1989 (6) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of amended section 13(1)(d) of the Income-tax Act, 1961.
2. Denial of exemption under section 11 of the Income-tax Act, 1961.
3. Scope of forfeiture of exemption under section 11.

Issue-wise Detailed Analysis:

1. Applicability of Amended Section 13(1)(d):

The primary issue revolves around whether the amended provisions of section 13(1)(d) of the Income-tax Act, 1961, introduced by the Finance Act, 1983, are applicable to the assessment year 1983-84. The assessee contended that the amended provisions, which required trust investments to comply with specified modes by 30-11-1983, were effective from the assessment year 1984-85. The Income-tax Officer (ITO) and the Commissioner of Income-tax (Appeals) (Commissioner (A)) held that these provisions applied from 1-4-1983, thus affecting the assessment year 1983-84.

The Tribunal analyzed the historical context and legislative intent behind section 13(1)(d). It noted that the amendments were prospective, not retrospective. The cut-off date of 30-11-1983 for compliance fell beyond the previous year relevant to the assessment year 1983-84. The Tribunal emphasized that section 13(1)(d) could not apply to the assessment year 1983-84 as the previous year ended on 31-3-1983, and the compliance date was after this period. Therefore, the provisions of section 13(1)(d) as amended by the Finance Act, 1983, were not applicable to the assessment year 1983-84.

2. Denial of Exemption under Section 11:

The assessee, a public charitable trust, claimed exemption under section 11 for the assessment year 1983-84, having spent its entire income on charitable purposes. The ITO denied the exemption, arguing that the trust's investments were not in the prescribed modes as of 28-2-1983 and remained unchanged by 30-11-1983, thus violating section 13(1)(d). The Commissioner (A) upheld this view.

The Tribunal, however, concluded that the denial of exemption was incorrect. It highlighted that the government had provided time until 30-11-1983 for trusts to align their investments with the prescribed modes. Since the previous year relevant to the assessment year 1983-84 ended on 31-3-1983, the trust could not have changed its investments within that period. Therefore, the exemption under section 11 could not be denied based on the amended section 13(1)(d) for the assessment year 1983-84.

3. Scope of Forfeiture of Exemption:

The assessee also argued that even if the amended section 13(1)(d) applied, the forfeiture of exemption should be limited to the income derived from the non-compliant investments, not the entire income of the trust. The Tribunal did not delve into this alternative plea, as it had already decided in favor of the assessee on the primary issue.

Conclusion:

The Tribunal set aside the orders of the lower authorities and directed the ITO to allow the exemption under section 11 for the assessment year 1983-84. The appeal was allowed, and the Tribunal emphasized that the amended provisions of section 13(1)(d) were not applicable to the assessment year 1983-84, as the compliance date fell beyond the relevant previous year. Therefore, the trust was entitled to the exemption under section 11 for the said assessment year.