2000 (11) TMI 82 - HC - Income Tax

Trust's Time Deposit Investment Deemed Valid under Tax Act

The court upheld the trust's position that investing in a time deposit with a scheduled bank constituted a valid form of investing money for charitable ... Charitable Purposes, Charitable Trust, Capital Gains, Exemption, Condition Precedent Issues involved: Questioning the correctness of the conclusions u/s 11(5) of the Income-tax Act, 1961 regarding time deposits in a scheduled bank.Summary:The appeal was filed u/s 260A of the Act for the assessment year 1990-91. The assessee-trust received a premium for leasing land and invested the amount in a time deposit with a bank. The Assessing Officer contended that this did not constitute investment in a capital asset, breaching section 11(5) of the Act. However, the Commissioner of Income-tax (Appeals) and the Tribunal upheld the trust's position, stating that the investment in a scheduled bank was in compliance with the Act.The Revenue argued that investment in term deposits did not meet the requirements of section 11(5). The court clarified that section 11 deals with income from property held for charitable or religious purposes. It was emphasized that investment in a scheduled bank, as per section 11(5)(iii), is a valid form of investing money for charitable purposes. The court further explained that a fixed term deposit in a scheduled bank qualifies as a capital asset, aligning with the provisions of section 11(1A.The court found no merit in the Revenue's plea, affirming that the trust's actions were in accordance with the law. It was concluded that the appeal lacked substance and was therefore dismissed.