Trust granted exemption under section 11 for charity funds assignment, no violation found.

The Tribunal upheld the Dy. Commissioner's decision, confirming no violation of section 13(1)(d) and granting exemption under section 11 to the charity trust for the years 1986-87 and 1987-88. The trust's assignment of funds from M/s. W. H. Harton & Co. Ltd. was deemed an actionable claim, not an investment, allowing for the benefit of section 11. The Revenue's appeal was dismissed, affirming the trust's entitlement to exemption despite alleged violations.

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Issues:
Violation of provisions of section 13(1)(d) by investing trust funds, Entitlement to exemption under section 11 of the Income-tax Act, 1961.

Analysis:

The case involved an appeal by the Revenue against the order of the Dy. Commissioner (Appeals) concerning the income-tax assessments of a charity trust for the years 1986-87 and 1987-88. The Revenue objected to the direction given by the Dy. Commissioner to allow the benefit of section 11 of the Act to the trust, despite alleged violations of section 13(1)(d) due to investments made by the trust. The trust had claimed that the funds with M/s. W. H. Harton & Co. Ltd. were not investments but an actionable claim assigned to them. The Dy. Commissioner (Appeals) accepted the trust's contentions, emphasizing that the trust had full authority over the debt due from M/s. W.H. Harton & Co. Ltd. and that the amount did not represent an investment by the trust. The Dy. Commissioner relied on past assessments and granted exemption under section 11 to the trust for the relevant years. The Revenue challenged this decision before the Tribunal.

During the Tribunal proceedings, the Revenue argued that the trust's actions constituted an investment in violation of section 11(5) and section 13(1)(d) of the Act. However, the Tribunal disagreed with this argument. The trust presented a deed of assignment dated 17-5-1983, which showed that the amount due from M/s. W. H. Harton & Co. Ltd. was assigned to the trust as an actionable claim. The Tribunal noted that the trust was gradually realizing the amount due, indicating no investment or deposit of trust funds with the company. The Tribunal referenced a similar decision by the Madras High Court to support the trust's case. Additionally, a clause inserted in section 13(1)(d) by the Finance (No. 2) Act, 1991 allowed the trust time until 31-3-1992 to rectify any investment violations. Consequently, the Tribunal upheld the Dy. Commissioner's order, confirming that there was no violation of section 13(1)(d) and granting exemption under section 11 to the trust for the relevant years. The appeals by the Revenue were dismissed, affirming the Dy. Commissioner's decision.

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