1. By order dated 17.5.2005 the following substantial question of law was framed in this appeal by the revenue which pertains to the assessment year 1991-92:-
"Whether the ITAT is correct in allowing the benefit of Section 11 to the assessee and thereby allowing the relief of Rs. 17,55,360/- to the assessee if at all there was violation of section 13(1)(d) of the Act?"
2. In nutshell, the contention of the revenue is that the respondent trust should be denied benefit of Section 11 of the Income Tax act, 1961 ('Act' in short) because they had not made investments in the modes permitted under Section 11(5) of the Act and had thus violated Section 13(1)(d) of the Act.
3. The Assessing Officer observed in his order dated 21.03.1994 that the trust had accumulation of Rs. 15,74,637/- but he has not observed that there was violation of Sections 11(5) & 13(1)(d) on account of wrong or prohibited investment of the aforesaid amount. However, the Assessing Officer has made reference to shares in foreign companies of Rs. 9,77,025/- and advance to Business India of Rs. 1,11,000/- and observed that these two investments were made contrary to the mandate of Section 11(5) of the Act. The Assessing Officer also observed that the advance given to Business India should be treated as investment as TDS Certificates had been issued on the interest paid on Rs. 1,11,000/- and annexed with the return. For the aforesaid reason, the Assessing Officer computed the total income as Rs. 17,55,360/-, denying benefit of Section 11 of the Act.
4. Having examined the assessment order and the appellate orders, we have to observe that the assessment order is cryptic and full details and facts have not been discussed. However, the same find elucidation in the order passed by the Commissioner of Income Tax (Appeals) dated 06.10.94.
5. The Commissioner of Income Tax (Appeals) has referred to the Will of late Raja Bahadur Sardar Singh of Khetri and that as per the said Will his entire property including immovable property and shares in a foreign company worth Rs. 9,77,025/- were bequeathed to the respondent trust. He has observed that the properties had not been transferred or acquired by the trust because of ongoing litigation in the Court. The Will of late Raja Bahadur Sardar Singh of Khetri was under challenge in the probate proceedings and the same were pending adjudication. It has been stated at the Bar, that the probate proceedings are still pending. Till the Will is probated and it is affirmed that the Will is genuine, the respondent trust would not acquire legal right on the property as such for the purpose of the present Act i.e. Income Tax Act, 1961. In case, probate is denied, the properties would not devolve on the respondent-trust. At present the legal and factual position is uncertain and inchoate.
6. Thus, the foreign shares have not been transferred in the name of the trust and were/are still in the name of late Raja Bahadur Sardar Singh. Commissioner of Income Tax (Appeals) has noticed that as per the Will, the shares are to become the corpus of the trust, but this acquisition is dependent upon adjudication of the Probate. Thus, there cannot be violation of Section 11(5) in the facts of the present case.
7. With regard to advance of Rs. 1,10,000/-, Commissioner of Income Tax (Appeals) has observed that the same was paid by the trustees for raising a memorial for late Raja Bahadur Sardar Singh. The project however had/has not been completed because of the ongoing dispute. However, the Business India had paid interest on the said amount. Accordingly payment of Rs. 1,10,000/- cannot be treated as an investment which was made and which was covered and regulated by Section 11(5) of the Act. The intent and purpose behind payment of Rs. 1,10,000/- was not investment.
8. The aforesaid view has been affirmed by the Tribunal,
9. Learned counsel for the appellant revenue has not been able to controvert and deny the aforesaid factual position. In fact, he was asked whether the revenue has filed or taken similar objections in respect of other years and denied benefit of Section 11. He is unable to answer the said question but counsel for the assessee has stated that in 2 or 3 assessment years similar objections were raised but in other years benefit under Section 11 has been granted. As noticed above, counsel for respondent trust has stated that probate proceedings are still pending.
10. In view of the factual position elucidated above and affirmed by the Commissioner of Income Tax (Appeals) and the Tribunal, we do not think allegation of violation of Section 11(5) of the Act arises for consideration or should be accepted. In view of aforesaid, the questions of law have to be answered in favour of the respondent-assessee and against the appellant.
11. The appeal is accordingly dismissed. No costs.