Ltd. In respect of these 290 shares received as donation by the trust, BRCRP Ltd. issued 870 bonus shares and thus the trust came to hold 1,160 shares in BRCRP Ltd. The total shareholding of BRCRP Ltd. consisted of 19,997 shares, of which 11,359 shares were held by relatives of L. Bharat Ram and L. Charat Ram who were the founder members of the trust and were treated by the Revenue authorities as "excluded persons" in terms of clause (b) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly. 13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof-... (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof-... (ii) if any part of such income or any property of the trust or institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3):... (2) Without prejudice to the generality of the provisions of clause (c) and clause (d) of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3).... (h) if any funds of the trust or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , such as notes, bills, cheques, drafts, stocks and bonds, and in broader meaning may include property of every kind...Money in hand, assets, cash, money available for the payment of a debt, legacy, etc. Corporate stocks or government securities; in this sense usu ally spoken of as the 'funds'. Assets, securities, bonds or revenue of a State or Government appropriated for the discharge of its debts. Generally, working capital; sometimes used to refer to cash or to cash and market able securities." "(b) Dictionary for Accountants, fourth edition, by Eric L. Kohler: 1. An asset or group of assets within any organisation, separated physically or in the accounts or both from other assets and limited to specific uses. Examples: a petty cash or working fund a replacement and renewal fund; an accident fund; a contingent fund a pension fund. Example: a trust fund created by a will; an endowment fund; a sinking fund. 4. pl.: Current assets less current liabilities (on an accrual basis) working capital; a term used in cash flow statements. 5. pl.: cash." "Chambers' Twentieth Century Dictionary, new edition Fund: n. a sum of money on which some enterprise is founded or expense s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kind (e.g., money in a drawer or in a bank or it may be a mere accountancy expression used to describe a particular category which a person uses in making up his accounts). A similar view was expressed in Allchin v. Coulthard [1942] 2 KB 228. The expression "fund" or "funds" has a variety of meanings but the sense in which it is employed must be gathered from the context. It would not be correct to adopt a strictly literal or technical meaning of this expression while construing section 13(2)(h). In other words we must not construe that provision mechanically. We must construe it having regard to the object which the Legislature had in view in enacting it and in the context of the setting in which it occurs. That, provision came to be inserted in the Act by the Finance Act, 1970. On a plain reading of that provision, it is clear that clause (h) of sub-section (2) of section 13 covers investment of the trust funds in any concern in which any of the persons specified in sub-section (3) has substantial interest ("specified persons" in short) and if such investment of the trust funds is made after December 31, 1970, it would result in forfeiture of exemption from tax. However, if the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such a manner that it produces a revenue. An illuminating observation was made in IRC v. Desoutter Bras. Ltd. [1946] 1 All ER 58 (CA) about what "investment" means. It was observed that the word "investment" is not a word of art, but has to be interpreted in a popular sense. It is not capable of legal definition, but a word of current vernacular. The words "invest" and "investment" are to be taken in the business sense of laying out of money for interest or profit. A plea similar to the one taken by learned counsel for the Revenue was raised before the Kerala High Court in CIT v. Chandrika Educational Trust [1994] 207 ITR 108. There also it was pleaded that the expression "continued to remain" qualifies the expression "in any concern" whether it was an investment or not. The plea was rejected by the Kerala High Court. It was observed that it would be doing violence to the plain language of the provision. Section 13(2)(h) requires that the funds of the trust are, or continue to remain invested in any concerti of the nature mentioned therein. The interpretation suggested by learned counsel for the Revenue would do violence to the plain language used. The dictum of Rowlatt J. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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