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Issues involved: Interpretation of exemption under section 11(2) of the Income-tax Act, 1961 regarding notice requirements under rule 17 of the Income-tax Rules, 1962.
Summary: The case involved a trust seeking exemption under section 11(2) of the Income-tax Act, 1961. The trust, established in 1962, had income from donations, interest, and property in the relevant assessment year 1971-72. The trust filed applications for extension of time to file returns, but the Income Tax Officer (ITO) did not respond. The ITO denied exemption under section 11(2) due to the late notice. The Appellate Authority Commission (AAC) and the Tribunal upheld this decision. The Tribunal ruled that the application for exemption should have been filed before the original or extended deadline for filing the return. The trust then approached the High Court, which directed the Tribunal to refer the question of law to the court. The High Court analyzed the provisions of section 139(1) and rule 13 of the Income-tax Rules, 1962, regarding extending the deadline for filing returns. It noted that the extension request could be made even after the original deadline. The court emphasized the importance of Form No. 10 under rule 17 for claiming exemption under section 11(2), stating that the notice must be given before the extended deadline for filing the return. The court cited precedents from other High Courts supporting the view that if the ITO does not respond to an extension request, the assessee can presume the request was granted. The court disagreed with the lone contrary view from the Andhra Pradesh High Court, emphasizing the need for the ITO to communicate extension decisions to the assessee. In conclusion, the High Court ruled in favor of the assessee, stating that the time for filing the return of income stood extended, and the trust had reasonable cause for the delay due to the lack of response from the ITO. The court answered the referred question in the negative, favoring the assessee. No costs were awarded in the judgment. Separate Judgment: - M. M. PUNCHHI J.: Analyzed the legal provisions and precedents related to the case, emphasizing the importance of timely notice for exemption under section 11(2) and the significance of Form No. 10 under rule 17. - RAJENDRA NATH MITTAL J.: Concurred with the decision and reasoning of M. M. PUNCHHI J.
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