2007 (6) TMI 197 - HC - Income Tax

Charitable trust - Exemption u/s 11(1A) denied on ground that amount was not invested properly amount received from sale of property partly lying in current account and partly invested in fixed deposit - as the amount invested in the current account is concerned the same has to be considered as classified and proper investment since details regarding the cheque amount were not available matter is remanded to tribunal to find out the details regarding the cheque amount and its deposit

Summary

Issues:
Interpretation of section 11(1A) of the Income-tax Act for exemption eligibility based on investment in capital assets.

Analysis:
The case involves an appeal filed by the Revenue against the order of the Income-tax Appellate Tribunal regarding the eligibility of Rs. 4,86,304 for exemption under section 11(1A) of the Income-tax Act. The dispute arose from the investment made by a trust where a portion was invested in fixed deposits and a building under construction, while the remaining amount was in the current account and as a cheque on hand. The Revenue argued that only the amount invested in capital assets could be considered for exemption, not the amount in the current account or as a cheque on hand. The assessee contended that the balance amount in the current account also constituted an investment as required by the Act.

The court analyzed the provisions of section 11(5)(iii) of the Act, which allows for deposit in any account with a scheduled bank to be considered as an investment. It was noted that the deposit made in the current account with the Bank of India fell within the definition of "deposit in any account with a scheduled bank." The court emphasized that "any account" includes a current account as well. The Commissioner of Income-tax (Appeals) had acknowledged that a portion of the balance amount was invested in the current account, satisfying the conditions under the Act.

However, the court found that details regarding the cheque amount were not available on record. Therefore, the court remanded the matter to the Tribunal to ascertain the details regarding the cheque amount and its deposition. The Tribunal was directed to determine whether the assessee had fulfilled all conditions as per the Act and make appropriate orders accordingly. The court clarified that the amount invested in the current account should be considered a "classified and proper investment," and the remand was solely for clarifying the details regarding the cheque amount for proper adjudication.

In conclusion, the court disposed of the tax case with the observation that the investment in the current account was valid, and the matter was remanded to determine the status of the cheque amount for compliance with the provisions of the Act.