Charitable trust denied s.11(1A) exemption as sale proceeds not properly invested; bank current account tentatively accepted pending verification

HC denied charitable trust's exemption under s.11(1A) because funds from property sale were not properly invested; part lay in a current account and part in fixed deposit. The Court held the current account balance may be treated as a proper investment pending clarification, since cheque details were unavailable. The matter was remanded to the tribunal to ascertain the cheque amounts and deposits and to reassess entitlement to exemption accordingly.

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Issues: Whether the sum of Rs. 4,86,304 (lying partly in a current account and partly as cheque on hand) that was not invested in another capital asset qualifies for exemption under section 11(1A) of the Income-tax Act, 1961.

Analysis: The Court examined whether deposits in a current account with a scheduled bank fall within the form or mode of investing or depositing money as contemplated by section 11(5)(iii) of the Income-tax Act, 1961. The Assessing Officer found only Rs. 4,58,321 invested in fixed deposits. The Tribunal and the CIT(A) treated amounts held in the current account as qualifying investments, but details regarding the cheque on hand were not on record. The Court held that the phrase "any account" with a scheduled bank includes a current account, and that the portion shown to be in the current account is covered by section 11(5)(iii). Because particulars about the cheque on hand and its deposit were absent, the Court directed a remand to the Tribunal to ascertain those details and determine applicability of exemption in respect of the cheque amount.

Conclusion: The amount shown as deposited in the current account is a classified and proper investment within section 11(5)(iii) and must be treated as eligible for exemption under section 11(1A); the matter is remanded to the Tribunal to determine and decide, on the basis of factual details regarding the cheque on hand, whether the remaining amount satisfies the conditions for exemption.

Ratio Decidendi: Deposits in a current account with a scheduled bank constitute "deposit in any account with a scheduled bank" under section 11(5)(iii) and therefore qualify as a form of classified investment for the purposes of exemption under section 11(1A) of the Income-tax Act, 1961.

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