2015 (11) TMI 114 - AT - Income Tax

Land sale for charity ruled non-taxable under Income Tax Act, Section 11

The Tribunal upheld the Commissioner of Income Tax (A)'s decision in favor of the assessee, ruling that the profit from the sale of land utilized for ... Eligibility for benefit U/s.11 - CIT(A) allowed the claim and not taxing the profit arising out of the sale of land since the proceeds were utilized for charitable activities of the Trust as per the provisions of sections 11, 12 & 13 of the Act - Held that:- It is apparent from the facts of the case that the assessee had sold its unutilized land for pursuing its main objects viz., education. In order to secure maximum revenue, the assessee has indulged in commercial transactions. It must be kept in mind that such transactions were made only for the purpose of extending its charitable activities with more resources. Retaining land which is not required for the purpose of the assessee’s trust will not help the assessee to comply with its objects in a constructive manner. Therefore, prudently the assessee trust has realized maximum revenue from the sale of the excess land, and utilized the same for complying with the main objects of the assessee trust viz., Education. Hence as held by the Ld. CIT (A), the transaction of the sale of the land by the assessee in a wise manner by applying commercial prudence is only an activity which is incidental to the main objects of the assessee. Therefore, the view of the Ld. CIT (A) that the proviso of Section-2(15) will not be applicable to the facts of the assessee’s case is appropriate and justified considering the facts and circumstances of the case. Therefore, we hereby confirm the order of the Ld. CIT (A). - Decided in favour of assessee. Issues:Revenue's appeal against the Commissioner of Income Tax (A)'s order regarding the taxability of profit from the sale of land under Section 11 of the Income Tax Act for the assessment years 2010-11 & 2011-12.Analysis:1. Issue: Revenue's grounds for appeal.- The Revenue raised six grounds in its appeal, focusing on the Ld. CIT(A)'s alleged error in allowing the assessee's claim for benefit under Section 11 of the Act, resulting in the non-taxation of profit from the sale of land utilized for charitable activities of the Trust.2. Issue: Background of the case and assessment details.- The assessee, a trust registered under Section 12A(a) of the Act, filed returns for the relevant assessment years admitting Nil income. The Assessing Officer treated income from the sale of land as business income, leading to disputes.3. Issue: Assessee's contentions and Assessing Officer's rebuttals.- The assessee argued that the sale of land was not for business motives but to enhance saleability, utilizing proceeds for charitable activities. However, the Assessing Officer rejected these contentions, emphasizing profit motive, frequency of transactions, and non-charitable nature of the activity.4. Issue: CIT (A)'s decision.- The CIT (A) ruled in favor of the assessee, holding that the profit from land sale was not taxable as it was used for charitable activities, emphasizing the trust's main objective of providing education and the incidental nature of commercial transactions to support charitable endeavors.5. Issue: Tribunal's decision.- The Tribunal upheld the CIT (A)'s order, emphasizing the prudent utilization of excess land sale proceeds for the trust's main charitable objectives, confirming that the commercial transactions were incidental to the trust's core activities and not for profit-making purposes.6. Conclusion:- The Tribunal dismissed the Revenue's appeals, affirming the non-taxability of profit from land sale under Section 11 of the Act, as the transactions were deemed incidental to the trust's charitable activities, aligning with the trust's main objectives of providing education and other charitable services.