Tribunal upholds CIT(A)'s decision on Rs. 50 lakh investment despite non-compliance

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 50 lakhs invested by the assessee in M/s Egmore Benefit Fund Society Ltd., despite not meeting s. 11(5) criteria, due to circumstances beyond control. The assessee's genuine efforts to reinvest were hindered by garnishee proceedings against a third party, preventing compliance with the Act. The principle of not compelling the impossible was applied, leading to the dismissal of the Revenue's appeal. The inability to reinvest in specified securities was deemed justified, resulting in the deletion of the addition for the assessment year.

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Issues Involved:
The appeal involves the issue of whether the CIT(A) was correct in deleting the addition of Rs. 50 lakhs invested by the assessee in M/s Egmore Benefit Fund Society Ltd. in contravention of s. 11(5) of the IT Act, 1961 for the assessment year 2004-05.

Comprehensive Details:

Issue 1: Investment Contravention of s. 11(5) of the IT Act

The Revenue appealed against the CIT(A)'s decision to delete the addition of Rs. 50 lakhs invested by the assessee in M/s Egmore Benefit Fund Society Ltd., which was not in accordance with the modes stipulated under s. 11(5) of the Act. The AO had denied the claim for exemption and taxed the income under s. 11(3) due to this investment not meeting the prescribed criteria.

The assessee trust originally invested funds in Indian Bank but later invested Rs. 50 lakhs in M/s Egmore Benefit Fund Society Ltd. to earn better interest rates. Following amendments in the Act, the trust sought registration under s. 12A. Attempts to withdraw the investment were hindered by garnishee proceedings initiated by the TRO against M/s M.G. Enterprises, mistakenly assuming the funds were with the assessee trust.

Efforts were made to lift the garnishee order to withdraw the Rs. 50 lakhs for reinvestment in specified securities, but due to outstanding taxes of M/s M.G. Enterprises, the attachment remained. The inability to reinvest as per s. 11(5) was attributed to circumstances beyond control, invoking the maxim lex non cogit ad impossibilia.

Precedent and Decision:
Referring to the case law, the Tribunal upheld the CIT(A)'s decision, considering that the assessee trust made genuine efforts to retrieve the investment but was impeded by external factors. The principle of law not compelling one to perform the impossible was applied, leading to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal found that the inability to reinvest the sum of Rs. 50 lakhs in compliance with s. 11(5) was due to external factors beyond the assessee's control, justifying the deletion of the addition and upholding the CIT(A)'s decision.

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