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TMI Blog2019 (3) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... annot agree with the contention of the learned counsel for the Revenue that such advance did not crystalise in any 'application of income' and was in suspended animation as we have already indicated above that nothing contrary was brought on record by Revenue that this advance did not crystalise in any 'application of income' in favour of the assessee during the year or even subsequently. On the contrary, it was contended at the bar by the Assessee that the leasehold rights were secured by the Assessee with the said investment and building on the said leasehold land is under construction as of now. No hesitation in holding that the advance or investment in the said lease hold property by the Assessee's Charitable Trust in the year in question could be held to be 'application of income' within the meaning of Section 11(1)(a) of the Act and therefore, the Assessee was entitled to the exemption.- Decided in favour of assessee - Tax Case Appeal No.951 of 2008 - - - Dated:- 12-2-2019 - Dr. Justice Vineet Kothari And Mr. Justice C.V. Karthikeyan For the Appellant : Mr.N.V.Balaji For the Respondent : Mr.J.Narayanasamy Standing Counsel JUDGMENT DR.VINEET KOTHARI, J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon various case laws, which are referred to in paragraph 3 of the said order and some of which amongst others are being discussed hereunder, as cited at he bar. 5. The Revenue filed the second appeal before the Income Tax Appellate Tribunal, 'B' Bench, Chennai, which allowed the said appeal of Revenue and held that the Assessee was not entitled to exemption in respect of the advance of ₹ 52.00 lakhs under Section 11(1)(a) of the Act. Being aggrieved by the same, the Assessee has come up with this appeal before this Court. 6. The appeal of the Assessee was admitted by a Co-ordinate Bench of this Court on 16th July 2008 on the following substantial questions of law, which are quoted below: 1.Whether the Appellate Tribunal is correct in law in sustaining the assessment of shortfall of the income applied for charitable purpose even though the advance given for the purchase of the property was for the purpose of achieving such objectives, to be considered as 'application of income' within the ambit of Section 11 of the Act? 2.Whether the Tribunal is correct in law in sustaining the order of assessment on the interpretation of the provisions in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 'applied' is wider in import than the word 'expenditure' . The relevant extract from paragraph 4 is quoted below for ready reference: 4.The word 'applied' is wider in import than the word 'expenditure'. As per Webster's Third New International Dictionary, Vol. I, the word 'applied' means: to put to practical use; engaged in for a utilitarian or contributory purpose; employed in the decoration, design or execution of useful objects. The word 'expenditure' means 'disbursement'. 'Expend' means: 'to put out or distribute; to spend'. The Supreme Court in the decision in Indian Molasses Co. (P.) Ltd. v. CIT (1959) 37 ITR 66 held that the word 'expenditure', means: 'pay out or away; spending something which is gone out irretrievably'. Considering these two words, we should state that the word 'applied' is of a wider import. The money or amount will not go out irretrievably, when it is 'applied' to a purpose. Relying upon the decision in Satya Vijay Patel Hindu Dharamshala Trust v. CIT (1972) 86 ITR 683 (Guj.), in Sampath Iyengar's Law of Incometa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(a), such accumulated income to the extent of 25 per cent of the total income (or ₹ 10,000, whichever is higher) would be exempted from income-tax. Section 11(2), in turn, provides that the restriction which is specified in clause (a) of sub-section (1) as regards accumulation, shall not apply if the assessee gives notice as prescribed under section 11(2)(a) and invests the amount accumulated in the Government securities as per section 11(2)(b). The restriction specified in clause (a) of sub-section (1) is clearly the restriction of 25 per cent of the accumulated income (or ₹ 10,000, whichever is higher) being exempt. If more than 25 per cent (or ₹ 10,000) is to be exempted then the assessee has to comply with the conditions prescribed under section 11(2). In the case of Addl. CIT v. A.L.N. Rao Charitable Trust (1995) 216 ITR 697 / 83 Taxman 252, this Court considered the provisions of section 11(1)(a) in the light of section 11(2) and held that section 11(2) does not in any manner restrict the operation of section 11(1). The accumulated income which is exempt under section 11(1)(a) need not be invested in the Government securities. It is only in respect of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income Tax v. V.G.P. Foundation, reported in (2004) 134 Taxman 663 (Mad.), a Division Bench of this Court held that where the Trust had advanced certain sums to its sister concern, a private limited company, of which the trustees of Assessee were also Directors and that sister concern held the said amount with it for whole of the year and did not spend for the purpose of constructing hospital/use for charitable purpose as was intended and in such facts, the Court held that the Assessee Trust could not be held to have 'applied' that amount of advance given to its sister concern for the object of the Trust and was, therefore, not entitled to exemption under Section 11 of the Act. We do not find any such intercorporate or inter-parte deposits in the present case, which could not achieve the object of the Trust in the case on hand. 15. The crux of the matter, in our opinion, is as to whether the 'investment' can also amount to 'application' or not. We would think that there is nothing in the provisions of Section 11(1) of the Act to curtail or narrow down the meaning of the word 'application', which by definition is of wider import as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that except construction of shopping complex, no other charitable work has been carried out and therefore, the Court, by a short order upheld the order of the Commissioner rejecting the application for renewal of the Trust, as the Trust was not entitled to exemption under Section 80G of the Act. No such facts were available in the present case and therefore, the said decision is of little help to the Revenue. (iii) The next citation relied upon by the learned counsel for the Revenue is Nachimuthu Industrial Association v. Commissioner of Income Tax, reported in (1999) 235 ITR 190 (SC), wherein the Hon'ble Supreme Court, by a short order, dismissed the appeal against the decision of the High Court, wherein the High Court held that mere setting apart as provision in the books of accounts of the assessee of ₹ 2,50,000/- without actually spending such sum for any charitable or religious purpose, does not entitle the Assessee to claim benefit under Section 11 of the Act in respect of such provision amount. Again, with great respects, we do not find any parity of facts here. 16. Therefore, we are of the clear opinion that the Assessee in the present case whil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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