1982 (2) TMI 112 - AT - Income Tax

Tribunal rules on capital gains and tax exemptions for charitable trusts.

The tribunal confirmed the assessment of capital gains on the sale of investments to a charitable trust, ruling that the reinvestment did not qualify as ... Charitable Or Religious Trust, Exemption Of Income From House Property Held Under Trust Issues:1. Assessment of capital gains on the sale of investments to a charitable trust.2. Taxability of voluntary contributions received from another charitable trust.Analysis:1. The first issue pertains to the assessment of capital gains amounting to Rs. 90,610 arising from the sale of investments to a charitable trust. The appellant, a charitable trust, claimed exemption of capital gains under section 11(1A)(a) of the Income-tax Act, 1961, as it reinvested the sale proceeds with the trust. However, the Income Tax Officer (ITO) held that the exemption was not applicable as the reinvestment did not qualify as acquiring another capital asset. The Commissioner (Appeals) upheld the decision, stating that the exemption was not available due to the nature of the transaction. The appellant argued that the reinvestment constituted acquiring another capital asset, but the tribunal disagreed. It noted that the deposits with the trust did not meet the criteria of a capital asset under relevant provisions, leading to the confirmation of the assessment of capital gains.2. The second issue concerns the taxability of voluntary contributions amounting to Rs. 2 1/2 lakhs received from another charitable trust. The ITO assessed these contributions as income, denying exemption under section 11 to the appellant trust. The Commissioner (Appeals) upheld the assessment based on the trust's income status. However, the appellant contended that the contributions should be exempt under section 12(1) of the Act, as section 11 conditions were not applicable. The tribunal agreed with the appellant, stating that section 12(1) exempted such contributions, and section 12(2) was not applicable in this scenario. Consequently, the tribunal held that the authorities were unjustified in assessing the voluntary contributions received from the charitable trust, leading to the partial allowance of the appeal.