2016 (3) TMI 73

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....he assessee is running an Arts College and duly registered u/s 12AA of the Act. During the year under consideration, the assessee sold a land for an amount of Rs. 39.66 crores. The purpose of sale was to use the sale proceeds for expansion of the educational activities. However, the aforesaid amount was advanced to M/s Anna Investments Pvt. Ltd. and the assessee claimed the capital gain as exempt income. The Assessing Officer observed that the assessee has not purchased the land and the money was used by M/s Anna Investment Pvt. Ltd for their purpose. As such, the Assessing Officer out rightly treated the income from sale of land as income of the assessee and also denied exemption u/s 11 of the Act as the amount advanced to M/s Anna Investm....

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....ved that the capital gain arising out of transfer of capital asset to be assessed as per sec. 48 of the Act and the rate is to be applied as per sec. 112 of the Act and not at the maximum marginal rate suggested by the Assessing Officer. Against this, the Revenue is in appeal before us. 3. We have heard both the parties and perused the material available on record. In this case, the assessee advanced an amount of Rs. 39,66,50,000/- on 30.6.2006 to M/s Anna Investment Pvt. Ltd. and the capital gain arising on sale of land at Navalur Egattur and Thalambur during the financial year on 31.3.2007. M/s Anna Investment Pvt. Ltd have returned the money on 31.3.2009 and the said amount was not invested in new asset within the previous year, there....

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.... 4. Now, we proceed to examine section 11 which reads as follows: (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India ; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent. of the income from such property ; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India ; and where any such income is finally set....

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....le governing the institution : Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of June, 1970" ; 5. As per sec. 13, the benefit of exemption from income tax is not available if any part of their income or property e....

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.... 246 ITR 164, we hold that the Assessing Officer was correct in invoking the provisions of sec. 13(1)(c) of the Act and denying exemption to the assessee u/s 11 of the Act. The assessee relied on the judgment of Bombay High Court in the case of Sheth Mafatlal Gagalbhai Foundation Trust (supra) which cannot be considered in view of the jurisdictional High Court judgment which is against the assessee. 6. The next contention of the assessee is that only that portion of income i.e capital gain to be considered for tax in terms of sec. 112 of the Act at maximum marginal rate as proposed by the Assessing Officer. In our opinion, this argument of the assessee is misplaced. Sec. 164(2) of the Act reads as follows: "(2) In the case of re....

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....the maximum marginal rate. 8. According to the ld. Representative for the assessee, in view of the judgment of the Karnataka High court in the case of Fr. Mullers Charitable Institutions(supra), the rate applicable as per sec. 112 to be applied. This judgment of Karnataka High Court is delivered in the context of invoking provisions of u/s 263 of the Act and denying benefit u/s 11 of the Act. The High Court adjudicated the issue and observed that the Assessing Officer has taken one possible view that only income from such investment or deposits which has been made in violation of sec. 11(5) is to be taxed and such violation of sec. 11 does not tantamount to denial of exemption u/s 11 of the Act and the entire income of the assessee-trust....