9911796707
TMI Blog1979 (12) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of computing the accumulations, in excess of 25% of the total income, outgoings by way of expenditure other than statutory deductions should also be considered having due regard to their nature ? " For the purpose of appreciating these two questions, it is necessary to set out the relevant facts. The assessee is the estate of Shri V. L. Ethiraj, represented by the Official Trustee, High Court, Madras. Shri V. L. Ethiraj executed a will on April 21, 1952, by which he created a trust of all his properties, movable and immovable, appointing the Official Trustee, High Court, Madras, as the sole executor and trustee. Certain annual payments to some of his relations, including his wife, were directed to be made out of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1967, and Rs. 1,88,267 paid on March 27, 1968, as income-tax should have been considered as outgoings and, if so considered, the entire income should have been wiped out and there was no question of bringing to tax any accumulation in excess of 25% mentioned in s. 11 (1). The case for the assessee was that for the purpose of determining whether there was accumulation of income or not, the commercial surplus alone should be considered and, hence, the income-tax paid should have been excluded in computing such commercial surplus. , As against this contention of the assessee the contention advanced on behalf of the revenue was that the income-tax can never be considered as an outgoing in computing the income, whatever may be the purpose of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose, the outgoings which may have to be taken into consideration may not invariably fall to be restricted to the statutory deductions. The outgoings can cover other expenditure also depending upon the nature, thereof, as also the particular source of funds from which the said expenditure has been met i.e., whether out of past profits or current income, etc. In the present case, the total income has not been determined in the manner indicated by us. This should first be done. If the total income, computed in accordance with the Act, is above the taxable limit, the Income-tax Officer will proceed to determine, with reference to the gross receipts, having clue regard to each individual claim of deduction of outgoing, whether there has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated under the Income-tax Act ?" With reference to that question, the Bench, after a discussion of the statutory provisions and certain other decisions, held as follows (p. 495 of 135 ITR): " The result is that the first question (the question extracted by us above) is answered as follows. The income from the properties held under trust would have to be arrived at in the normal commercial manner without reference to the provisions which are attracted by sec. 14. Twentyfive per cent. thereof will have to be ascertained and if the assessee had accumulated more than 25%, then the consequences contemplated by section II will follow." For coming to the above conclusion, the Bench referred to the decision of the Supreme Court in CIT v. Bipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income. Consequently, following the judgment of this court referred to above as well as the language of s. 11 (1)(a), we hold that the Tribunal is in error in giving the directions which it did, and, accordingly, answer the first question referred to the court in the negative. As far as the second question is concerned, it contemplates, whether there can be any outgoing in addition to the deductions contemplated by the respective sections dealing with different heads of income ? Since we have held that there is no question of computing the income under the different heads with reference to the relevant statutory deduction for the purpose of determining the income under s. 11 (1), the question of allowing any other outgoing by w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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