Suhas Chandra Sen, J. - (1.) The Tribunal has referred the following question of law to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee's right to accumulate 25% of the total income of the previous year extended to the deemed income under Section 11(3) of the Income-tax Act, 1961, added therein in the circumstances mentioned above ?"
(2.) The facts found by the Tribunal as stated in the statement of case are as follows : The assessee-trust accumulated Rs. 46,184 during the accounting years relevant to the assessment years 1973-74 to 1976-77. During the previous year relevant to the present assessment year, accumulated income ceased to be invested in fixed deposit with the Indian Bank and it was, therefore, deemed to be the income of the trust in the previous year in which it ceased to remain invested or deposited in terms of Clause (b) of Sub-section (3) of Section 11 of the Income-tax Act, 1961. The Income-tax Officer was of the opinion that the assessee was not entitled to accumulate 25% of this deemed income because permitting it to do so would amount to a double benefit to the assessee. He, therefore, assessed the entire deemed income.
(3.) The Tribunal in agreeing with the decision of the Appellate Assistant Commissioner observed: The legal fiction contained in Section 11(3) of the Income-tax Act, 1961, should be allowed to play to the fullest extent and there is no warrant to take a restricted view for denying the exemption which is specifically allowed by the statute. In fact, as per the law as stood from April 1, 1976, charitable trusts are permitted to accumulate up to 25% of their income without complying with any formalities or condition and such accumulation is not included in the total income. Therefore, we uphold the order of the Appellate Assistant Commissioner as it is quite justified in law and the assessee would be entitled to accumulate 25% of the total income of the previous year relevant to the assessment year 1978-79 inclusive of the deemed income under Section 11 (3) of the Income-tax Act, 1961.;