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TMI Blog1996 (8) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... pacity or as the case may be, loss from the proprietary business of the trusts. 2. Kalindi Trust besides having interest income was partner with 8% share in a Registered Firm under the name and style of M/s. Sijcon Construction Co. and against the partnership income it showed nil income stating "Accounts not received". Bharti Trust besides interest income was partner with 10% share in a Registered Firm under the name and style of M/s. Sijcon Construction Co. (Nadihi Project) and for assessment year 1985-86, it declared a loss of Rs. 2,488 against "partnership income" and for assessment year 1986-87 nil income was declared stating "Accounts not received". Smita Trust was partner having 10% share in a Registered Firm under the name and sty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61(1A) covered loss from the business, whether proprietary or by way of share from the firm and as such tax was rightly charged at the maximum marginal rate on the whole of the income remaining after set off of loss. 6. Shri S.N. Divatia, the learned counsel for the assessee-trusts strongly supported the orders of the Dy. CIT (Appeals). He submitted that the phrase "Profits and gains of business" does not include negative profits and gains of business and it is only when the said profits and gains are positive and remains after set off, if any, that tax is chargeable at maximum marginal rate. According to the learned counsel, section 161(1A) envisages two situations, namely, (i) where the only income of the trust may be profits and gains o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income and therefore tax cannot be levied at maximum marginal rate. In support of this contention, the learned counsel for the assessee-trusts relied upon the clarification regarding computation of tax in respect of Long Term Capital Gains under section 112 made by CBDT vide its Circular No. 721, dated 13-9-1995 wherein Board was called upon to interpret the phraseology, namely, "total income" and "includes" which is analogous to one under interpretation in the present appeals. The learned counsel further submitted that the Board is of the view that wherein there is no income under the head "Capital gains" after set off of loss under other heads of income, there would be no tax. The learned counsel for the assessee-trusts therefore co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into for purposes of tax avoidance the main object being to avoid payment of the registered firm tax which would become payable if the business is carried on in partnership. " Thus, the object behind enacting this sub-section is to curb the practice of avoiding R.F. tax by carrying on business through the medium of private trusts. In the cases before us, the first three trusts, viz., Kalindi Trust, Bharti Trust and Smitha Trust were partners in the registered firms, the fact admitted by the assessees and it is clear that these trusts were deriving profits and gains of business. There is nothing on record to indicate that the firms in which these three trusts were partners stood dissolved formally or informally during the years under appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be sacrificed for the language. We cannot do better than repeat the famous words of Judge Learned Hand when he said : " It is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable source of interpreting the meaning of any writing, be it a statute, a contract or anything else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning. " We would also like to quote the following two paragraphs from the judgment of the Apex Court in the case of J.H. Gotla : " If a stri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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