Charitable Trust Entitled to Tax Benefit for Property Held for Charitable Purposes Until Sale in 2008-09.

The HC upheld the ITAT's decision, confirming that the Assessee, a public charitable trust, was entitled to the benefit under Section 11(1A) of the Income Tax Act. The court agreed that the property was held wholly for charitable purposes until its sale in the assessment year 2008-09, despite not being in the trust's possession for 12 years. Legal possession was transferred in 2008-09, and thus, no substantial question of law arose. The appeal was dismissed, allowing the Assessee to claim the benefit.

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Issues involved:
The main issue in this case is whether the Assessee, a public charitable trust, is entitled to claim the benefit under Section 11(1A) of the Income Tax Act, despite not holding the property under the trust wholly for charitable or religious purposes.

Comprehensive details of the judgment:

1. The Respondent-Assessee, a public charitable trust, entered into an agreement in 1994 to sell a property and needed permission from the Charity Commissioner to dispose of it. The Charity Commissioner granted permission subject to conditions, including investing the sale proceeds in fixed deposits for charitable activities. A dispute arose with the buyer, leading to a settlement where the property was transferred to the buyer's nominee.

2. The Assessee invested the sale proceeds in fixed deposits with nationalized banks, claiming that no capital gain should be assessed under Section 11(1A) of the Act if the proceeds are reinvested in long-term investments for charitable purposes.

3. The Assessing Officer disagreed, stating that since the property was not in the trust's possession for 12 years until the sale deed was executed, the trust did not fulfill the requirement of holding the property wholly for charitable purposes under Section 11(1A).

4. The Commissioner of Income Tax (Appeals) ruled in favor of the Assessee, allowing the appeal and granting the benefit under Section 11(1A).

5. The issue before the ITAT was whether the Assessee was entitled to claim the benefit under Section 11(1A). The ITAT concluded that the Assessee was eligible for the benefit, considering that legal possession was transferred in the assessment year 2008-09, and the property was held by the trust wholly for charitable purposes until its sale.

6. The High Court upheld the ITAT's decision, stating that once legal possession was transferred in 2008-09, it was presumed that the property was held by the trust wholly for charitable purposes until the sale. No substantial question of law arose, and the appeal was dismissed.

This summary provides a detailed overview of the judgment, highlighting the key issues and the court's decision regarding the Assessee's entitlement to the benefit under Section 11(1A) of the Income Tax Act.

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