Law:

Section:

Section 11 of the Income-tax Act, 1961 [Corresponding to section 4(3)(i) of the Indian Income-tax Act, 1922] - Charitable or religious trust - Exemption of income from property held under - Assessment year 1960-61 - 'A' a trustee of assessee-trust, transferred certain shares to trust, reserving right to revoke and recall transfer but not before completion of seven years from date of delivery of shares - Trustees accepted transfer with all terms and conditions - Trustees claimed that dividend income arising from those shares was exempt under section 4(3)(i) of 1922 Act and, therefore, claimed refund of tax deducted at source - High Court held that gift of shares by 'A' was a valid one, but said gift did not have effect of augmenting assessee-trust, and, therefore, assessee was not entitled to refund of TDS on dividend accrued on those shares - Whether there was no difficulty for trustees to accept gifts from third parties for purpose of furthering objectives of trust, so long as trust deed did not prohibit them from receiving such gifts and so long as gift made did not in any manner impinge on objects intended to be achieved by trust - Held, yes - Whether gift made by 'A' being a valid gift, shares gifted were vested in trust and, therefore, trust was entitled to dividends received in respect of those shares - Held, yes - Whether in view of section 4(3)(i) of 1922 Act dividend was exempt from tax and, therefore, assessee-trust was entitled to refund claimed - Held, yes FACTS 'A' one of the trustees of the assessee, a charitable trust, transferred certain shares to the trust, reserving to himself the right to revoke and recall the transfer but not until after the expiry of clear full seven years from the date of delivery of the shares to the trust. The trustees accepted the offer with all its terms and conditions. The trustees claimed that the dividend income from the said shares was exempt from payment of income-tax in view of section 4(3)(i), and hence the amount of TDS, be refunded. The ITO refused to grant the refund on the ground that in absence of any provision for receipt of donations or gifts from outsiders, the gift made by 'A' was not a valid one, and…

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