JUDGMENT - S.H. KAPADIA, J.:---The above group of appeals raise common questions of law. Hence they are disposed of by this common judgment. For the sake of convenience, facts in Income Tax Appeal No. 81 of 1999 are taken into consideration.

2. Two questions of law arise in this appeal under section 200-A of the Income-tax Act.

(1) Whether the assessee trust was assessable as an individual and consequently entitled to deduction under section 80-L of the Act?

(2) Whether the assessee trust violated section 13(1)(d) of the Act in the Assessment Year 1993-1994 by not disinvesting the shares of non-Government companies by 31st March, 1993?

FACTS:

3. The assessee-trust came into existence after 1st June, 1973. The assessee-trust was the holder of enquiry shares of Mafatlal Industries upto 31st March, 1993. The same were not disinvested or disposed of by 31st March, 1993. The assessee claims that it was entitled to hold the said shares upto 31st March, 1993; that, they were required to disinvest on and after 1st April, 1993. In this appeal, we are concerned with the accounting year 1992, 1993 relevant to the assessment year 1993-1994. The previous year ended on 31st March, 1993. The department contended that the assessee was required to dispose of the above shares by 31st March, 1993 and since they failed to do so, the exemption granted to the trust stood withdrawn for breach of section 11(5) of the Act. In this group of appeals, we are not concerned with the question as to whether the maximum marginal rate of tax is leviable on the entire income of the trust. This part of the question calls for consideration in the next group of appeals with which we are not concerned at this stage.

ARGUMENTS ON QUESTION NO. 2:---

4. Mr. Desai, learned Senior Counsel for the department contended that the assessee was a Public Charitable Trust; that section 11(5) of the Act deals with various modes of investing or depositing the money referred to in section 11(2)(b). He submitted that under section 13(1)(d), exemption provided to a Charitable Trust or institution shall stand forfeited if any funds of the trust are invested or deposited after 28th February, 1983, otherwise than in any one or more of the forms or modes specified in section 11(5) of the Act. The specified forms or modes of investment generally are Government securities, units of U.T.I. bonds issued by certain Financial Corporations, deposits in Post Office, Savings Bank or in any Scheduled Bank etc. He contended that so far as the assets which do not conform to the provisions of section 11(5), the proviso to section 13(1)(d) provided that only such essence would not make the trust lose tax exemption if such assets were disposed of or converted into permissible investments within one year from the end of the financial year in which such assets were received on 31st March, 1992, whichever was later. He contended that initially under the Finance Act of 1991, the trusts were required to dispose of or convert the assets by 31st March, 1992. However, several trusts made representations to the Government pursuant to which, the date was extended to 31st March, 1993. He accordingly contended that by legislation an outer limit was given to the trusts to dispose of or convert impermissible investments to permissible investments by 31st March, 1993, failing which exemption from income tax provided to a Charitable Trust would stand forfeited under section 13(1)(d) of the Act. In this connection, Mr. Desai relied upon the circulars issued by the Board bearing No. 636 dated 31st August, 1992 (198 I.T.R. page 145)1; Circular No. 691 dated 19th December, 1991 (195 I.T.R. page 164)2.

5. Mr. Andhyarujina, learned Counsel appearing on behalf of the assessee-trust, on the other hand, contended that looking to the scheme of section 13(1)(d)(iia), it is clear that the trust was entitled to hold the shares in Mafatlal Industries upto the end of the accounting year 31st March, 1993. It is not in dispute that the

Click Here to Read the rest of this document