Case Law Details
Tribunal has held that in case the income is to be computed 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 utilized for acquiring new capital asset, then the whole of the capital gain is exempt. It was further contended that the ld. CIT(A) has adjudicated the issue in the light of the relevant provisions of the Act and also various judicial pronouncements. The relevant observations of the Tribunal are as under-
6.1 From the order of 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 lac 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 lac 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 utilized for acquiring new capital asset, then the whole of the 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 Learned D.R. of the Revenue on the judgment of Hon’ble Kerala High Court rendered in the case of Lissie Medical Institutions Vs Commissioner of Income-tax (supra), we find that in that case, it was held by 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 discussion, we find that no interference is called for in the order of CIT(A).
INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH “B”, LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA Nos.256 & 257/LKW/2011
Assessment years:2007-08 & 2008-09
A.C.I.T.
Vs.
Shri Dwarikadhish Temple Trust
Date of pronouncement -21/08/2014
ORDER
PER A. K. GARODIA, A.M.
Both these appeals are filed by the Revenue, which are directed against two separate orders of learned CIT(A)-II, Kanpur both dated 10/02/2011 for the assessment year 2007-08 and 2008-09. Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
2. First we take up the appeal for assessment year 2007-08 i.e. I.T.A. No.256/Lkw/2011.
3. Ground No. 1 is as under:
“1. The Learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in considering the net sale consideration Rs.2,25,000/- as against Rs.66,38,900/- taken by the Assessing Officer, without appreciating the facts brought on records during the course of assessment proceedings.”
4. Learned D.R. of the Revenue supported the assessment order and placed reliance on the judgment of Hon’ble Kerala High Court rendered in the case of Lissie Medical Institutions Vs Commissioner of Income-tax [2012] 321 ITR 371 (Ker).
5. Learned A.R. of the assessee supported the order of learned CIT(A). He also submitted that in the present case, trust income is to be computed u/s 11 and not total income under various heads. He also submitted that there is no such accrual of income out of books. He placed reliance on the following judicial pronouncements:
(i) Commissioner of Income-tax Vs Sahara India Savings and Investment Corporation [2003] 264 ITR 646
(ii) Commissioner of Income-tax Vs Sahara India Savings and Investment Corporation [2010] 321 ITR 371
6. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) as per Para 4 to 4.5 of his order, which are reproduced below for the sake of ready reference:
“4. Decision I have carefully considered the facts of the case and the arguments of the Ld. A.R. in this regard Section 11(1 A) of the Income tax Act describes the method of computation of chargeable capital gains arising from the sale of any property held under trust. As per sub clause (i) of clause (a) of section 11(1 A), if whole of the “net consideration” is invested in acquiring of new capital assets, no capital gain is chargeable to tax. This bring 3 issues to the fore namely: – (i) amount of capital gains, (ii) “net consideration” and (iii) investment in new capital assets.
4.2 In my view, capital gains on transfer of an immovable property has to be computed in accordance with the provisions of section 50C since it is a special provision for computing capital gains. It is a trite law that Special provisions override the general provisions. Once capital gains has been computed, if the assessee happens to be a trust to whom provisions of section 11 to 13 are applicable, then one has to refer to the provision of section 11(1 A) of the I.T. Act which deals with the treatment to be given to such capital gains when earned by a trust. It would be worthwhile to reproduce the relevant portion of the subsection as under:-
(a) where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the specified hereunder, namely:-
| (i) | where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of such capital gain; |
| (ii) | xxxxxxxx |
| xxxxxxxx | |
| Explanation – in this sub-section | |
| (i) | xxxxxxx |
| (ii) | xxxxxxx |
| (iii) | “net consideration” means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.” |
4.3 Since section 50C is a relatively new section in the Act, there is not much authority on the subject. However, the Hon’ble ITAT in the case of Gyanchand Batra Vs ITO 115 DTK 45 (JP- Trib.) has analysed the impugned legal aspect as under:-
“From sub-section (1) of section 50C, it is clear that in case the consideration received is less than the value adopted by stamp valuation authority then the value so adopted is to be taken as full value of the consideration for the purposes of section 48. Section 50 C provides a deeming provision for considering the full value of consideration as the value adopted for stamp duty. In modern statutes, the expression ‘deem’ is used a great deal and for many purposes. It is at times used to introduce artificial conceptions which are intended to go beyond legal principles or to give an artificial construction of a word for phrase. Thus the artificial meaning of full value of the consideration has been given in section 50C for the purpose of section 48. One is entitled to ascertain the purpose for creating a statutory fiction. After ascertaining the purpose, full effect must be given to the statutory / fiction and it should be carried to its logical conclusion and to that end, it would be proper and even necessary to assume all those facts on which alone fiction can operate. The legislature in its wisdom has referred to section 48 in section 50C for, adopting the same value as fair market value. Hence, the deeming fiction as provided in section 50C in respect of the words ‘full value of the consideration’ is to be applied only for section 48. The words full value of consideration as mentioned in other provisions of the Act are not governed by the meaning of full value of, consideration as contained infection, 50C. The natural meaning of full value of consideration refers to consideration specified in the sale deed. Hence, for the meaning of full value of consideration as mentioned in different provisions of the Act except in section 48, one will have to consider the full value of consideration as specified in sale deed. ClT vs. Smt Nilofer I. Singh (2009) 221 CTR (Del) 277: (2008) 14 DTR (Del) 108: (2009) 309 ITR 233 (Del) relied on.”
4.4 Respectfully following the aforesaid finding of the Hon’ble Tribunal, I hold that the “net consideration” in terms of section 11(1A) would mean the actual sale consideration of Rs.2,25,000/-.
4.5 On perusal of the A.O., it is seen that there is no dispute to the fact that the appellant trust had utilized the ”net consideration” of Rs.2,25,000/- in acquiring a new capital asset, i.e. Fixed Deposits with Bank (which is a capital asset in terms of definition of capital asset given in section 2(14) of the Act). Accordingly, in terms of sub-clause (i) of clause (a) to section 11(1 A) the whole of such capital gains shall be deemed to have been applied to charitable & religious purposes.”
6.1 From the order of 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 lac 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 lac 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 utilized for acquiring new capital asset, then the whole of the 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 Learned D.R. of the Revenue on the judgment of Hon’ble Kerala High Court rendered in the case of Lissie Medical Institutions Vs Commissioner of Income-tax (supra), we find that in that case, it was held by 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 discussion, we find that no interference is called for in the order of CIT(A).
7. In the result, the appeal of the Revenue stands dismissed.
8. Now we take up the appeal of the Revenue for assessment year 2008- 09 i.e. I.T.A. No.257/Lkw/2011. In this appeal, the Revenue has raised the following grounds:
“1. The Learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in considering the net sale consideration Rs.9,00,000/- as against Rs.52,51,846/- taken by the Assessing Officer, without appreciating the facts brought on records during the course of assessment proceedings.
2. The Learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.50,16,646/- on account of exemption u/s 11(1A) of the Income Tax Act, 1961 holding that section 50C of Income Tax Act is not applicable in the case of charitable institution.
3. That the order of the Ld. CIT (A)-I, Kanpur dated 10.02.2011 needs to be quashed and the order passed by the Assessing Officer dated 27.12.2010 be restored.
4. That the appellant craves leave to modify any of the grounds of appeal mentioned above and/or to add any fresh grounds as and when it is required to do so.”
9. Both the sides agreed that the issue involved in the present appeal is identical to the issue involved in assessment year 2007-08 of the Revenue’s appeal and the same can be decided on similar line. In assessment year 2007-08, we have decided this issue in favour of the assessee. In the present year also, the entire sale consideration of Rs. 9 lac was invested in capital asset i.e. Fixed Deposit with the bank and the addition was made by invoking the provisions of section 50C of the Act. In line with our decision in assessment year 2007-08, in this year also, this issue is decided in favour of the assessee and against the Revenue.
10. In the result, the appeal of the Revenue stands dismissed.
11. In the combined result, both the appeals of the Revenue stand dismissed.
(Order was pronounced in the open court on the date mentioned on the caption page)
