1990 (2) TMI 140 - AT - Income Tax

Tribunal's Decision on Trust's Appeals for Assessment Years 1983-85

VENKATESWARA TRUST. Versus INCOME TAX OFFICER.

The tribunal allowed the appeals for the assessment years 1983-84 and 1984-85, setting aside the Commissioner's order and restoring the original ... - Issues Involved:1. Contravention of Section 13(1)(d) for Assessment Years 1983-84 and 1984-85.2. Contravention of Section 13(1)(d) for Assessment Year 1985-86.3. Entitlement to Relief under Section 80L of the IT Act for Assessment Year 1985-86.Issue 1: Contravention of Section 13(1)(d) for Assessment Years 1983-84 and 1984-85The appellate tribunal examined whether the assessee-trust had contravened the provisions of Section 13(1)(d) of the IT Act for the assessment years 1983-84 and 1984-85. The trust had invested its funds in M/s The Indian Textile Paper Tube Company Ltd., a company in which the trustees had substantial interest. The Commissioner found that the trust continued to keep its funds invested in the company beyond the permissible date without converting them into approved securities under Section 11(5). However, the tribunal noted that the relevant previous years ended on 30th September 1982 and 30th September 1983, respectively. The tribunal held that the assessee had time until 30th November 1983 to convert its funds into approved securities, and thus, it could not be concluded that the assessee had contravened Section 13(1)(d) for these assessment years. The tribunal cited previous decisions in M/s. Tulu Vellala Association and C.M. Kothari Charitable Trust to support its conclusion. Consequently, the tribunal set aside the Commissioner's order for these years and restored the original assessment orders.Issue 2: Contravention of Section 13(1)(d) for Assessment Year 1985-86For the assessment year 1985-86, the tribunal considered whether the trust had contravened Section 13(1)(d) by not converting its bonus shares into approved securities by 30th November 1983. The tribunal rejected the assessee's argument that the term 'funds of the trust' should be interpreted to mean only liquid cash. The tribunal referred to the Gujarat High Court's decision in CIT vs. Insaniyat Trust but distinguished it by stating that the contextual interpretation given to 'funds of the trust' under Section 13(2)(h) does not apply to Section 13(1)(d). The tribunal held that the term 'funds of the trust' under Section 13(1)(d) has a broader meaning, including shares. Since the assessee did not convert the 500 bonus shares into approved securities by 30th November 1983, the tribunal concluded that the trust had contravened Section 13(1)(d) and thus lost its exemption under Sections 11 and 12 for the assessment year 1985-86. Consequently, the tribunal sustained the Commissioner's revisionary order for this year.Issue 3: Entitlement to Relief under Section 80L of the IT Act for Assessment Year 1985-86The assessee raised an additional ground seeking relief under Section 80L of the IT Act if its income was held to be taxable. The tribunal noted that this ground did not arise from the impugned order. Moreover, the tribunal found that the assessee did not receive any dividend income for the assessment year 1985-86, as stated in the original assessment order. Consequently, the tribunal held that no material benefit would accrue to the assessee even if it were entitled to deduction under Section 80L. Therefore, the tribunal did not consider this ground for the assessment year 1985-86.ConclusionThe appeals for the assessment years 1983-84 and 1984-85 were allowed, setting aside the Commissioner's order and restoring the original assessment orders. The appeal for the assessment year 1985-86 was dismissed, and the Commissioner's revisionary order was sustained.