The meaning of the expressions "fund" and "invest" in Section 13(2)(h) of the Income Tax Act, 1961, and their applicability in determining the exemption of a charitable trust under Section 11.

( 1 ) THE material facts on record and the proceedings leading up to this reference are, inter alia, that Birla Charity Trust, the assessee, is a trust founded in 1920. It is not in dispute that the income of the assessee is spent for charitable purposes. Between 1956 and 1963, the assessee received from time to time ordinary shares of Jiyajee Rao Cotton Mills Ltd. ("the company"), from various parties aggregating 96,490 shares.

( 2 ) IN the assessment year 1971-72, the relevant accounting year ending on March 31, 1971, the assessee received dividends on the said shares amounting to Rs. 1,44,735. In its return of income as well as in its assessment, the assessee claimed that the said amount of Rs. 1,44,735 was not exigible to income-tax under the provisions of Section 13 (1) (c) (ii) of the Income-tax Act, 1961 ("the Act"), read with the second proviso to the said section. The Income-tax Officer rejected the contentions of the assessee and held that the funds of the assessee remained invested in a concern in which the persons referred to in Sub-section (3) of Section 13 of the Act, viz. , the settlor of the trust, the persons who had made a substantial contribution to the trust and/or their relatives had substantial interest in the company and, therefore, the income of the assessee by way of dividends from the said shares was not entitled to exemption under Section 11 of the Act.

( 3 ) BEING aggrieved, the assessee preferred an appeal from the assessment to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner accepted the contentions of the assessee and held that the investment in the instant case had been made by the donors and the donations were received by the assessee by 1963. It was held that as no funds of the assessee had been invested in the said shares and that as the assessee had received the shares themselves by way of donation, the provisions of Section 13 (2) (h) read with Section 13 (1) (c) had no application and that the dividend received by the assessee from the said shares was exempt from income-tax.

( 4 ) BEING aggrieved, the Revenue preferred an appeal to the Tribunal against the order of the Appellate Assistant Commissioner. It was contended on behalf of the Revenue before the Tribunal that as the assessee continued to hold the said shares even after April 1, 1971, the assessee ceased to be entitled to claim exemption from income-tax in respect of the dividends received from the said shares under Section 11 by reason of the provisions of Section 13 (2) (h ). It was submitted that the expression "fund" referred to in Section 13 (2) (h) would cover the said shares held by the assessee and, therefore, the Income-tax Officer was justified in holding that the said dividend was not exempt from income-tax under Section 11. At best, the assessee would be entitled to claim a benefit of exemption under Section 11 in respect of such dividend from the said shares received during the period prior to June 1, 1970, and not thereafter. It was submitted further that the assessee ought to have reinvested the amount represented by the said shares in some other concern to which the provisions of Section 13 (3) were not applicable.

( 5 ) IT was contended on behalf of the assessee before the Tribunal that the expressions "fund" and "invest" which were not defined in the Income-tax Act had to be construed with reference to their dictionary meaning. The meaning of the said words as given in the Chambers, Twentieth Century Dictionary, 1972 edition, the Concise Oxford Dictionary, 5th edn. and the Webster's New Collegiate Dictionary, 7th edition, were referred to and relied on.

( 6 ) IT was contended on behalf of the assessee that the assessee had received the said shares qua shares by way of donation. The shares were neither funds nor did they continue to remain invested in the company within the meaning of Section 13 (2) (h ). It was submitted that no fund, property or income of the a