2010 (5) TMI 38 - HC - Income Tax

Exemption u/s 11(5) Exemption u/s 10(23C(iv) - Investment - the petitioner had complied with the direction given in the earlier order of the high court of withdrawing the amount lying invested in India Exposition Mart Limited and in placing the said amount in a scheduled bank in accordance with Section 11(5) of the said Act. However, despite this having been done, the Director General of Income Tax (Exemption) did not grant exemption to the petitioner under Section 10(23C)(iv) for all the assessment years 2008-2009 to 2010-2011 but limited the exemption to the assessment years 2009-2010 and 2010-2011. In other words, he denied exemption for the assessment year 2008-2009. Held that it was not open to the Director General of Income Tax (Exemption) to have refused exemption for the assessment year 2008-2009, when the petitioner had withdrawn the investment in India Exposition Mart Limited and placed the same in a scheduled bank in compliance with the provisions of Section 11(5) of the said Act. It was made clear in the order passed by this Court that the second application that would be moved by the petitioner pursuant to the order of the High Court, would be treated as having been filed on 22.05.2007 and was to be an entire substitute of the original application. decided in favor of assessee

Summary

Issues:
1. Grant of exemption under Section 10(23C)(iv) of the Income Tax Act, 1961.
2. Compliance with Section 11(5) of the Income Tax Act for exemption.
3. Denial of exemption for the assessment year 2008-2009.

Analysis:

Issue 1: Grant of exemption under Section 10(23C)(iv) of the Income Tax Act, 1961:
The judgment pertains to the grant of exemption under Section 10(23C)(iv) of the Income Tax Act, 1961. The petitioner had previously approached the Court regarding this matter, and the Court had directed the petitioner to withdraw its investment in India Exposition Mart Limited and reinvest the funds in compliance with Section 11(5) of the Act. The Court emphasized that a fresh application for exemption could be made, which would be treated as a substitute for the earlier application. The petitioner complied with this direction by withdrawing the investment and depositing the funds in a scheduled bank. However, the Director General of Income Tax (Exemption) did not grant exemption for all the assessment years as requested by the petitioner.

Issue 2: Compliance with Section 11(5) of the Income Tax Act for exemption:
The Court analyzed the compliance of the petitioner with Section 11(5) of the Income Tax Act. Despite the petitioner's fulfillment of the Court's directions by withdrawing the investment and placing the funds in a scheduled bank, the Director General of Income Tax (Exemption) limited the exemption to certain assessment years, denying it for the assessment year 2008-2009. The Court held that the Director General was not justified in refusing exemption for the said assessment year when the petitioner had complied with the provisions of Section 11(5) as directed by the Court. The Court reiterated that the fresh application filed by the petitioner should be considered a complete substitute for the original application, filed in line with the Court's directions.

Issue 3: Denial of exemption for the assessment year 2008-2009:
The judgment addressed the denial of exemption for the assessment year 2008-2009 by the Director General of Income Tax (Exemption). Despite the petitioner's compliance with the Court's directions regarding the investment and reinvestment of funds, the exemption was denied for this specific assessment year. The Court set aside this denial, directing the respondent to grant exemption for the assessment year 2008-2009 as well. The Court emphasized that the petitioner's adherence to the Court's directives in the earlier order warranted the grant of exemption for all the relevant assessment years, including 2008-2009.

In conclusion, the Court allowed the writ petition to the extent indicated above, setting aside the denial of exemption for the assessment year 2008-2009 and directing the respondent to grant the exemption in line with the petitioner's compliance with the Court's directions.