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Issues:
1. Whether an assessee must invest the entire surplus income in the manner provided in section 11(2)(b) of the Income-tax Act, 1961 to earn exemption for any part of the surplus income. Analysis: The judgment pertains to a charitable trust's assessment under the Income-tax Act, 1961 for the year 1969-70. Initially, the Income-tax Officer disallowed exemptions under section 11 of the Act, considering the trust not genuine. However, the Income-tax Appellate Tribunal later ruled in favor of the trust, allowing the exemptions. Subsequently, the Income-tax Officer, following the Tribunal's decision, exempted the entire surplus income from tax due to investments made as per section 11(2)(b). The Commissioner of Income-tax found this order prejudicial to revenue and issued a notice under section 263 for revision, prompting the trust to file a writ petition. The Commissioner's notice highlighted that the trust failed to invest the entire surplus income in approved securities as required by section 11(2)(b), proposing to tax the entire surplus income of Rs. 85,262. The primary issue in this case is whether full investment of surplus income is necessary to claim exemption under section 11(2)(b). The petitioner argued that compliance with clauses (a) and (b) of section 11(2) should entitle them to exemption for the invested portion, in addition to the 25% exemption under section 11(1)(a). The court analyzed sections 11(1)(a) and 11(2) of the Act, emphasizing that compliance with section 11(2) provides an alternative to section 11(1)(a) for exemption. It ruled that the trust could not claim both the 25% exemption and exemption for the invested surplus amount simultaneously. As the trust had invested 75% of the surplus income as required by section 11(2)(b) and issued the necessary notice, it was entitled to exemption only for that portion. The court rejected the revenue's argument to tax the entire surplus income due to partial investment. The judgment concluded by directing the Commissioner to proceed with the revision under section 263 in line with the court's decision, allowing the trust a reasonable opportunity to present its case. The court also clarified that questions regarding the validity of prescribed forms could be raised separately if necessary. The petition was disposed of with no costs awarded.
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