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Issues Involved:
The issue involves the correct application of exemption u/s 11 of the Income-tax Act, 1961 to the respondent-assessee for the assessment year 1974-75, specifically regarding the timing of the amendment in the articles of association of the company and its impact on the eligibility for exemption. Summary: The respondent-assessee, a public limited company engaged in the business of stock exchange, claimed exemption u/s 11 of the Act for the income derived from enlistment and renewal fees. The Assessing Officer initially disallowed the exemption due to the absence of a prohibition in the articles of association against profit distribution. However, an amendment was made in December 1973, prohibiting profit distribution, leading to the Appellate Assistant Commissioner accepting the claim. The Revenue appealed to the Tribunal, arguing that the exemption should only apply from December 1973, not for the entire assessment year. The Tribunal disagreed, stating that the amendment covered the entire financial year 1973-74, entitling the income for the whole assessment year to exemption u/s 11. The court considered whether the exemption should be restricted to the period of the amendment or apply to the entire previous year relevant to the assessment year 1974-75. The court analyzed the Act's provisions and concluded that the exemption under section 11 should apply for the entire assessment year, despite the amendment occurring mid-year. The rectification of the flaw in the articles of association during the previous year validated the exemption for the entire year. The court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue, with no costs awarded. This judgment clarifies the application of exemption u/s 11 in cases where amendments affecting eligibility are made during the assessment year, emphasizing the importance of compliance with legal requirements for claiming exemptions under the Income-tax Act, 1961.
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