COMMISSIONER OF INCOME TAX Vs. KRISHEN CHAND CHARITABLE TRUST

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act of 1961 by the Income-tax Appellate Tribunal (Chandigarh Bench), on an application made before the Tribunal for reference by the Commissioner of Income-tax, Patiala. The question which has been referred by the Tribunal to this court is to the following effect:

(2.) THE relevant facts which have given rise to this reference briefly stated are as follows:

(3.) THE facts which I have stated above would clearly show that the undisputed position is that the assessee is a charitable trust and would be entitled to exemption under Section 11(1)(a). He would also be further entitled to exemption under Section 11(2) of the Act provided the conditions laid down in that section are complied with. Admittedly, the assessee invested the amount in Govt. securities in terms of Section 11(2) of the Act but there was a shortfall. This shortfall was, in the circumstances as stated above, viz., firstly, that the assessee had placed a sum of Rs. 2 lakhs which was more than the accumulated amount at the disposal of his bankers with a clear direction that the entire sum should be invested in Govt. securities but the bankers presumably under some mistaken notion invested a lesser amount and refunded the balance with the result that there was a shortfall. It also appears from the facts which I have stated above that this shortfall was made up in a way when in the very next year the assessee instead of investing Rs. 20,600, as required by the statute, invested a larger sum, viz., Rs. 36,000. It may also be mentioned here that at one stage of the proceedings there was a controversy between the parties whether the investment of Rs. 1,87,000 odd was within the time as required by the relevant Rules framed under the Act, This controversy was resolved when the Appellate Assistant Commissioner made an enquiry from the bank and this fact has also been clearly mentioned in the Tribunal's order where it has been stated that regarding the date of investment the controversy has been set at rest by the Appellate Assistant Commissioner and both the assessee and the departmental representative agreed that the investment was made on July 26, 1965, which was within four months of the close of the accounting period. THE main question which, therefore, arises is whether, in spite of the shortfall in the circumstances and on an interpretation of the relevant provisions of the Act, could the assesses be entitled to an exemption as contemplated by Section 11(2) of the Act. It is necessary, therefore, first of all to refer here to the relevant provisions in this connection. THE relevant provision is Section 11 of the Act. This section is under Chapter III which deals with incomes not included in total income, Section 11 deals with charitable trusts and we are concerned here primarily with the two provisions, viz., Section 11(i)(a) and Section 11(2) which run as under :