2014 (8) TMI 1034 - AT - Income Tax

Tribunal rules in favor of assessee on capital gains computation and section 50C application

The Tribunal upheld the decisions of the CIT(A) for both assessment years, ruling in favor of the assessee regarding the computation of net sale ... Exemption u/s 11 - capital gain exemption - Held that:- 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 ₹ 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 ₹ 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 [2010 (8) TMI 528 - ITAT JAIPUR ] 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. - Decided in favour of assessee Issues:1. Discrepancy in net sale consideration for assessment years 2007-08 and 2008-09.2. Applicability of section 50C of the Income Tax Act.3. Treatment of capital gains for a charitable trust under section 11(1A).Issue 1: Discrepancy in Net Sale ConsiderationFor the assessment year 2007-08, the Revenue appealed against the CIT(A)'s decision to consider the net sale consideration as Rs. 2,25,000 instead of Rs. 66,38,900 determined by the Assessing Officer. The Revenue argued in favor of the assessment order citing the Kerala High Court judgment. However, the assessee contended that trust income should be computed under section 11 and not total income. The CIT(A) decided in favor of the assessee, following the Tribunal decision in a similar case. The Tribunal upheld the CIT(A)'s decision, emphasizing that the net consideration was fully utilized for acquiring a new capital asset, thus exempting the capital gains.Issue 2: Applicability of Section 50CThe Tribunal examined the applicability of section 50C for the assessment year 2007-08, where the Revenue contested the net sale consideration of Rs. 9,00,000 instead of Rs. 52,51,846. The Revenue also challenged the deletion of an addition of Rs. 50,16,646 under section 11(1A), arguing that section 50C should apply. The Tribunal found the issue identical to the previous year and ruled in favor of the assessee, emphasizing that the entire sale consideration was invested in a capital asset, aligning with the decision for the assessment year 2007-08.Issue 3: Treatment of Capital Gains for Charitable TrustThe Tribunal analyzed the treatment of capital gains for a charitable trust under section 11(1A) for both assessment years. It noted that if the net consideration from the transfer of a capital asset is utilized for acquiring a new capital asset, the capital gains are exempt. The Tribunal upheld the CIT(A)'s decision in both cases, emphasizing the utilization of the net consideration for acquiring new capital assets, thereby exempting the capital gains. The Tribunal dismissed the Revenue's appeals for both assessment years.In conclusion, the Tribunal upheld the decisions of the CIT(A) for both assessment years, ruling in favor of the assessee regarding the computation of net sale consideration, applicability of section 50C, and the treatment of capital gains for a charitable trust under section 11(1A) of the Income Tax Act.