Charitable trust exemption under section 11 upheld despite non-compliant investments; related tax deduction issue ceased to survive.

Retrospective amendment of section 13(1)(d) and proviso (iia) allowed charitable trusts time until 31 March 1993 to disinvest from impermissible investments, so holdings contrary to section 11(5) during the relevant period did not forfeit exemption under section 11. On that basis, the assessee retained full section 11 benefit, and the related issue on section 80L ceased to survive for consideration.

---

---

Issues: Whether the assessee was entitled to exemption under section 11 despite investments made contrary to section 11(5) in view of proviso (iia) to section 13(1)(d); and whether the question relating to deduction under section 80L survived for consideration.

Analysis: Section 13(1)(d) of the Income-tax Act was retrospectively amended by the Finance (No. 2) Act, 1991 with effect from 1 April 1983, and proviso (iia) extended the time available to charitable trusts for disinvestment up to 31 March 1993. On that footing, investments held contrary to section 11(5) during the relevant period did not deprive the assessee of the benefit of section 11. Since the assessee was held entitled to full exemption under section 11, the direction for re-examination by the Assessing Officer ceased to have any survival.

Conclusion: The assessee was entitled to exemption under section 11 notwithstanding the impugned investments, and the related issue concerning section 80L did not survive.

---