Ss. 11, 12A, 50C – Provisions of section 50C cannot be invoked in the case of a society or a charitable trust registered u/s. 12A of the Act. In such a case income is to be computed as per section 11(1A) of the Act which is a complete code by itself.
Facts:
The assessee, a society registered u/s. 12A of the Act, transferred its capital asset whose stamp duty value was more than the consideration accruing or arising on the transfer of the asset. The net consideration arising on transfer of capital asset was invested by the assessee in other capital asset. The Assessing Officer (AO) made an addition of Rs. 43,78,588 on account of capital gain arising out of sale of property by applying the provisions of section 50C of the Act.
Aggrieved, the assessee preferred an appeal to the CIT(A) who allowed the appeal filed by the assessee.
Aggrieved, the revenue preferred an appeal to Tribunal.
Held:
The question of applicability of provisions of section 50C of the Act on transfer of capital asset in the case of a charitable society was examined by the Tribunal in the case of ACIT vs. Shri Dwarikadhish Temple Trust, Kanpur (ITA No. 256 & 257/Lkw/2011), in which the Tribunal has held that where the entire sale consideration was invested in other capital asset, provisions of section 50C of the Act should not be invoked. The Tribunal noted the following observations from the said order –
“6.1 From the order of the CIT(A),we find that the assessee is a charitable and religious trust registered u/s. 12A of the Act. It is also noted by the Assessing Officer that the assessee has sold immovable property for total sale consideration of Rs. 2.25 lakh and the entire sale consideration was invested in other capital asset i.e. fixed asset with bank. The Assessing Officer invoked the provisions of section 50C of the Act and computed the capital income at Rs. 66.38 lakh based on the value adopted by stamp duty authorities for stamp duty purposes. We find that the CIT(A) has decided this issue in favour of the assessee by following the Tribunal decision in the case of Gyanchand Batra vs. Income Tax Officer 115 DTR 45 (Jp – Trib).
6.2 We also find that it is specifically mentioned in section 50C(1) of the Act that the stamp duty value is to be considered as full value of consideration received or accruing as a result of transfer for the purpose of section 48 of the Act. It is true that the assessee is a charitable trust and the income of the assessee has to be computed u/s .11 of the Act. As per sub-section (1A) of section 11 of the Act, if the net consideration for transfer of capital asset of a charitable trust is utilised for acquiring new capital asset, then the whole of capital gain is exempt. Considering all these facts, we do not find any reason to interfere in the order of CIT(A) on this issue.
6.3 Regarding the reliance placed by the Learned D.R. of the Revenue on the judgment of the Hon’ble Kerala High Court rendered in the case of Lissie Medical Institutions vs. CIT(supra), we find that in that case, it was held by the Hon’ble Kerala High Court that claim of depreciation is not allowable on the assets which were considered as application of income at the time of acquisition of assets. In our considered opinion, this judgment is not relevant in the present case.
6.4 As per the above decision, we find that no interference is called for in the order of CIT(A).”
The Tribunal observed that the CIT(A) has adjudicated the issue based on legal provisions and various judicial pronouncements while holding that section 11(1A) of the Act which lays down a complete system of taxability of capital gains in respect of an institution approved by the CIT u/s. 12A of the Act is a complete code. The Tribunal held the order of the CIT(A) to be in accordance with law. It confirmed the order of CIT(A).
The appeal filed by revenue was dismissed.
