Deeming fiction created by virtue of sec. 50C cannot be extended to sec. 11(1A)

Deeming fiction created by virtue of section 50C of Income Tax Act,1961 in determining capital gain cannot be extended to section 11(1A).

This appeal is preferred by the Revenue against the order of the ld. CIT(A) on a solitary ground that the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.43,78,588/- made by the Assessing Officer on account of capital gain arisen out of sale of property at Rs.1,22,58,888/- by applying the provisions of section 50C of the Income-tax Act, 1961 (hereinafter called in short ‘the Act’) without appreciating the facts brought on record by the Assessing Officer during the course of assessment proceedings.

During the course of hearing of the appeal, the ld. counsel for the assessee has invited our attention to the fact that the assessee is a society registered under section 12A of the Act. Therefore, provisions of section 50C of the Act cannot be invoked in the case of a society or a charitable trust, which is registered under section 12A of the Act. In support of his contention, the ld. counsel for the assessee has placed reliance upon the order of the Tribunal in the case of ACIT vs. Shri. Dwarikadhish Temple Trust, Kanpur in I.T.A. No. 256 & 257/LKW/2011, in which the 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. Therefore, no interference is called for in the order of the ld. CIT(A).

We find that undisputedly the assessee is a charitable society and is registered under section 12A of the Act. 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 in I.T.A. 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.