Charitable trust wins appeal for indexation and carry forward of deficits under tax law

The appellant, a charitable trust, successfully appealed against the CIT (A)'s order for the assessment year 2013-14. The Tribunal allowed indexation on the sale of long term investments, treating the appellant as an individual for assessment purposes. Additionally, the Tribunal permitted the carry forward of earlier year deficits and set off against the current year's income, in accordance with the Act. The appeal was partly allowed, with the judgment delayed due to the COVID-19 lockdown, and the order was pronounced on July 16, 2020.

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Issues:
1. Denial of benefit of indexation on sale of long term investments
2. Denial of set-off of deficit of earlier years against current year's income

Analysis:

1. The appellant, a charitable trust, appealed against the CIT (A)'s order for the assessment year 2013-14, challenging the enhancement of taxable income and denial of indexation on the sale of long term investments. The appellant sold mutual funds resulting in a long term capital loss, but the benefit of indexation was disallowed by the Assessing Officer. The appellant argued that as the assessment was made under regular provisions, indexation should be allowed. Citing a Bombay High Court decision, the appellant contended that despite the withdrawal of section 13 benefit, indexation should still be granted. The Tribunal agreed, treating the appellant as an individual for assessment purposes and allowing indexation, thus partly allowing the appeal on this ground.

2. The Department contended that the appellant, by violating section 11(5) provisions, was ineligible for section 13 benefits. The Assessing Officer, after withdrawing section 13 benefits, assessed the appellant under normal provisions, denying indexation. The Tribunal, referring to a Bombay High Court decision, held that the appellant should be treated as an individual for assessment under normal provisions. Consequently, the Tribunal allowed the carry forward of earlier year deficits and set off against the current year's income, in line with the Act. Thus, the appeal was partly allowed on this ground.

3. The Tribunal dismissed the first ground of appeal as an alternative claim was allowed, and the fourth ground was considered general. The judgment was pronounced beyond the usual 90-day period due to the COVID-19 lockdown, following a pragmatic approach in interpreting time limits for order pronouncements. The appeal was partly allowed, with the order pronounced on July 16, 2020, under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962.

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