IN HIGH COURT OF DELHI AT NEW DELHI ITA 171/2003 DIRECTOR OF INCOME TAX (EXEMPTION) Appellant Through Mr. Abhishek Singh Baghel, Advocate. versus M/S KHETRI TRUST NEW DELHI Respondent Through CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE V. KAMESWAR RAO ORDER 26.11.2014 This appeal by Revenue under Section 260A of Income Tax Act, 1961 (Act, for short), which pertains to assessment year 1994-95, was admitted for hearing vide order dated 17th May, 2005, on following substantial question of law:- ?Whether ITAT is correct in allowing benefit of Section 11 to assessee and thereby allowing relief of Rs.22,87,444/- to assessee if at all there was violation of section 13(1)(d) of Act?? 2. assessment order records that assessee had accumulation of Rs.23,61,858/- till end of financial year ending on 31st March, 1994, but said amount had not been invested in modes mandated under Section 11(5) and, thus, there was violation of Section 13 (1)(d) of Act. reason recorded was assessee held shares in foreign companies valued at Rs.9,77,025/- and had paid advance of Rs.1,11,000/- to Business India. assessee it was observed had claimed expenditure of Rs.4,38,966/-, which could not be treated as application of money, as it was relatable to day-to-day expenses. 3. first appellate authority dismissed appeal of respondent-assessee. 4. These findings, however, were reversed by Income Tax Appellate Tribunal in impugned order dated 16th October, 2002 after observing that similar issue stand decided by Tribunal in favour of respondent-assessee for assessment year 1991-92. 5. Identical question had been raised in ITA No. 162/2001 filed by Revenue against assessee, which was decided by order dated 17th July, 2014, recording as under:- ?3. Assessing Officer observed in his order dated 21.03.1994 that trust had accumulation of Rs.15,74,637/- but he has not observed that there was violation of Sections 11(5) and 13(1)(d) on account of wrong or prohibited investment of aforesaid amount. However, 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 mandate of Section 11(5) of Act. Assessing Officer also observed that advance given to Business India should be treated as investment as TDS Certificates had been issued on interest paid on Rs.1,11,000/- and annexed with return. For aforesaid reason, Assessing Officer computed total income as Rs.17,55,360/-, denying benefit of Section 11 of Act. 4. Having examined assessment order and appellate orders, we have to observe that assessment order is cryptic and full details and facts have not been discussed. However, same find elucidation in order passed by Commissioner of Income Tax (Appeals) dated 06.10.94. 5. Commissioner of Income Tax (Appeals) has referred to Will of late Raja Bahadur Sardar Singh of Khetri and that as per said Will his entire property including immovable property and shares in foreign company worth Rs.9,77,025/- were bequeathed to respondent trust. He has observed that properties had not been transferred or acquired by trust because of ongoing litigation in Court. Will of late Raja Bahadur Sardar Singh of Khetri was under challenge in probate proceedings and same were pending adjudication. It has been stated at Bar, that probate proceedings are still pending. Till Will is probated and it is affirmed that Will is genuine, respondent trust would not acquire legal right on property as such for purpose of present Act i.e. Income Tax Act, 1961. In case, probate is denied, properties would not devolve on respondent-trust. At present legal and factual position is uncertain and inchoate. 6. Thus, foreign shares have not been transferred in name of trust and were/are still in name of late Raja Bahadur Sardar Singh. Commissioner of Income Tax (Appeals) has noticed that as per Will, shares are to become corpus of trust, but this acquisition is dependent upon adjudication of Probate. Thus, there cannot be violation of Section 11(5) in facts of present case. 7. With regard to advance of Rs.1,10,000/-, Commissioner of Income Tax (Appeals) has observed that same was paid by trustees for raising memorial for late Raja Bahadur Sardar Singh. project however had/has not been completed because of ongoing dispute. However, Business India had paid interest on said amount. Accordingly payment of Rs.1,10,000/- cannot be treated as investment which was made and which was covered and regulated by Section 11(5) of Act. intent and purpose behind payment of Rs.1,10,000/- was not investment. 8. aforesaid view has been affirmed by Tribunal. 9. Learned counsel for appellant revenue has not been able to controvert and deny aforesaid factual position. In fact, he was asked whether revenue has filed or taken similar objections in respect of other years and denied benefit of Section 11. He is unable to answer said question but counsel for assesssee 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 factual position elucidated above and affirmed by Commissioner of Income Tax (Appeals) and Tribunal, we do not think allegation of violation of Section 11(5) of Act arises for consideration or should be accepted. In view of aforesaid, questions of law have to be answered in favour of respondent-assessee and against appellant.? question raised, therefore, is covered by aforesaid decision dated 17th July, 2014 in ITA 162/2001 in case of respondent-assessee. question of law is accordingly answered in favour of respondent-assessee and against appellant-Revenue. appeal is disposed of. SANJIV KHANNA, J. V. KAMESWAR RAO, J. NOVEMBER 26, 2014 Director of Income-tax (Exemption) v. Khetri Trust