1988 (11) TMI 129 - AT - Income Tax

Summary

Issues Involved:

1. Applicability of the proviso to section 13(1)(d)(ii) of the Income-tax Act, 1961 to the assessee-trust.
2. Entitlement to deduction under section 80G of the Income-tax Act for donations.

Detailed Analysis:

1. Applicability of the Proviso to Section 13(1)(d)(ii):

The primary issue in this appeal was whether the assessee-trust is saved by the proviso to section 13(1)(d)(ii) of the Income-tax Act, 1961. The factual background reveals that the assessee-trust held investments with M/s Jay Engg. Works Ltd. which were later shifted to M/s DCM Ltd. The assessing officer concluded that the sum of Rs. 6 lakhs deposited with M/s DCM Ltd. was hit by the provisions of section 13(1)(d)(ii) and thus, the benefit of exemption was not available.

The assessee argued that the investments were in accordance with the permissible modes of investment under section 13(5)(b), which continued to be protected by the proviso to section 13(1)(d) up to the assessment year 1983-84. The change of the depositee from M/s Jay Engg. Works Ltd. to M/s DCM Ltd. did not alter the mode of investment, and thus, the exemption should still apply.

The revenue argued that the deposit with M/s DCM Ltd. was not an asset as of 1-6-1973 and hence, not covered by the proviso to section 13(1)(d). The funds were in a converted form and thus, not eligible for exemption.

The Tribunal examined the relevant statutory provisions, including sections 11, 12, and 13 of the Income-tax Act, 1961. It was noted that section 13(1)(d) provides exceptions to the general rule of exclusions under sections 11 and 12, with a proviso for assets forming part of the corpus of the trust as on 1-6-1973. The Tribunal concluded that the change of deposit from M/s Jay Engg. Works Ltd. to M/s DCM Ltd. was not material as long as the investments continued to be in the approved forms or modes. The funds continued to be invested in the same mode with the same type of depositee. Therefore, the assessee was entitled to the exemption under the proviso to section 13(1)(d).

2. Entitlement to Deduction under Section 80G:

The issue regarding deduction under section 80G for donations was considered consequential to the main issue. Since the main issue was decided in favor of the assessee, the Tribunal did not discuss this issue in detail, as it was covered by the favorable decision on the primary issue.

Conclusion:

The Tribunal decided the primary issue in favor of the assessee, holding that the change of deposit from M/s Jay Engg. Works Ltd. to M/s DCM Ltd. did not affect the exemption under the proviso to section 13(1)(d). Consequently, the issue regarding deduction under section 80G was also decided in favor of the assessee.