9911796707
TMI Blog1992 (2) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ief facts relating to aforesaid disallowance are that the appellant had settled an amount of Rs. 1000 on 20th March, 1983 for the benefit of its labourers and staff members. During the accounting year ended on 31st March, 1983 i.e., relating to assessment year, 1983-84, the appellant had contributed a sum of Rs. 2 lakhs each to both the aforesaid trusts on 20th March, 1983. The amount was handed over to both the trusts and the trustees of these two trusts decided to earn interest on the said amount of Rs. 2 lakhs. Both the trusts accordingly deposited the said amount of Rs. 2 lakhs with the appellant on interest. The appellant in turn paid interest to both the trusts which was claimed as deduction in the Profit Loss account. 2.1 Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and, therefore, the income arising out of the said amounts also belongs to the assessee. 3. The learned counsel for the assessee submitted that the appellant had contributed a sum of Rs. 4 lakhs to the aforesaid two trusts in the preceding year. The amount was handed over to those trusts. The said trusts made a deposit of Rs. 2 lakhs each with the assessee on which interest was not only credited in their respective accounts periodically but was also paid to those trusts and tax was also deducted at source thereon. The said income has been charged to tax in the respective assessments of those two trusts. The mere fact that by virtue of a retrospective amendment made by the Finance Act, 1984, the assessee became entitled to recover the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically made retrospective w.e.f. 1st April, 1980. The effect of such retrospective amendment in substance is that the assessee would be regarded as the owner of the amount of such contribution/donation made in the previous year commencing from assessment year 1980-81. Since the assessee itself is regarded as owner of the said funds with retrospective effect, the deduction in respect of interest thereon has rightly been denied by the departmental authorities. He thus supported the order of the CIT(A). 5. We have carefully considered the rival submissions made by the learned representatives and have also gone through the orders of the departmental authorities. We have also carefully examined the relevant provisions of law. 5.1 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scouraging creation of such trusts, funds, companies, association of persons, societies, etc., the Finance Act has provided that no deduction shall be allowed in the computation of taxable profits in respect of any sums paid by the assessee as an employer towards the setting up or formation of or as contribution to any fund, trust, company, association of persons, body of individuals, or society or any other institution for any purpose, except where such sum is paid or contributed (within the limits laid down under the relevant provisions) to a recognised provident fund or an approved gratuity fund or an approved superannuation fund or for the purposes of and to the extent required by or under any other law. 16.3 With a view to avoiding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , where such a claim is so made, such unexpended amount shall be returned by the trustee to the assessee as early as possible. The assessee may also claim that any asset being land, building, machinery, plant or furniture acquired or constructed by the fund, trust, company, association of persons, body of individuals, society or any other institution out of the sums paid by the assessee be transferred to him and where any such claim is so made such asset shall be transferred to the assessee as early as possible. " A perusal of the aforesaid provisions as well as the clarification made by the CBDT in the aforesaid circular reveals that the assessee had the option to claim that the unexpended amount shall be returned by these trusts or fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the inception of such contribution/donation. In our view, the obvious answer would be that the trusts continue to remain owner of the unspent amount of donations/ contributions given by the assessee to them until the assessee, after insertion of section 40A(11), made a claim from the respective trusts asking them to repay the amount to the extent of unutilised amount out of such contribution. There is no provision which provides that the assessee shall be deemed to be the owner of the funds ever since the date of making the contribution/donation in question. Further there is no provision that the assessee shall be regarded as the real owner of the income derived by the trust by investing those funds by way of interest etc. In the abse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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