SHARDA TRUST Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THE following question of law arising out of order dated December 21, 1976, in Income-tax Appeal No. 83 of 1976-77 has been referred to this court under Section 256 (1) of the I. T. Act, 1961 : " Whether, on the facts and in the circumstances of the case and on an application of correct legal principles, the Tribunal was justified in law in holding that the assessee was not entitled to exemption under Section 11 of the Income-tax Act, 1961 ? "

(2.) THE facts found and mentioned in the statement of the case are that the assessee is a trust registered under the Societies Registration Act, 1860. The assessment in issue relates to the year which ended on March 31, 1971. The amount of Rs. 40,000, Rs. 10,000 by each of the four partners of the firm M/s. Cheru Lat Bal Chand, was donated to this trust ; Rs. 20,000 in equal proportion were debited to the accounts of Shankar Lal and Lalit Mohan and credited to the account of the turst in the books of the firm on March 23, 1971. Similarly, a sum of Rs. 10,000 was debited to the account of Parshotam Lal on March 26, 1971, another sum of Rs. 10,000 to the account of Bal Chand on March 27, 1971, and credited to the account of the trust. In the balance-sheet of the trust relating to the period ending March 31, 1971, the aforesaid amount of Rs. 40,000 was added to the general funds and shown as donations receivable.

(3.) AT the time of assessment, the assessee claimed that the said amount was exempt under Section 11 of the I. T. Act. However, the ITO did not allow it holding that the provisions of Section 13 (2) (h) become operative because the sum of Rs. 40,000 donated by the four partners remained invested in the firm in which they were partners. On appeal, the AAC held that as the actual amount was later on handed over to the trust in two instalments of Rs. 20,000 each on April, 10 and 15, 1971, respectively, it could not be said that the amount remained invested with the firm and allowed the claim of the assessee. The order of the AAC was reversed by the Tribunal which led to this reference at the instance of the assessee. As an identical question is involved in another reference (I. T. R. No. 165 of 1979) by the assessee which relates to the subsequent year, the same shall also be disposed of by this order.