1980 (2) TMI 114 - AT - Income Tax

Summary

Issues:
- Entitlement to benefit of s. 11(2) of the IT Act, 1961
- Compliance with the provisions of s. 11(2)
- Condonation of delay in filing application under s. 11(2)
- Interpretation of s. 11(2)(a) and s. 11(2)(b)
- Validity of rule prescribing time limit for application under s. 11(2)

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi revolved around the issue of whether the assessee, a public charitable trust, was entitled to the benefit of s. 11(2) of the IT Act, 1961. The assessee had accumulated funds and filed an application under s. 11(2) beyond the statutory time limit, resulting in the Income Tax Officer (ITO) assessing the income over expenditure as the assessee's income. The assessee contended that the delay was due to changes in the law and submitted an affidavit explaining the reasons for the delay.

The assessee challenged the ITO's order before the Appellate Assistant Commissioner (AAC), arguing that s. 11(2) did not specify a time limit for filing the application and that a major part of the funds had been deposited as required by law. The AAC, however, held that the notice was not given to the ITO within the prescribed time limit, leading to non-compliance with s. 11(2).

Upon hearing the arguments, the Tribunal opined that the main purpose of s. 11(2) would be served if s. 11(2)(b) was complied with, considering s. 11(2)(a) as a mere formality of notice to the ITO. The Tribunal deemed the delay in s. 11(2)(a) as condonable, characterizing it as a technical breach deserving of leniency.

Additionally, the Tribunal agreed with the assessee's argument that the rule prescribing a time limit for the application under s. 11(2) was invalid. Citing a Madras High Court ruling, the Tribunal held that the rule-making authority had exceeded its limits by including time limits in the application process. Consequently, the Tribunal ruled in favor of the assessee, allowing the appeal and holding that the income accumulated to the extent of Rs. 30,073 should not be assessed as the assessee's income.

In conclusion, the Tribunal allowed the appeal, granting the assessee the benefit of s. 11(2) to the extent of compliance with s. 11(2)(b) and emphasizing the condonable nature of the technical breach in filing the application.