Charitable trust accumulation exemption survives a minor investment shortfall where compliance was attempted in good faith.

Section 11 continued to protect a charitable trust's exemption where the accumulated income was intended for investment in the prescribed manner and a minor shortfall occurred for reasons beyond the trust's control after remittance of the full amount for Government securities. The provision was read liberally, so a narrow construction that would deny all exemption for a small investment deficiency was rejected as inconsistent with the purpose of section 11(2). Where two reasonable interpretations of a taxing provision are available, the interpretation favourable to the taxpayer was preferred. The trust remained entitled to exemption, and the shortfall did not defeat relief.

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Issues: Whether the accumulated income of a charitable trust remained entitled to exemption under section 11 despite a shortfall in the investment required under the accumulation conditions.

Analysis: The statutory scheme allowed exemption of income applied to charitable purposes and also protected accumulation up to the specified limit. Section 11(2) enlarged that exemption by permitting further accumulation if the prescribed conditions were complied with. The shortfall in investment arose from circumstances beyond the trust's control after it had remitted the full amount for investment in Government securities. A narrow construction that would deny all exemption for a minor shortfall would penalise a charitable trust and defeat the liberal purpose of the provision. In a taxing statute, where two interpretations are reasonably possible, the interpretation favourable to the subject is to be preferred.

Conclusion: The trust was entitled to exemption and the shortfall did not defeat relief under section 11(2).

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