Court rules in favor of assessee, finding no application of Income-tax Act section 13(2)(h).

The court ruled in favor of the assessee, stating that section 13(2)(h) of the Income-tax Act did not apply in this case as the trustees' receipt of shares as donations did not constitute investing in those shares. The court did not specifically address the burden of proof under section 13(1)(c) but concluded that the provisions of section 13(2)(h) were not applicable to the assessee. The decision favored the assessee, with the questions raised by the Tribunal answered in the affirmative against the Revenue, resulting in the disposal of the reference without costs imposed.

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Issues involved: Interpretation of section 13(2)(h) of the Income-tax Act, 1961 regarding investment of trust funds, burden of proof under section 13(1)(c), and applicability of section 13(2)(h) to the case.

Interpretation of section 13(2)(h): The Income-tax Appellate Tribunal questioned whether the condition in section 13(2)(h) was met due to the trustees not investing trust funds in certain concerns as required by the section. The court referred to a previous decision in CIT v. Insaniyat Trust [1988] 173 ITR 248, which established that receiving shares as donations does not constitute investing in those shares. Therefore, the court held in favor of the assessee, stating that section 13(2)(h) did not apply in this case.

Burden of proof under section 13(1)(c): The Tribunal also considered whether the burden was on the Revenue to demonstrate the application of section 13(1)(c) in the case, especially in light of Explanation 3 to that section. However, the court did not delve into this issue specifically in its judgment.

Applicability of section 13(2)(h): Lastly, the Tribunal had to determine if the case of the assessee fell under the provisions of section 13(2)(h) of the Income-tax Act. Following the precedent set in CIT v. Insaniyat Trust [1988] 173 ITR 248, the court ruled in favor of the assessee, concluding that section 13(2)(h) did not apply. The questions raised by the Tribunal were answered in the affirmative, against the Revenue and in favor of the assessee, leading to the disposal of the reference with no costs imposed.

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