- (1.) This appeal by special leave is directed against the decision of the Division Bench of the Karnataka High Court in Writ Appeal No.864 of 1974 decided on 4th September 1975. The said writ appeal, moved on behalf of the Revenue by Additional Commissioner of Income-tax, Mysore and First Income Tax Officer, Mangalore Circle, Mangalore against the order of learned Single Judge Venkataramiah, J., as he then was, in the Writ Petition No. 597 of 1973 came to be dismissed by the Appellate Bench of the High Court. In order to highlight the grievance of the Revenue in this appeal a few relevant introductory facts are required to be noted. Background Facts.
(2.) Respondent A.L.N. Rao Charitable Trust, Mangalore, is a charitable trust. For the assessment year 1969-70, the respondent, hereinafter referred to as "the assessee" submitted its Return to the First Income-tax Officer, Mangalore Circle. In the said Return, the assessee claimed that a sum of Rs. 85,262/- which was the surplus income of the previous year, was exempt from tax under Section 11(1)(a) and sub-section (2) of the said Section. On the Assessing Authority holding that the assessee is not a genuine Trust and therefore not entitled to claim the benefit of Section 11 the assessee preferred an appeal before the Appellate Assistant Commissioner, which was dismissed. In the second appeal preferred by the assessee before the Income-tax Appellate Tribunal, it was held that the assessee was a charitable trust and therefore was entitled to claim exemption from tax under Section 11 of the Income-tax Act, 1961 (hereinafter referred to as the Act'). In I.T.R.C. No. 31 of 1973 which was a reference made at the instance of the Department, the High Court by its judgment dated 4-8-1975 answered the question referred in favour of the assessee and against the Department. That judgment became final. Consequently there remained no dispute about the eligibility of the assessee to claim benefit of Section 11.
(3.) The Assessing Authority took up the assessment to pass an order in accordance with the judgment of the Tribunal and made an order on 21-1-1972 by which it held that the assessee, after complying with the requirement of giving notice under Section 11 (2)(a) had invested 75% of the accumulated income intended to be applied for charitable purposes in future years as required by clause (b) of Section 11(2) and therefore, the entire surplus income was exempt from tax.;