Calcutta High Court
Commissioner Of Income-Tax vs Deoria Public Charitable Trust on 29 April, 1991
Equivalent citations: [1992]196ITR110(CAL)
JUDGMENT Ajit K. Sengupta, J.
1. In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1983-84, the following question of law has been referred to this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the assessee is entitled to exemption under Section 11 of the Income-tax Act ?"
2. The facts are in a narrow compass. The assessee is a public charitable trust. The accounting year relevant to the assessment year 1983-84 ended on September 30, 1982. The assessee invested its assets in shares of private companies. The assessee failed to produce evidence that the assets were converted into specified investments before November 30, 1983, as required by the provisions of Section 13(1)(d) read with Section 11(5) of the Income-tax Act, 1961. Therefore, the Income-tax Officer denied exemption under Section 11 of the Income-tax Act. The Income-tax Officer was of the view that the amended provisions of the above section came into force with effect from April 1, 1983, and that the said provision is applicable to the assessment year 1983-84. The assessee, being aggrieved by the order of the Income-tax Officer, went in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the amended provisions should apply only for the accounting year after November 30, 1983. Therefore, he directed the Income-tax Officer to allow exemption to the assessee under Section 11 of the Income-tax Act. The Revenue, being aggrieved by the order of the Appellate Assistant Commissioner, brought the dispute before the Tribunal. It was contended on behalf of the Revenue that the provisions relating to the investment of trust funds take effect from April 1, 1983, and, accordingly, the same were applicable to the assessment year 1983-84 and subsequent assessment years. The assessment year involved in this reference application is 1983-84.
3. The Tribunal, following its earlier order in the case of Karam Chand Thapar Memorial Trust for the assessment year 1983-84, held that the assessee was eligible for exemption in spite of the amendment of Section 13(1)(d) read with Section 11(5) of the Act.
4. At the hearing before us, Mr. Sunil Kumar Mitra, learned advocate, contended that Section 13(1)(d) of the Act was amended with effect from April 1, 1983, and, therefore, the law as amended is applicable for the assessment year 1983-84, even though the previous year ended on September 30, 1982. Consequently, the assessee was not eligible for the exemption.
5. Mr. R. N. Bajoria, learned advocate, as amicus curiae, has submitted that the assessee-trust was allowed time till November 30, 1983, to convert the investments into specific investments in terms of the provisions of Section 13(1)(d) read with Section 11(5) whereas the previous year of the assessee ended long prior to the material date, i.e., November 30, 1983. In such a case, the question of contravention of any of the provisions in the previous year relevant to the assessment year 1983-84 did not arise. In other words, his contention is that the said provisions were not applicable to the assessment year 1983-84 as the previous year of the assessee ended prior to November 30, 1983. He has also drawn our attention to Circular No. 596, dated March 15, 1991 (see [1991] 188 ITR (St.) 115) of the Board where the Board decided that the provisions of Section 13(1)(d) would be applicable from the assessment year 1984-85 and not from the assessment year 1983-84.
6. We have considered the rival contentions. Section 13(1)(d) of the Income-tax Act, before its amendment by the Finance Act, 1983, provided that the exemption under Section 11 shall not operate for the assessment year 1983-84 or any subsequent year, if any funds of the trust or institution are invested or deposited or continue to remain invested or deposited for any period during any previous year commencing on or after April 1, 1982, otherwise than in any of the forms or modes specified in Sub-section (5) of Section 13. The Finance Act, 1983, has amended the aforesaid provisions and laid down a uniform pattern of investment for the income accumulated under Section 11(2) and the funds referred to in Section 13(1)(d) of the Act. The forms and modes of investing or depositing such income or other funds of charitable and religious trusts and institutions have been specified. Section 13(1)(d), as amended by the Finance Act, 1983, provides that the income of any charitable or religious trust or institution will not be entitled to exemption under Section 11 or Section 12 if, for any period during the previous year--
(i) any funds of the trust or institution are invested or deposited after the 28th February, 1983, otherwise than in any one or more of the forms or modes specified above ;
(ii) any funds of the trust or institution invested or deposited before 1st March, 1983, otherwise than in any one or more of the forms or modes specified above, continue to remain so invested or deposited after 30th November, 1983 ; or
(iii) any shares in a company (other than a Government company as defined in Section 617 of the Companies Act, 1956, or a statutory corporation) are held by the trust or institution after 30th November, 1983.
7. It is relevant in this connection to note that the provisions of Section 13(1)(d) which would otherwise have come into operation from the assessment year 1983-84 stood superseded by the amendments made by the Finance Act, 1983.
8. It is no doubt true that the aforesaid provisions relating to investment of trust funds in specified forms or modes took effect from April 1, 1983, but the question is, having regard to the effect of the amendment, whether the assessee-trust can be denied exemption for the assessment year 1983-84, if the conversion of the investments as enjoined by Section 13(1)(d) read with Section 11(5) was not made before November 30, 1983, which falls in the subsequent assessment year. As would appear from the amendments effected, the stipulated date for change of investments under Section 13(1)(d)(ii) and 13(1)(d)(iii) is November 30, 1983. The assessee's previous year ended on September 30, 1982. The stipulated date is long after the end of the previous year relevant to the assessment year 1983-84. The Legislature, in its wisdom, has allowed time for the change over up to a certain date. It could not have been the intention of the Legislature to deny exemption to a charitable trust otherwise eligible for exemption under Section 11, when the time for conversion of such investments did not expire during the relevant previous year. The provisions of Section 13(1)(d) as amended by the Finance Act, 1983, with effect from April 1, 1983, made it clear that the assessee who was having investments as specified in Sub-clauses (ii) and (iii) of Section 13(1)(d) must hold such investments in accordance with Section 11(5) of the Act. The assessee was permitted to change over on or before November 30, 1983. If the investments are not converted in accordance with the provisions of Section 11(5) by November 30, 1983, the question of denying exemption will fall for consideration for the assessment year -1984-85 which will be the relevant assessment year, the previous year of the assessee having ended prior to April 1, 1983. The assessee was still having time up to November 30, 1983, to convert its investments in accordance with Section 11(5). In our view, in considering the question whether the assess ee-trust can be allowed exemption for the assessment year 1983-84, the fact that no conversion has been made as enjoined by Section 13(1)(d) read with Section 11(5) will be of no relevance.
9. While looking at the facts prevailing during the previous year relevant to the assessment year 1983-84, it cannot be said that the assessee failed to comply with the provisions of Section 11(5) by not converting the investments by November 30, 1983. The provisions of the Act have to be harmoniously construed and exemptions can only be denied if the assessee-trust does not change the investments in accordance with Section 11(5) in the previous year commencing on or after April 1, 1983. The provisions of Section 13(1)(d) read with Section 11(5) of the Act can only be made applicable from the very first assessment year relevant to the previous year beginning after April 1, 1983, when the amended provisions came into effect. In other words, the amendment will be given effect to not from the assessment year 1983-84, but from the previous year commencing on or after April 1, 1983, i.e., from the assessment year 1984-85. In our view, therefore, the provisions of Section 13(1)(d) as amended will not have any application for the assessment year 1983-84 and the trust will not lose the exemption under Section 11 merely by the application of Section 13(1)(d).
10. We may refer to the Board's Circular No. 596, dated March 15, 1991, (see [1991] 188 ITR (St.) 115) which provides as follows :
"1. Clause (d) of Sub-section (1) of Section 13 of the Income-tax Act-was substituted by the Finance Act, 1983, with effect from April 1, 1983. The provisions of "the new sub-clause were to be applicable from the assessment year 1983-84 onwards. This was also clarified in paragraph 18.7 of Board's Circular No. 372, dated December 8, 1983 ([F. No. 131/ (27)/83-TPL]-see [1984] 146 ITR (St.) 9). However, under Sub-clause (ii) of the said section, religious/charitable trusts and institutions, having investments otherwise than in one or more of the forms or modes specified in Section 11(5) of the Act, which had been made before March 1, 1983, were allowed to change their pattern of investment to that specified in Section 11(5) before "November 30, 1983. Many trusts and institutions, who changed their investment pattern between April 1, 1983 and November 30, 1983, were denied the benefit of exemption for the assessment year 1983-84 in view of the provisions of Section 13(1)(d).
2. The issue has been considered in the Board and it is decided that the provisions of Section 13(1)(d) would be applicable from the assessment year 1984-85 and not from the assessment year 1983-84. It is also decided that appellate decisions on this issue, hitherto in favour of the assessee, may not be further contested, and pending appeals/references may be withdrawn by the Chief Commissioners of Income-tax in exercise of the powers delegated to them."
11. In our view, the Board has correctly laid down that the provisions of Section 13(1)(d) would be applicable from the assessment year 1984-85 and not from the assessment year 1983-84. No trust or institution which failed to change its investment pattern between April 1, 1983, and November 30, 1983, can be denied the benefit of exemption for the assessment year 1983-84 as the crucial date fell within the previous year relevant to the assessment year 1984-85.
12. For the reasons aforesaid, we answer this question in the affirmative and in favour of the assessee.
13. There will be no order as to costs.
Shyamal Kumar Sen, J.
14. I agree.