INCOME TAX ACT, 1961

--Income --Application of incomeTaxes paid under VDIS--The assessee was a trust registered under section 12A by order dated 29-6-1998. In respect of the assessment year 1998-99, it filed a return of income declaring âہ“nilâ€Â income on 22-10-1998. The return was first accepted under section 143(1)(a) but was subsequently selected for scrutiny. Accordingly notices were issued under section 143(2). In the course of the assessment proceedings the AO examined the financial statements such as income and expenditure accounts, balance sheet, etc. On a perusal thereof he noted that the assessee had filed a declaration under the Voluntary Disclosure of Income Scheme, 1997 (VDIS) and had paid taxes of Rs. 43,76,812 in respect of the income for several years up to and including the assessment year 1997-98. The payment of the taxes was claimed by the assessee to represent application of the income of the trust for purposes of section 11(1)(a). The Commissioner (Appeals) upheld the view taken by the assessing officer with regard to the payment of taxes and the expenditure incurred in Germany in connection with a trade fair held there. He accordingly confirmed the computation of the surplus at Rs. 80,56,929as made by the assessing officer. 5. The assessee carried the matter in further appeal before the Tribunal. The Tribunal found that the taxes paid under VDIS related to the assessment years 1989-90 to 1997-98 and that they were paid to protect the existence of trust which was absolutely necessary for its continuance. According to the Tribunal, if the taxes paid are not to be treated as application of income of the trust, it would amount to reducing the corpus of the trust by the amount of taxes paid which would be to the detriment of the trust. The Tribunal held that the payment of taxes under the VDIS should be treated as application of income of the trust. Held: Having regard to the authorities noticed and keeping in view the fact that the long-settled position, which has also been accepted by the CBDT, should not be upset, particularly where the statute which one dealing with is an all-India statute, we express our agreement with the judicial trend and hold that the payment of taxes under the VDIS is to be deducted before arriving at the commercial income of the assessee-trust that is available for application to charitable purposes.