1991 (2) TMI 189 - AT - Income Tax

Summary

Issues:
1. Whether the investment made by the appellant in FD with Nagarjuna Steels Ltd. is in accordance with the provisions of section 11 of the Income-tax Act.
2. Whether the appellant is entitled to exemption under section 11 of the Act for the surplus amount.
3. Whether the assessing officer's order was erroneous or prejudicial to the revenue's interests, justifying the exercise of jurisdiction under section 263 of the Act.

Detailed Analysis:

Issue 1: The appellant, a public charitable institution, invested Rs. 3000 in FD with Nagarjuna Steels Ltd. The CIT Guntur invoked section 263, stating that the investment did not comply with the investment pattern specified in section 11(5) of the IT Act. The CIT(A) held that the appellant contravened section 13(1)(d)(2), justifying the inclusion of the surplus amount in the total income. The appellant argued that the investment was made before the enactment of section 13(1)(d) and was structured to mature after the provision's effective date. The terms of the deposit indicated that the money could not be withdrawn before maturity, making it practically impossible for the appellant to disinvest. The Tribunal considered the legislative intent behind section 13(1)(d) and concluded that the appellant did not breach the law since the investment was made under the company's terms and conditions. The Tribunal ruled that the appellant did not deceive the statute and, based on the legal maxim 'Lex Cogit non ad impossibilia,' exempted the appellant from denial of benefits under section 11.

Issue 2: The Tribunal emphasized that the appellant's inability to withdraw the funds before maturity due to the deposit terms did not amount to a deliberate violation of the statute. The Tribunal highlighted that the law does not compel individuals to perform the impossible. Considering the circumstances, the Tribunal held that the assessing officer's order was neither erroneous nor prejudicial to the revenue's interests. Consequently, the Tribunal found no grounds for invoking jurisdiction under section 263 of the Act.

Issue 3: The Tribunal allowed all three appeals filed by the appellant, emphasizing that the investment was made before the enactment of section 13(1)(d) and was structured to mature post the provision's effective date. The Tribunal's decision was based on the principle that individuals cannot be compelled to perform the impossible. Therefore, the Tribunal concluded that the assessing officer's order was not erroneous or prejudicial to the revenue's interests, thereby rejecting the need for jurisdiction under section 263 of the Act.