Retrospective disinvestment extension under tax law allowed trust investments to be retained without section 13(1)(d) breach

The retrospective extension of time to disinvest until 31 March 1993, introduced by the Finance (No. 2) Act, 1991 and the Finance Act, 1992, applied from 1 April 1983. For the assessment years covered, a trust could continue holding investments outside the modes specified under section 11(5) so long as it complied with the extended deadline and thereafter retained only permitted investments. On that basis, mere retention of the investments during the assessment year did not amount to contravention of section 13(1)(d) of the Income-tax Act, 1961, and the issue was decided in favour of the assessee.

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Issues: Whether the Tribunal was right in holding that there was no contravention of section 13(1)(d) of the Income-tax Act, 1961, for the relevant assessment years in view of the extended time for complying with the specified pattern of investment.

Analysis: The extension of time for disinvestment up to 31 March 1993, introduced by the Finance (No. 2) Act, 1991 and the Finance Act, 1992, was held to operate retrospectively from 1 April 1983. For the assessment years covered by that provision, the trust could retain investments even if they were not then in the modes specified under section 11(5), though it remained bound to disinvest by the extended deadline and thereafter hold only investments permitted by law.

Conclusion: There was no contravention of section 13(1)(d) of the Income-tax Act, 1961, merely because the assessee held the investments during the assessment year; the question was answered in favour of the assessee and against the Revenue.

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