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Issues Involved:
1. Entitlement to exemption under Section 11(1)(a) and/or Section 11(2)(b) of the Income-tax Act, 1961. 2. Shortfall in investment in Government securities. 3. Interpretation of Section 11(2)(b) regarding the extent of investment required. 4. Timing and manner of investment as per the relevant rules. Issue-wise Detailed Analysis: 1. Entitlement to Exemption under Section 11(1)(a) and/or Section 11(2)(b) of the Income-tax Act, 1961: The primary issue was whether the Appellate Tribunal was correct in law in holding that the accumulated income of the assessee, a charitable trust, was entitled to exemption under Section 11(1)(a) and/or Section 11(2)(b) of the Income-tax Act, 1961. The Tribunal had ruled in favor of the assessee, acknowledging the charitable nature of the trust and its compliance with the conditions laid down in the Act, albeit with a minor shortfall in the investment. 2. Shortfall in Investment in Government Securities: The assessee had remitted Rs. 2,00,000 to Punjab National Bank for investment in Government securities. However, only Rs. 1,87,778.62 was invested, resulting in a shortfall of Rs. 1,861.67. This shortfall was due to circumstances beyond the control of the assessee, as the bank refunded the balance amount. The Income-tax Officer initially denied the exemption due to this shortfall, but the Appellate Assistant Commissioner and the Tribunal later ruled in favor of the assessee, considering the bona fides and the subsequent corrective actions taken by the trust. 3. Interpretation of Section 11(2)(b) Regarding the Extent of Investment Required: The Tribunal and the High Court interpreted Section 11(2)(b) to mean that the assessee should not be penalized for a minor shortfall in investment, especially when the shortfall was unintentional and beyond the assessee's control. The court noted that the purpose of Section 11(2) is to enlarge the scope of exemption and not to penalize the assessee. The court emphasized that a charitable trust should not lose its exemption due to a technical shortfall, particularly when the trust had demonstrated its intent to comply with the statutory requirements by remitting the full amount initially. 4. Timing and Manner of Investment as per the Relevant Rules: The court also addressed the timing of the investment, noting that the investment was made within four months of the close of the accounting period, as required by the relevant rules. The Tribunal had resolved any controversy regarding the timing of the investment, confirming that the investment date was July 26, 1965, within the permissible period. The court further opined that the rules prescribing a time limit should not be interpreted in a manner that deprives the assessee of the exemption, especially when the statute itself does not prescribe a specific time limit. Conclusion: On a comprehensive analysis of the facts and legal provisions, the High Court concluded that the assessee was entitled to the exemption under Section 11(1)(a) and Section 11(2) of the Income-tax Act, 1961. The court affirmed that the minor shortfall in investment did not disqualify the assessee from the exemption, given the bona fide actions and subsequent compliance by the trust. The question referred to the court was answered in the affirmative, upholding the Tribunal's decision in favor of the assessee.
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