1990 (2) TMI 137 - AT - Income Tax

Issues Involved:

1. Applicability of Section 13(1)(d) of the Income-tax Act, 1961 for the assessment years 1983-84 and 1984-85.
2. Applicability of Section 13(1)(d) for the assessment year 1985-86.
3. Eligibility for relief under Section 80L of the Income-tax Act for the assessment year 1985-86.

Issue-wise Detailed Analysis:

1. Applicability of Section 13(1)(d) of the Income-tax Act, 1961 for the assessment years 1983-84 and 1984-85:

The assessee, a public charitable trust, appealed against the Commissioner's order invoking Section 263 of the Income-tax Act, 1961, for the assessment years 1983-84 and 1984-85. The Commissioner had held that the trust violated Section 13(1)(d) by continuing to invest in M/s. The Indian Textile Paper Tube Company Ltd., a company in which the trustees had substantial interest, instead of converting its funds into approved securities under Section 11(5). However, the Tribunal noted that the previous years relevant to these assessment years ended on 30-9-1982 and 30-9-1983, respectively. The Tribunal observed that Section 13(1)(d) mandates conversion of funds into approved securities by 30-11-1983. Since the previous year for the assessment year 1984-85 ended on 30-9-1983, the assessee had time until 30-11-1983 to comply. Therefore, it was concluded that the assessee had not contravened Section 13(1)(d) for these years. The Tribunal relied on earlier decisions, including Tulu Vellala Association v. ITO and M. Kothari Charitable Trust v. ITO, to support this conclusion. Consequently, the appeals for these years were allowed, and the Commissioner's order was set aside.

2. Applicability of Section 13(1)(d) for the assessment year 1985-86:

For the assessment year 1985-86, the previous year ended on 30-9-1984, and 30-11-1983 fell within this accounting year. The assessee argued that 'funds of the trust' should mean only liquid cash capable of being invested in approved securities, and bonus shares did not constitute such funds. The assessee relied on the Gujarat High Court decision in CIT v. Insaniyat Trust, which interpreted 'funds' in Section 13(2)(h) to mean actual money or cash resources. However, the Tribunal rejected this argument, noting that the Gujarat High Court itself distinguished the interpretation of 'funds' in Section 13(2)(h) from Section 13(1)(d), suggesting a broader meaning in the latter context. The Tribunal concluded that shares, including bonus shares, are part of the trust's funds and must be converted into approved securities. Since the assessee did not convert the 500 bonus shares by 30-11-1983, it was held to have contravened Section 13(1)(d) for the assessment year 1985-86. Consequently, the appeal for this year was dismissed, and the Commissioner's order was sustained.

3. Eligibility for relief under Section 80L of the Income-tax Act for the assessment year 1985-86:

The assessee raised an additional ground seeking relief under Section 80L if its income was held taxable, citing the Special Bench decision in ITO v. Shri Krishna Bhandar Trust. However, the Tribunal noted that this additional ground did not arise from the impugned order. Moreover, since the assessee was granted exemption under Sections 11 and 12 for the assessment years 1983-84 and 1984-85, the additional ground was not considered for these years. For the assessment year 1985-86, the Tribunal observed that the original assessment order stated no dividend income was received from the 500 bonus shares. Thus, even if the assessee were entitled to Section 80L relief, it would not benefit due to the absence of dividend income. Therefore, the additional ground was deemed irrelevant for the assessment year 1985-86.

Conclusion:

The appeals for the assessment years 1983-84 and 1984-85 were allowed, restoring the Income-tax Officer's original assessment orders. The appeal for the assessment year 1985-86 was dismissed, upholding the Commissioner's revisionary order.

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