2014 (8) TMI 4 - HC - Income Tax

Benefit u/s 11 Investments made in modes prescribed u/s 13(1)(d) or not - Whether the Tribunal is correct in allowing the benefit of Section 11 to the assessee and thereby allowing the relief to the assessee if at all there was violation of section 13(1)(d) of the Act Held that - The foreign shares have not been transferred in the name of the trust and were/are still in the name of late Raja Bahadur Sardar Singh CIT(A) has noticed that as per the Will, the shares are to become the corpus of the trust, but this acquisition is dependent upon adjudication of the Probate - there cannot be violation of Section 11(5) - revenue has not been able to controvert and deny the factual position - he was asked whether the revenue has filed or taken similar objections in respect of other years and denied benefit of Section 11 allegation of violation of Section 11(5) of the Act does not arises for consideration - Decided against revenue.

Summary

Issues:
1. Interpretation of Section 11 of the Income Tax Act, 1961
2. Violation of Section 13(1)(d) of the Act
3. Assessment of trust's income for the year 1991-92

Analysis:
The High Court addressed the issue of whether the respondent trust should be denied the benefit of Section 11 of the Income Tax Act, 1961, due to alleged violations of Section 13(1)(d) of the Act. The Assessing Officer initially raised concerns regarding investments made by the trust, specifically mentioning shares in foreign companies and advances given to Business India, which were deemed contrary to Section 11(5) of the Act. However, the Commissioner of Income Tax (Appeals) highlighted that the shares were part of a bequest in a Will that was under probate proceedings, indicating an uncertain legal status. The Commissioner also noted that the advance to Business India was for a memorial project, not a regulated investment under Section 11(5). The Tribunal affirmed this view, emphasizing the lack of violation of Section 11(5) based on the factual circumstances.

The court further observed that the trust had not acquired legal rights over the foreign shares as they were still in the name of the deceased benefactor, pending probate confirmation. The completion of the memorial project was also hindered by ongoing disputes, indicating that the intent behind the advance payment was not for investment purposes under Section 11(5). The court found that the trust's actions did not amount to a violation of the investment regulations under Section 11(5) based on the detailed analysis provided by the Commissioner of Income Tax (Appeals) and the Tribunal.

The court noted that the revenue failed to contest the factual positions presented by the Commissioner of Income Tax (Appeals) and the Tribunal. The appellant's counsel could not provide evidence of similar objections raised in other years or demonstrate consistent denial of Section 11 benefits. As the probate proceedings were still pending, the court concluded that the allegations of Section 11(5) violation were unfounded in this case. Consequently, the court ruled in favor of the respondent-assessee, dismissing the appeal and not awarding any costs.