ITO Vs Seth Damji Laxmichand Jain (ITAT Mumbai)
Charitable Trust Entitled to Indexation Benefit on Capital Gains & Simultaneous Deduction u/s 11(1)(a) and 11(1A); Revenue Appeal Dismissed – ITAT Mumbai
The ITAT Mumbai dismissed the Revenue’s appeal for AY 2012-13 & upheld the order of CIT(A) granting relief to the charitable trust registered u/s 12A.
On the issue of indexation benefit, the Tribunal held that while computing LTCG on sale of trust property, the indexed cost of acquisition u/s 48 is allowable, even where the capital gains are claimed as application of income u/s 11(1A). Explanation to section 11(1A) itself refers to computation of capital gains in accordance with section 48, which expressly permits indexation. CBDT Circular No. 5P dated 19.06.1968 cannot override statutory provisions. Accordingly, denial of indexation by the AO was held to be unsustainable.
On the alleged double deduction, the Tribunal rejected the Revenue’s contention that claiming 15% accumulation u/s 11(1)(a) and application of capital gains u/s 11(1A) amounts to double benefit. It was held that both provisions operate in different fields, are mutually exclusive, & there is no statutory bar prohibiting a trust from claiming benefit under both sections, so long as conditions are fulfilled.
On the issue of donation out of accumulated income u/s 11(2), the ITAT upheld the action of CIT(A) in remanding the matter to the AO for limited verification as to whether the donee trusts were registered u/s 12A or covered u/s 10(23C). Such factual verification was held to be proper & within appellate powers.
Accordingly, finding no infirmity in the order of CIT(A) on any of the issues, the Revenue’s appeal was dismissed in entirety.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
