N. V. Balasubramanian, J.
1. There are three assessees, viz., M. Ct. Muthiah Chettiar Family Trust, M. Ct. Trust and S. RM. M. Ct. M. Thiruppani Trust. The assessment years involved in all the three cases is the same viz., 1972-73. It would be sufficient to notice the facts in the case of M. Ct. Trust (hereinafter referred to as 'the assessee'), as the facts in the other cases are more or less similar and the other cases raise identical disputes.
2. The assessee is a public charitable trust eligible for exemption from income-tax in accordance with the provisions of Section 11 of the Income-tax Act, 1961 (hereinafter to be referred to as 'the Act'). The assessee, in the instant case, for the assessment years commencing from 1962-63 and ending on 1971-72, had been accumulating the income of the trust as declared in the notice in Form No. 10. The income so accumulated should have been utilised for the purposes for which it was accumulated before April 1, 1972. The purposes for which the accumulation was sought are stated as follows :
'(i) to establish and maintain and manage hospitals, clinics, laboratories and medical research centres and to provide the poor with medical relief, surgical advice and aid ;
(ii) to acquire or take over any hospitals, clinics, laboratories or research centres and to maintain and manage them ;
(iii) to establish, maintain and manage educational institutions or libraries for imparting technical knowledge or scientific knowledge, or knowledge in any subject or language ;
(iv) to award scholarships or stipends to students to enable them to prosecute their studies in India or in foreign countries and to award prizes to students for proficiency in any subject or language ;
(v) to render substantial financial aid to any existing hospital or educational institutions ;
(vi) to give substantial donations to any relief fund by way of charity.'
3. As earlier stated, the entire income of the assessee for the previous year relevant to the assessment year 1961-62 and nine subsequent previous years till the previous year ending 1971-72 were accumulated and no part of the income whatsoever of any such previous years was in fact applied to any specified purpose till December 27, 1971. On December 27, 1971, the assessee handed over the entire investment representing the accumulated income for the concerned previous years to a new charitable trust known as 'M. Ct. Muthiah Chettiar Foundation' for the purpose of carrying out certain charitable purposes.
4. The Income-tax Officer in the assessment made for the assessment year 1972-73 included not only the income of the relevant previous year ended on April 13, 1972, but also the income of the previous year relevant to the assessment year as not having been utilised within the time allowed and therefore, having become the income taxable within the meaning of Section 11(3) of the Act.
5. The Commissioner of Income-tax in exercise of the powers of revision found that the assessee had not spent any part of the accumulated income during the years 1962-63 to 1971-72 under Section 11(2)(a) of the Act as stipulated in the notice and he was of the opinion that the order of the Income-tax Officer including in the assessment for the assessment year 1972-73, only the unspent income of the year 1962-63 attracting the provisions of Section 11(3) of the Act and not of the subsequent assessment years was erroneous and prejudicial to the interests of the Revenue. The Commissioner initiated the proceedings under Section 265 of the Act and revised the assessment by enhancing the income of the assessee so as to include the income accumulated in all ten years. Consequently, he recomputed the income of the assessee at Rs. 13,39,316 as against Rs. 3,34,250 assessed by the Income-tax Officer.
6. The assessee challenged the order of the Commissioner of Income-tax by filing an appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal held that by handing over of charitable trust income to another charitable trust having similar and other objects of charity it ^ would amount to application of income to charitable purposes. The Tribunal relied upon a decision in IRC v. Helen Slater Charitable Trust Ltd. [1980] 3 WLR 157 ; [1980] 1 All ER 785 (Ch. D.) and the decision of this court in the case of CIT v. Thanthi Trust [1982] 137 ITR 735, and held that the assessee was entitled and authorised to apply its income to charitable purposes and handing over of accumulated income to another charitable trust was within the powers of the asses see-trust and it would amount to application of its income. The Tribunal further held that the assessee was specifically authorised to make over the accumulated income to another charitable trust to carry out other objects of the said charitable trust. The Tribunal held that there is no difference between the employment of the expression, 'utilised' in Clause (c) and the expression, 'used' in Clause (a) of Section 11(3) of the Act. According to the Tribunal, as the assessee had taken steps for forming M. Ct. Muthiah Foundation for the specific purpose of acquiring or establishing certain educational institutions, hospitals and maintaining them, the assessee handed over the accumulated income to it for implementing the objects, and the assessee had utilised the income for the purposes stated by it in the notice given to the Income-tax Officer under Section 11(2) of the Act. The Tribunal held that the assessee had completely divested itself of its ownership over the accumulated income by handing it over and put it beyond its control and it would amount to utilisation for which the notice was given. The Tribunal, therefore, held that the Commissioner was not justified in holding that the accumulated income of the trust was not applied or utilised for the charitable purposes within the period specified in Form No. 10 notice or in the year immediately following the expiry thereof. The Tribunal also held that the Commissioner was not justified in taking 100 per cent, of the income each year even assuming' that the assessee had not applied the accumulated income for charitable purposes within the period provided in Section 11(3) of the Act. The Tribunal, in this view of the matter, allowed the appeal preferred by the assessee.
7. The Commissioner of Income-tax filed an application to refer as many as eight questions of law arising out of the order of the Tribunal, but the Tribunal has stated a case and referred the following two questions of law for our consideration under Section 256(1) of the Act.
'1. Whether the Tribunal was justified in law in holding that the accumulated income of the trust for the years concerned was applied to charitable purposes within the period specified in the notice or in the year immediately following thereof and, therefore, the order of the Commissioner of Income-tax to the contrary was not justified ?
2. If answer to question No. 1 is in the negative, whether the Appellate Tribunal was justified in law in holding that the Commissioner of Income-tax was not justified in taking 100 per cent. of the income of each year for bringing it into charge even assuming that in the facts of the case it cannot be held that the assessee had applied accumulated income to charitable purposes within the period provided in Section 11(3) of the Act and that only 75 per cent. of the same could be so taken ?'
8. We may straightaway say that the first question as framed by the Appellate Tribunal does not bring out the real controversy between the parties. The case of the Revenue was that by handing over the accumulated income to a trust having similar objects, it would not amount to utilisation of the accumulated income for the purpose for which it was accumulated. The Tribunal, however, framed the question as if whether it would amount to application of income. Therefore, the question as framed by the Tribunal, in our opinion, should be reframed and the first question is reframed as under :
'Whether, the Tribunal was justified in law in holding that the accumulated income of the trust for the years concerned was utilised for the purpose for which it was accumulated or set apart and, therefore, it should not be deemed to be the income of the assessee for the relevant assessment year ?'
9. Mr. J. Jayaraman, learned senior counsel appearing for the Revenue, submitted that exemption under Section 11 is granted on application of income for charitable or religious purpose and if the trust applies 75 per cent. of its income, then, an exemption of 100 per cent. is granted under section 11 of the Act. He submitted that in case the trust decides to accumulate its income, the accumulation can be done subject to certain conditions and the income should be accumulated for the purposes specified in the notice given to the Income-tax Officer. He also submitted that the accumulated income should be utilised by the assessee for the purpose for which the income was accumulated and by handing over of the accumulated income to another trust, the assessee had not utilised the income for the purpose of accumulation and it would not qualify for exemption under Section 11(3)(c) of the Act. He submitted that the assessee had not utilised its income and the assessee had failed to fulfil the statutory obligations undertaken by it under the provisions of Section 11(2) of the Act. His further submission was that a mere repetition of the objects of the trust would not be sufficient and Section 11(2) requires that the assessee must specify the purpose and there is a violation of Section 11(2)(b) of the Act. According to learned senior counsel, the Legislature has used the expression, 'application' in Section 11, and the expression, 'accumulation' in Section 11(2), but in Section 11(3), the Legislature has made a departure and used the expression, 'utilisation' and there is a violation of Section 11(3)(c) of the Act, According to him, the trust either should utilise the income, and the mere handing over of the accumulated income to another trust having similar objects would not amount to utilisation of its income. He submitted that the cases wherein the courts have taken the view that mere handing over of the trust money to another trust having similar objects would amount to application of income are not applicable to the case of utilisation and those cases dealt with application of the current year's income and he also submitted that in some of the cases, money had been handed over to an existing institution. According to him, the latter part of Section 11(3)(c) would apply to the consequences of non-utilisation of the income. In other words, according to learned counsel, Sections 11(2) and 11(3) should be read together and the principles which are applicable to the case of application cannot be extended to the case of accumulation of income or utilisation of income.
10. Mr. C. Ramakrishna, learned counsel appearing for the assessee, on the other hand, submitted that moneys were invested in Government securities as defined in Section 11(2)(b) of the Act. According to him, the moneys received were neither misappropriated nor was there any misuse on receipt of the moneys. He submitted that the object behind Section 11(3) is that the income should be applied and utilised for charity-before the end of the accounting year or in the year immediately after the expiry of the period mentioned in Section 11(3)(c) of the Act. Learned counsel also submitted that no private individual or company had any control over the moneys and the purpose behind Sections 11(2) and 11(3) is to prevent the misuse of the moneys and the assessee had lost the control over the moneys. He submitted that the provisions should be construed in a reasonable manner and, according to him, the expression, 'utilised' in Section 11(3)(c) would also include 'applied' and the Legislature has not employed the expression 'spent'. He, therefore, submitted that it is not necessary that the accumulated income should be handed over to an existing institution. Learned counsel strongly placed reliance on a decision of the Gujarat High Court in the case of CIT v. Sarladevi Sarabhai Trust (No. 2) : [1988]172ITR698(Guj) and the circular of the Board referred to therein and submitted that the utilisation does not mean that the amount should be spent forthwith. According to learned counsel for the assessee, the assessee had lost its complete control and it had completely divested itself of its ownership over the moneys by handing over the moneys to another trust and, therefore, it is not necessary that the money should be handed over to an existing institution. He placed stress on the expression, 'utilisation' and submitted that the accumulated funds were applied for bona fide purposes in furtherance of the objects mentioned in Form No. 10 and there was no non-use or misuse of the funds and the moneys were utilised for the purpose for which they were accumulated. He submitted that Section 11 should be construed in a way for which it was enacted and the moneys of the trust had been utilised and invested in Government securities and, according to him, since the trust in question was unable to spend the moneys for itself before the expiry of ten years, it handed over the same to another trust having similar objects and the asses see-trust cannot be taxed. According to him, the assessee-trust has not violated the conditions specified in Clause (a) or in Clause (b) or in Clause (c) of Section 11(3) of the Act, since the entire income had been handed over to another trust. He further submitted that the consequences of non-utilisation are not provided for in Section 11(3)(c) of the Act. He submitted that this court should not interfere with the finding of fact and there was no infraction of Clause (c) of Section 11(3) of the Act. He also submitted that Form No. 10 does not say anything about the spending or application of income and the taxing statute should be construed in a reasonable manner and the taxing statute should be explicit and the words cannot be construed on the basis of mere conjectures and the beneficial construction should be given to the words found in Section 11(3)(c) of the Act. He, therefore, submitted that the assessee has complied with the provisions of Section 11(3) of the Act and the trust has utilised the moneys by handing over the same to another trust having similar objects. The submission of learned counsel for the assessee was that the handing over of the accumulated income to another trust with a view to carry out the purposes for which the moneys were accumulated would amount to utilisation of income and there is no difference between the words 'application' and 'utilisation'.
11. We have set out the facts of the case earlier. Before considering the point that arises in the tax cases, it is necessary to notice certain further facts also. The trustees of the assessee-trusts, viz., M. Ct. Trust, S. Rm. M. Ct. M. Thiruppani Trust and M. Ct. Muthiah Chettiar Family Trust, made over the accumulated income to one M. Ct. M. Chidambaram Chettiar Foundation. The said new trust was formed on December 28, 1971. The three assessee-trusts were desirous to establish and maintain a hospital and a school to be constructed in the property known as 'Rama Vilas', situate at Luz Church Road, Mylapore, Chennai, which was purchased by Thiruppani Trust and to repair, renovate, reconstruct and to expand the M. Ct. Muthiah Chettiar High School, Lady Muthiah Chettiar Girls High School and M Ct. M. Chidambaram Chettiar Memorial Boys' Hostel all situate at Madras and M. Ct. M. Chidambaram Chettiar Memorial Higher Elementary School at Kanadukathan. The trustees felt that in view of the magnitude of the scheme and in order to. expeditiously construct the hospital and the school, a separate trust should be formed appointing a competent and independent body of persons as board of trustees. Accordingly, the foundation trust was created by transfer of a sum of Rs. 5,000 by each of the settlor--trusts and the funds or assets of the institutions, were transferred by the settlors or other persons including the income and accumulation thereof are required to be applied for the following purposes :
(a) to construct a hospital in the premises belonging to Thiruppani Trust and known as 'Rama Vilas' situated in Luz Church Road, Mylapore, Madras, and maintaining and managing the said hospital, and for such purpose to prepare a scheme and carry it out as expeditiously as possible ;
(b) to repair, renovate, reconstruct and/or expand Sir M. Ct. Muthiah Chettiar High School, Lady Muthiah Chettiar Girls High School and M. Ct. M, Chidambaram Chettiar Memorial Boys' Hostel all situated in Madras and expand M. Ct. M. Chidambaram Chettiar Memorial Higher Elementary School, Kanadukathan ;
(c) to meet all expenses necessary and incidental for carrying out the aforesaid purposes and for management of the trust hereby constituted ;
(d) subject to availability of funds after providing for the aforesaid objects, to construct a school for education in 'Rama Vilas' property and maintain and manage the school ;'
12. Clauses 4 and 5 of the foundation trust deed read as under :
'4. The Rama Vilas property will continue to be the property of the Thiruppani Trust. The board of trustees are, however, authorised to enter the premises, construct the hospital and school as aforesaid and manage the hospital and school. The property tax and other outgoings in respect of the Rama Vilas property shall be paid by the board of trustees out of the funds available with them.
5. The board of trustees hereby undertake to act diligently, promptly and expeditiously in carrying out the aforesaid objects and utilise the said funds only for the said objects and not utilise them for any other purposes whatsoever.'
13. It is in the light of the above facts, the question whether there was utilisation of the accumulated income of the trust has to be considered.
14. The scheme of Section 11 of the. Act was examined by the apex court in S. Rm. M. Ct M. Tiruppani Trust v. CIT : [1998]230ITR636(SC) , as under :
'Under Section 11(1)(a), income derived from property held under trust for charity, to the extent that such income is applied for charitable or religious purposes will be exempt from income-tax. Where the income or the entire income is not so spent, but is accumulated, it will be exempt to the extent of 25 per cent. of its total income or Rs. 10,000, whichever is higher. Under Section 11(2), if the trust desires to accumulate more than 25 per cent, of its income and wants to claim exemption from income-tax, it has to comply with the conditions which are laid down in Section 11(2)(a) and (b). The first condition is that a notice in writing should be given to the Income-tax Officer in the prescribed manner specifying the purpose for which the income is being accumulated and the period for which the income is to be accumulated. The period should not exceed ten years. Rule 17 of the Income-tax Rules, 1962, prescribes that the notice which is required to be given under Section 11(2)(a) should be in Form No. 10. The second condition is that the amount so accumulated has to be invested in any Government security as specified in Section 11(2)(a).'
15. The trust is allowed to accumulate its income for a maximum period of ten years. The condition is that the trust should specify in the prescribed form the purpose for which the income is accumulated or set apart. It is not enough for the trustees to repeat the objects of the trust, but must specify a particular purpose for which the income is being accumulated. We are in agreement with the view of the Calcutta High Court in Director of I. T. (Exemption) v. Trustees of Singhania Charitable Trust : [1993]199ITR819(Cal) wherein the Calcutta High Court held that the long-term accumulation should be for a definite and concrete purpose or purposes and the charitable trust cannot use its objects as the purposes for the accumulation of the income under Section 11(2) of the Act. It is only by mentioning the purposes specifically, it will be possible for the Income-tax Officer to monitor the situation whether the trust has applied its accumulated income for the purposes mentioned in Form No. 10. Therefore, it is essential that the trust should specify its purposes and the very requirement is that the purposes must have some individuality and mere repetition of the objects of the trust would not meet the requirements of Section 11(2) of the Act. However, on the facts of the case, it is seen that the assessee-trust had merely repeated its objects when it filed the necessary Form No. 10, and the Income-tax Officer, on the basis of Form No. 10 furnished by the assessee, allowed its income to be accumulated for a period of ten years and it is too late in the day to question the purposes mentioned in Form No. 10 and learned senior counsel for the Revenue in his fairness has not disputed that the Department is not in a position now to challenge that Form No. 10 filed is invalid.
16. Learned senior counsel for the Revenue also has not disputed that in so far as the application of income of the trust under Section 11(1)(a) of the Act is concerned, the payment of a sum from one charitable trust to another charitable trust for utilisation by the latter trust towards its charitable objects would amount to application of income for charitable purposes. The above proposition is well-settled by a decision of this court in the case of CIT v. Thanthi Trust [1982] 137 ITR 735. In that case, this court referred to a decision of the Chancery Division in IRC v. Helen Slater Charitable Trust Ltd. [1980] 3 WLR 157 ; [1980] 1 All ER 785, wherein the court construed the expression, 'applied for charitable purposes' as making transfer of funds outright to another charitable institution which was exclusively for charitable objects and the transfer of assets by one institution in favour of another institution in such a manner as to pass the whole right to the transferee must be said to have applied such assets for charitable purposes.
17. The above view is uniformly taken by several High Courts (vide CIT v. Sarladevi Sarabhai Trust No. 2 : [1988]172ITR698(Guj) ; C/Tv. Trustees of thejadi Trust : [1982]133ITR494(Bom) ; CIT v. Hindusthan Charity Trust : [1983]139ITR913(Cal) ; CIT v. J. K. Charitable Trust : [1992]196ITR31(All) and CIT v. Trustees ofH. E. H. the Nizam's Charitable Trust : [1981]131ITR497(AP) . The Board has also reiterated the same position of law and issued a circular dated January 5, 1978, wherein the Board has stated that the payment of a sum by one charitable trust to another for utilisation by the donee trust towards its charitable objects is proper application of income for charitable purpose in the hands of the donee trust. Recently, the Supreme Court in the case of S. Rm. M. Ct. M. Tiruppani Trust v. CIT : [1998]230ITR636(SC) has also taken the view that the money spent for purchase of a building which is to be utilised as a hospital would amount to application of income under Section 11(1) of the Act.
18. The contention of Mr. C. Ramakrishna, learned counsel for the assessee, was that the assessee had invested in Government securities for a period of ten years and the assessee had lost the complete control over the money and before the expiry of the period mentioned in Section 11(3)(c) of the Act, the trustees have utilised the income for the purpose for which it was accumulated. He referred to the decision in Short v. Poole Corporation [1926] 1 Ch. 66 (CA) at page 91, and submitted that the act of a public body, though performed in good faith and without the taint of corruption was so clearly founded on alien and irrelevant grounds as to be outside the authority conferred upon the body, and, therefore, inoperative. He also referred to the decision of the Court of Appeal in the case of Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 KB 223; [1947] 2 All ER 680, and submitted that the court is entitled to investigate the action of the local authority with a view to see whether they have taken into account matters which they ought not to take into account, or conversely, have refused to take into account or neglected to take into account matters which they ought to take into account. He also referred to the decision of the Court of Appeal in the case of Reg. v. Secretary of State for the Home Department, Ex. p. Phansopkar [1975] 3 All ER 497 ; [1976] 1 QB 606, at page 621. He also referred to the decision of the Calcutta High Court in the case of Santi Swamp Sarhar v. Pradip Kumar Sarkar, : AIR1997Cal197 , wherein the learned judge held that any interpretation of the statute which would obviate purposeless proliferation of litigation, without whittling down the effectiveness of the protection for the parties sought to be helped by the legislation should be preferred to any literal, pedantic, legalistic or technically correct alternative. It is relevant to state that the learned judge referred to the decision of the Supreme Court in the case of B. Banerjee v. Smt. Anita Pan, : [1975]2SCR774 . Learned counsel for the assessee also referred to the decision of the Supreme Court in the case of M.V. Javali v. Mahajan Borewell and Co. : [1998]230ITR1(SC) relating to the principle of interpretation of statutes. There can be no quarrel over the proposition of law submitted by learned counsel for the assessee relating to the interpretation of the statute.
19. The House of Lords in the case of IRC v. Willoughby [1997] 1 WLR 1071; [1997] 4 All ER 65 observed that one of the traditional functions of the tax system is to permit socially desirable objectives by providing a favourable tax regime for those who pursue them and individuals who make provision for their retirement or for greater financial security are a familiar example of those who have received such fiscal encouragement in various forms over the years. It is only with the above objectives, Section 11 of the Act has to be interpreted. The House of Lords in the above decision made a distinction between tax avoidance and tax mitigation schemes and the . relevant passage reads as under (page 1079) :
'Tax avoidance was to be distinguished from tax mitigation. The hallmark of tax avoidance is that the taxpayer reduces his liability to tax without incurring the economic consequences that Parliament intended to be suffered by any taxpayer qualifying for such reduction in his tax liability. The hallmark of tax mitigation, on the other hand, is that the taxpayer takes advantage of a fiscally attractive option afforded to him by the tax legislation, and genuinely suffers the economic consequences that Parliament intended to be suffered by those taking advantage of the option. Where the taxpayer's chosen course is seen upon examination to involve tax avoidance (as opposed to tax mitigation), it follows that tax avoidance must be at least one of the taxpayer's purposes in adopting' that course, whether or not the taxpayer has formed the subjective motive of avoiding tax.'
20. We are of the opinion, the asses see-trust by filing the requisite form and accumulating its income during the course of ten years, had adopted the tax mitigation scheme and the assessee had enjoyed the total freedom of tax during the period of accumulation of income. The question that arises is whether the assessee had contravened Section 11(3)(c) of the Act.
21. The key words in Section 11(3)(c) of the Act are 'not utilised for the purposes for which it was so accumulated'. In our opinion, Clauses (a), (b) and (c) of Section 11(3) of the Act have to be read together in a harmonious manner. Section 11(3)(a) of the Act, inter alia, provides that if the income referred to in Sub-section (2) is applied to purposes other than charitable or religious purposes, or ceases to be accumulated or set apart for application, then it is deemed to be the income of the trust. Similarly, Section 11(3)(b) deals with a case of income which has ceased to remain in Government securities or ceased to be deposited in the deposits referred to in Section 11(2) of the Act and in those cases, the income is deemed to be the income of the assessee-trust. In both the situations, the provisions of Section 11(3)(a) and (b) of the Act contemplate a positive act on the part of the trustees in applying the income for purposes other than a charitable purpose or ceasing to hold or converting the Government security or deposit. On the other hand, Clause (c) of Section 11(3) deals with both positive and negative acts of the trustees, namely, (i) the inaction on the part of the trustees to utilise the accumulated income for the purposes for which it was accumulated during the period referred to in Section 11(2) or in the immediately following years, and (ii) a positive act on the part of the trustees in applying the income for a purpose other than the purposes for which the income was accumulated. It is, no doubt, true that the accumulated income should be utilised for the purposes for which it was accumulated and the words, and the expression, 'not utilised' in Section 11(3)(c) have to be read in conjunction with the words that follow the expression, namely, 'for the purpose for which it was so accumulated'. Though the word, 'utilised' has different shades of meaning, in the context of Section 11(3)(c) of the Act, in our opinion, it means application of income, that is, where the trustees had not applied the income for the purposes for which it was so accumulated. The later amendment in Section 11(3A) of the Act, which was introduced by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, also gives a clue that the word, 'utilisation' in Section 11(3)(c) should be interpreted to mean 'application', as under Section 11(3A) of the Act, it is permissible for the Income-tax Officer to change the purpose of application of income, if the trustees state before the Income-tax Officer that the income accumulated cannot be applied for the purposes due to the reasons mentioned therein. Though the word, 'utilisation' in normal connotation would connote spending of money for the purposes for which the income was accumulated, in the context of Section 11(3)(c), the more appropriate meaning that can be assigned is that the expression 'utilisation' would mean application of the income. As seen earlier, Section 11(3), in our opinion, is so designed to take care of different situations ; where the trust applies its income for a non-charitable purpose or where the trust converts its securities or deposits before the expiry of the period or where the trust had not applied the amount for the purposes for which it was so accumulated. The Section deals with three successive stages in the application of the accumulated income. The first stage is non-application of income and the second stage is conversion of the approved Government securities or deposits, before the period mentioned in Section 11(2) and the third stage is the non-utilisation or utilisation of the accumulated income for some other purposes either during or after the expiry of the period mentioned in Section 11(2) of the Act. We have seen that the purposes for which the income should be accumulated should be specific and within the scope of the object of the trust, and even where the trust applies its accumulated income for any of its charitable purposes, not mentioned in the notice for accumulation, though within its objects, it would amount to violation of the provisions of Section 11(3)(c) of the Act.
22. The intention of the Legislature is to curtail the practices of applying the accumulated income of for non-charitable purposes or for retention of the money even after the period mentioned in Section 11(2) of the Act but however, where the trust applies its income for the purposes for which it was accumulated, it cannot be said that there is a violation of Section 11(3)(c) of the Act. The emphasis given under the provisions of Sections 11(1) and 11(2) is 'application of income' for charitable or religious purposes and it is only in this context, the courts have taken the view that the handing over of the money by one trust to another trust having similar objects would amount to application of income. There are no weighty reasons to give a different meaning to the expression 'utilised' as 'spent' in Section 11(3)(c) of the Act and it cannot be assumed that the Legislature has postulated a different test for utilisation of the accumulated income. As observed by the Gujarat High Court in the case of CIT v. Sarladevi Sara-bhai Trust (No. 2) : [1988]172ITR698(Guj) , the expression, 'utilisation' does not mean that the entire amount has to be spent forthwith. We agree with the above observation of the Gujarat High Court.
23. That apart, the asses see-trust by handing over the money to M. Ct. M. Chidambaram Foundation has completely lost its title and dominion over the accumulated money in question. Further, the donee trust is also a public trust and it also under the judicial supervision of the High Court and to ascribe the meaning to the expression 'utilised' as 'applied' in Section 11(3)(c) of the Act is also in consonance with the subsequent amendment in Section 11(3A) of the Act. We have seen, by the judicial development, the expression 'applied' has been construed to include cases of handing over the money by one trust to another public charitable trust. Further, the argument that the view we have taken would encourage tax avoidance by the public trust permitting the trust to hand over the accumulated income to another trust which may hold it for ten years and then transfer to a third trust with an endless, unbroken chain of passing on the money from one trust to another without actual utilisation of the money is unacceptable. That cannot be a ground to give a normal meaning of the word, 'utilised.' The benefit of accumulation of income is expressly provided by the Legislature as a tax mitigation scheme and when in the view of the Legislature it is not a tax avoidance, it is not possible for the court to hold that it will encourage tax avoidance. Further, it is not the case of the Revenue that the transfer is not real but a sham transfer or the donee trust is not a genuine or real trust. However, the question that has to be examined in each of the cases is whether the trust income was applied for the purposes for which it was accumulated.
24. The trust, in our opinion, would be fulfilling the conditions prescribed in Section 11(3)(c) of the Act, either by directly applying or spending the income for the purpose for which the income was accumulated or by handing over the same to an existing institution to be utilised, for the same purpose. But, Section 11(3)(c) of the Act cannot be limited to the above two situations. In our opinion, the words in Section 11(3)(c) are also apt to cover cases of handing over the accumulated income to another trust having its objects similar to the purposes for which the income was accumulated with directions by the donor trust that the accumulated income should be applied to the purposes for which the income was accumulated. We have seen from the order of the Income-tax Officer, the purposes for which the assessee-trust had been allowed to accumulate its income and we find that the objects of the newly formed M. Ct. M. Chidambaram Foundation would fall within the scope of the purposes for which the income was accumulated.
25. The Supreme Court in the case of S. RM. M. Ct. M. Tiruppani Trust v. CIT : [1998]230ITR636(SC) , held that the amount spent for purchase of a property by the trust would amount to application of income as the building was used for charitable purposes. Applying the same ratio, the assessee-trust by handing over the money to the donee trust has directed the donee trust to apply the accumulated income for the purposes for which the income was accumulated. As a matter of fact, the purposes mentioned include establishment, maintenance and management of hospitals, educational institutions, etc. It also includes rendering financial aid to any existing institution or educational institutions- It is seen that on the facts of the case, the educational institutions are existing institutions. The site for the hospital had been purchased by one of the asses see-trusts. Similarly, one of the purposes is to give substantial donation to any relief fund by way of charity and by handing over the accumulated money to the newly created trust, it cannot be said that the assessee has not utilised the accumulated income for a purpose other than the one for which the income was accumulated. In effect, all the three trusts have pooled their reserves and handed over the entire accumulated income to the donee trust so that the donee trust can carry out the purpose for which the income was accumulated during the course of ten years in an effective manner. Therefore, we are of the opinion that the assessee by this process, had not contravened any of the provisions of Section 11(3) of the Act and the Commissioner was not justified in directing the officer to levy the tax on the entire accumulated income as well as income of the assessee in the assessment year in question. We are of the view that the Appellate Tribunal was justified in cancelling the order of the Commissioner.
26. Accordingly, we answer the first question of law, as reframed by us, in the affirmative and against the Revenue. In view of our answer to the first question, it is not necessary to render any answer to the second question, though the issue raised in the said question is concluded against the Revenue by the decisions of the Supreme Court in Addl. CIT v. A. L. N, Rao Charitable Trust : [1995]216ITR697(SC) and S. RM. M. CT. M, Tiruppani Trust v. CIT : [1998]230ITR636(SC) . However, in the circumstances of the case, there will be no order as to costs.