ORDER
T.V. Rajagopala Rao, Judicial Member
1. This is Revenue’s appeal for the assessment year 1982-83. The brief facts relevant for the disposal of this appeal may be stated as under:
2. The assessee is M/s. Tube Investments of India Ltd. Management Employees Welfare Trust. It was formed under the Trust Deed dated 27-12-1979, a copy of which is furnished to me. The object of the trust as stated in the preamble is to promote, support, advance, assist or otherwise whether by grants or payment of money or loans and advances or by providing amenities or facilities and its activities for the welfare and interest of all permanent management employees of the Settlor Company. Originally, an amount of Rs. 50,000 was contributed to the assessee. Under the provisions of the trust deed, the trustees can at their discretion invest the trust funds in a fixed deposit with any scheduled bank and also invest in debentures as well as shares, and other securities issued by the Companies registered in India. The trustees are entitled to establish necessary guidelines and procedures and administering the objects which include financial assistance byway of grant of repayable loans. They can prescribe the period of repayment of loan, the interest rate of the loan etc. The total of the contributions together with accretions during the assessment years 1977-1978 to 1982-83 came to Rs. 30,50,000. In 1983-84 under the provisions of Finance Act, 1984, Sections 40A(9), (10) and (11) are inserted. These provisions are retrospective in operation and the Legislature made them retrospective from 1-4-1980. By virtue of the authority vested in it, the Tube Investment of India Ltd. (the Company which made the contributions) asked the assessee-trust to refund the unutilised amount from out of the contributions made by it right from the inception of the trust together with the accretions thereon. Such demand was made by the letter dated 25-6-1984. A copy of the said letter was furnished to me. In the said letter, it is stated that the aggregate of the contributions made by the Company to the assessee-trust during 1978-79 to 1982-83 is stated to be Rs. 30.50 lakhs and a demand to refund the said amount and to account for the actual expenditure incurred by the assessee-trust is made in the said letter. In pursuance of the letter issued by the assessee-trust, it had passed a resolution dated 5-7-84 stating that the contributions made by the Tube Investment of India Ltd. from 1979 to 1983 and the accretions thereon would be refunded to them as per their request in their letter dated 25-6-1984. It is also stated in the second resolution that from out of the contributions made by the Company, the assessee had lent some of the monies to the employees towards loans and refund of the amounts constituting the loans would be made as and when those loans sanctioned previously were realised by the trust.
3. For the assessment year 1982-83, the assessee-trust filed its Income-tax return disclosing an income of Rs. 31,770. The said return was filed on 28-6-1982 at a time when the provisions of Sub-sections (9)1 to (11) of Section 40A were not inserted in the statute book with retrospective effect from 1-4-1980 by Finance Act, 1984. It would appear that from out of the contributions made by the Tube Investment of India Ltd. to the assessee-trust, some amounts were kept as fixed deposit in scheduled banks earning interest income thereon. Some amounts were also invested in the purchase of the shares from Public Limited Companies on which the assessee-trust is getting dividend income. In the accounting year in question, the assessee-trust got gross interest income of Rs. 83,640 and net interest income of Rs. 78,965. The assessee-trust also got an amount of Rs. 1,375 as dividend on shares. The Income-tax Officer completed the assessment of the assessee-trust for the assessment year 1982-83 by his order dated 19-3-1985 under which he had determined the total taxable income of the assessee at Rs. 80,340 as against its returned income of Rs. 31,770.
4. Against the assessment order, the assessee went in appeal before the Appellate Asstt. Commissioner. It is contended before him that by virtue of the provisions of Sections 40A(10) and (11), the Tube Investment of India Ltd. had already recalled the unutilised amount from out of the amount contributed by it to the assessee-trust and also the accretions made from out of the sum contributed. In those circumstances, the income declared by the assessee-trust should be deemed always to be the income of the Tube Investment of India Ltd. (hereinafter called as ‘the Company’). It was also argued that since the whole of the trust fund were allowed to be recalled and they were actually been recalled by the Company, the trust itself should be deemed to have come to an end from 1-4-1988. For that reason also, the assessed income of Rs. 80,340 for the assessment year 1982-83 should only be assessed in the hands of the Company and not in the hands of the assessee-trust. This argument was accepted by the Appellate Asstt. Commissioner who held that the income declared by the assessee-trust for the assessment year 1982-83 should be assessed in the hands of the Company. The Appellate Assistant Commissioner cancelled the assessment against the assessee-trust and directed the Income-tax Officer to intimate the Income-tax Officer, Central Circle XIV, Madras who was the assessing Officer of the Company to take necessary further steps. As against the impugned order passed by the AAC dated 4-2-1987, the present second appeal is brought in by the Revenue and thus the matter stood for my consideration.
5. I have heard Shri S.C. Goel, the learned Departmental Representative and Shri V. Ranganathan, the learned counsel for the assessee-trust. According to the grounds of appeal, the Revenue’s stand is that under the provisions of Section 40A(11), the Company can only claim the unspent amount available with the assessee-trust out of the contribution made by it. It is also contended that as per Section 79 of the Indian Trusts Act, no trust can be revoked by the author so as to defeat or prejudice the acts of the trustees in the execution of the trust. It is also contended that the Appellate Asstt. Commissioner erred in holding that the income of the assessee-trust should be assessed in the hands of the Company. After hearing both the sides, I am of the view that the order of the lower Appellate authority does not call for any interference from me. My reasons are as follows:
6. At the time of argument, it is stated as an uncontroverted fact that the amount of Rs. 30,50,000 was properly brought in the books of the Company and now it is being reflected in the audited balance sheet for the year ending 31-12-1984 (Assessment year 1985-86 of the Company). The point at issue is whether the income accrued to the trust during the accounting year in question is assessable in the hands of the trustees of the assessee-trust or the Company which had contributed the funds which ultimately yielded either the interest income or the dividend. It is argued before me that Sections 40(10) and (11) were brought into the statute book to mitigate the hardship felt by the contributing Companies like that of the Company in this case. It is argued by the learned Departmental representative that the finding of the Appellate Asstt. Commissioner that the assessee-trust went out of the existence from 1-4-1980 simply because the Company was given the powers to recall the monies it had contributed to the assessee-trust is wrong. There is no dispute that the trust is a valid trust in this case. Whatever earned as income on the trust fund should be taken as the trust income. The income of the trust cannot be considered as that of the Company. The interest income cannot be considered in the hands of the Company and it is rightly considered only in the hands of the assessee-trust. As against the above arguments of the learned Departmental Representative, the assessee’s counsel submitted that the newly inserted provisions of Sections 40A(10) and (11) have three peculiar features that they are retrospective in character, that there is a deeming fiction that the expenditure laid out are expended wholly and exclusively for the welfare of the employees of the Company out of the contributions made by it to the trust, the amount of such expenditure in case it had’ not been allowed in the hands of the Company while computing its business income of previous years in which such expenditure is laid out or expended, should be allowed while computing the business income under Section 28 of the Income-tax Act as if such expenditure has been laid out or expended by the assessee-company, the invalidity of the trust deed contemplated under Section 40A(11) is absolute in its terms and the trusts will no longer be considered to be in existence. The amount of Rs. 30.50 lakhs which was claimed back by the Company from the Trust includes the amount of income assessed in the hands of the assessee-trust for the assessment year 1982-83 as per the assessment order dated 19-3-1985. According to my understanding of Section 40A(11)(i), it enables the Company to claim back the whole of the unutilised amount. So also under Sub-clause (ii) of the said sub-section enables the Company to claim the accretions if any from out of the contributions made by it to the assessee-trust. The interest income and the dividend income which formed part of the assessed income for the assessment year 1982-83, in my understanding, are no other than the accretions made from out of the sums paid by the Company to the assessee-trust. The amount of Rs. 30.50 lakhs which was returned by the Assessee-trust to the Company by virtue of its resolution dated 5-7-84 also includes the assessed income for the assessment year 1982-83. The crucial issue to be decided in this appeal is whether the income earned during the relevant accounting year comes under the comprehension of the word “asset” used under Section 40A(11)(ii). Section 40A(11) with its sub-clauses are extracted hereunder:
(11) Where the assessee has, before the 1st day of March, 1984, paid any sum to any fund, trust, company, association of persons, body of individuals, society or other institution referred to in Sub-section (9), then, notwithstanding anything contained in any other law or in any instrument, he shall be entitled-
(i) to claim that so much of the amount paid by him as has not been laid out or expended by such fund, trust, company, association of persons, body of individuals, society or other institution (such amount being hereinafter referred to as the unutilised amount) be repaid to him, and where any claim is so made, the unutilised amount shall be repaid, as soon as may be, to him;
(ii) to 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 other institution out of the sum paid by the assessee, be transferred to him, and where any claim is so made, such asset shall be transferred, as soon as may be, to him.
The first contention of the assessee’s counsel is that the expenditure and income go together. Since expenditure is allowable in the hands of the Company under Section 40A(10) the income also should be allowed only in the hands of the Company and it should not be assessed in the hands of the trust. It is strongly contended by the learned Departmental Representative that while applying the ejusdem generis rule of interpretation is applied, to the real meaning of the word “asset” used in the Section 40A(11)(ii) it cannot take in the word “income”. The learned Departmental Representative argued that the true scope of ejusdem generis rule is that the words of a general nature following the specific and particular words should be construed as limited to things which are of the same nature as those specified. Now, in the above sub-section, the word “asset” is of a general nature and it is followed by the specific words (land, building, machinery, plant or furniture). If so, the asset should be of the same category as that of land, building, machinery, land or furniture. Money as such representing interest income does not go along with or come under the category of either land and building machinery, plant or furniture and, therefore, though the general meaning of the word “asset” comprehends money as such in the particular context in which the words occur in Section 40A(11)(ii) either the interest income or the dividend income can be taken to be assets and, therefore, the interest income and the dividend income earned by the assessee-trust for the assessment year 1982-83 cannot be deemed to be part of the income earned by the Company and those incomes cannot be included in the Company’s hands for the assessment year 1982-83. The learned counsel for the assessee contended that the rule of ejusdem generis is merely a rule of construction and it cannot prevail in cases where it is clear that wider words have been deliberately used in order to make the scope of the defined word correspondingly-wider, It is only where the intention of the Legislature in associating wider words with words of narrower significance is doubtful or otherwise not clear, that the rule cap be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful but where the object of the Legislature in using wider words is clear and free of ambiguity. The said rule of construction cannot be pressed into service. The learned counsel argued that the interest income and dividend income are well comprehended by the word “asset”. The meaning of the word “asset” as defined in Webster’s Comprehensive Dictionary at page 87 is the following:
Property, real and personal of a person of a Corporation or of a partnership, which is or may be chargeable with the debts or legacies of such parties or persons.
I am of the opinion that the general meaning of the word “asset” should not be applied while construing the real meaning of the words in Sub-clause (ii) of Sub-section (11) of Section 40A of the Income-tax Act.
To my mind, it appears that the ejusdem generis rule canvassed by the learned Departmental Representative clearly applies to the word “asset”. The ‘asset’ contemplated should be of the nature similar to that of land, building, machinery, plant or furniture. Money as such cannot be taken to be similar to those specified types of assets and, therefore, I hold that money is not comprehended by the word “asset”. I also hold that the intention of Legislature is that when any asset like that of land, building plant, machinery or furniture is acquired from out of the sums paid by the contributing Company, such assets only can be retransferred under Section 40A(11)(ii). However, my finding on this aspect may not have any adverse effect to the claim of the assessee-trust in this case. According to me, the accrued interest for the accounting year in question or the dividend income earned during the accounting year which were both assessed in the hands of the assessee-trust for the assessment year 1982-83 come under the unutilised amount for which also the Company has got every right to recover from the assessee-trust. I am of the opinion that the amount invested in fixed deposits in bank from out of contributions made and the accrued interest thereon cannot partake the character .of expenditure in the hands of the assessee-trust. What constitutes the ‘trust fund’ is clearly defined under Clause (2) of the trust deed which is extracted hereunder:
2. The Trustees shall henceforth hold and stand possessed of the said sum and any other contributions, donations and all accumulations’ there of referred to in clause 8 of this indenture (hereinafter referred to as “the Trust Fund” which expression shall unless repugnant to the subject or context also include any other property and investments of any kind whatsoever into which the same or any part thereof may be converted, invested or varied from time to time and those which may be acquired by the Trustees or come to their hands by virtue of these presents, or by operation of law, or testamentary disposition, or contributions from the Settlor, or any other organisation and/or individual, or otherwise whatsoever in relation to these presents including all contributions, donations, gifts, bequests and legacies either in cash or other properties whatsoever which may be received by the Trustees from time to time for the purposes of these presents and also any income including profits, dividends, interests, accumulations of income including all rights and/or bonus shares and other benefits, advantages and acquisitions, which may accrue from time to time to the Trust Fund) upon the trusts and with and subject to the powers, provisions, agreements, declarations as hereinafter declared or contained and concerned the same.
As can be seen from the above provisions of the trust deed, the dividend and interest accumulations also constitute trust fund. Under the provisions of Section 40A(11)(i), the unutilised amount from out of the contributions made can be claimed back by the Company from the trust. The invested funds in fixed deposits can by no stretch of imagination be called expenditure. I am of the opinion that the invested funds in fixed deposits from the facts and circumstances of this case, should be held forming part of the unutilised amount within the meaning of Section 40A(l)(i). This unutilised amount, because of the retrospective operation should be deemed to be returnable even by 1-4-1980. The interest income as well as dividend income were earned from out of the part of unutilised amount which are liable to be returned even by 1-4-1980. To put in other words, from 1-4-1980 the whole of the unutilised amount belongs to the Company and no longer belongs to the assessee-trust. The interest and dividend incomes were earned on unutilised amount which rightfully belongs to the Company during the accounting year in question. When the amount of deposit belongs to the Company especially in die accounting year relevant to the assessment year 1982-83 the interest income accrued there from or the dividend income derived should also belong to the company though it was claimed later from it. The provisions of Sub-section (11) of Section 40A operate notwithstanding anything contained even in the trust deed. To the extent of claiming unutilised amount, the trust deed stands revoked. I have also found that the interest income and the dividend income were earned on and forms part of unutilised amount which originally belongs to the company in the accounting year relevant to the assessment year 1982-83. Section 61 of the Income-tax Act in this connection becomes relevant and in fact the learned counsel for the assessee very much relied on it. It, is in the following terms:
All income arising to any person by virtue of a revocable transfer of assets shall be chargeable to income-tax as the income of the transferor and shall be included in his total income.
To the extent of recovering the unutilised amount the trust deed in my opinion should be considered as revocable transfer. Therefore, all incomes which accrue or arise by virtue of revocation of the trust shall be chargeable to Income-tax as the income of the transferor. In this case, the transferor is the Company. Admittedly, the interest and dividend incomes were accrued on the unutilised amounts, that too during a period when unutilised amount should have been transferred to the Company and in those circumstances, I hold that Section 61 clearly applies to the facts of this case and the interest and dividend incomes should be chargeable to Income-tax as incomes of the Company but not as income of the assessee-trust.
7. In Sampat Iyengar’s Law of Income-tax, 7th Edn., page 2352, the law is stated to be as under:
It may, however, be mentioned here that for this Section to be applicable there must be a valid transfer of assets. Where though there is adequate consideration there is no valid transfer for some reason or the other, say for example, because the deed of transfer was not got registered, the property will continue to be with the transferor and its income will be assessable in his hands.
This statement of law was reproduced from the authority of the Patna High Court in the case of CIT v. Syed Saddique Imam [1978] 111 ITR 475 (FB). Applying the above legal position to the facts of the present case, it may be seen that the trust is a valid trust as on its date of execution, namely, 27-12-1979. Subsequently, to the extent a provision:” is made under Section 40A(11), the trust deed should be deemed to be revoked under the authority of law. By means of revocation of the trust, the monies contributed are liable to be returned to the transferor. The interest and the dividend incomes were no other than the incomes earned on which assets returnable by virtue of the abrogation of the trust deed by means of retrospective legislation. Therefore, in my opinion, the interest and dividend incomes are assessable only in the hands of Company for the assessment year 1982-83. In view of this, I hold that the order of the Appellate Assistant Commissioner does not call for any interference.
8. In the result, the appeal filed by the revenue fails and the same is dismissed.