1989 (3) TMI 405 - AT - Income Tax

Summary

Issues Involved:
1. Compliance with Section 12A(5) of the Income-tax Act, 1961.
2. Investment compliance u/s 13(1)(d) of the Income-tax Act, 1961.

Issue 1: Compliance with Section 12A(5) of the Income-tax Act, 1961

In this appeal for the assessment year 1984-85, the primary issue was whether the requirements of Section 12A(5) were satisfied. The assessee, a charitable institution, was denied tax exemption u/s 11 on the grounds that the requirements of Section 12A were not met. The controversy centered around the interpretation of the term "such accountant" in Section 12A(b). The accounts were audited by Lovelock & Lewis, but the certificate was provided by Khare Associates. The Inspecting Asstt. Commissioner held that the same auditor must provide the certificate, a view upheld by the Commissioner (A).

The Tribunal, however, disagreed, stating that the statutory auditor does not necessarily have to furnish the certificate. Any Chartered Accountant, as defined in the Explanation below Sub-section (2) of Section 288, can audit the accounts and provide the certificate. The Tribunal concluded that the certificate by Khare Associates was valid, as long as it was not proven false. Thus, the department's view was rejected.

Issue 2: Investment compliance u/s 13(1)(d) of the Income-tax Act, 1961

The second issue involved the assessee-trust's investment in shares, which were not in the prescribed form u/s 11(5) and continued to be held after 30-11-1983. The Inspecting Asstt. Commissioner and the Commissioner (A) both held that this violated Section 13(1)(d), thereby denying the exemption u/s 11.

The assessee argued that the shares formed part of the corpus of the trust as on 1-6-1973, invoking the proviso to Section 13(1)(d). The Tribunal admitted additional evidence to verify this claim, emphasizing that substantial justice should not be denied on technical grounds. The case was remitted back to the Commissioner (A) for examination of the additional evidence regarding the corpus of the trust.

Conclusion:

The appeal was allowed for statistical purposes, with the Tribunal setting aside the order of the Commissioner (A) on the second issue and remitting the case for further examination.