Vaishnav Samaj Trust , Dungri V. Income Tax Officer, Exemption Ward, Surat, Surat

ITA 281/SRT/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6063 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-05-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 14-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Charitable institution; Cost of acquisition; Condonation of delay; Revenue expenditure; Capital Gains
• Section: 12; 144; 11; 143(3); 50C; 142(1); 12A; 205; 11(1A); 139(1); 43; 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No. 281/Srt/2024 (Assessment Year 2016-17) (Physical hearing) Vaishnav Samaj Trust, 7/623/7, Vaidya Hospital, Opp. State Bank of India, Dungri-396375 (Gujarat) PAN No. AAATV 5923 D Vs. I.T.O., Exemption Ward, Surat. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Rajesh Upadhyay, A.R. Department represented by Shri J.K. Chandnani, Sr. DR Date of Institution of Appeal 15/03/2024 Date of hearing 31/05/2024 Date of pronouncement 03/07/2024 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned National Faceless Appeal Centre, Delhi (NFAC)/Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 22/12/2023 for the Assessment Year (AY) 2016-17, wherein the assessee has raised following grounds of appeal: “1 Ld. CIT(A), NFAC, Delhi has erred in and or fact to make computation of Capital Gain U/s 11(1A) of the IT Act without allowing deduction available under the Act w.r.t. investment of Rs. 75,00,000/- in Fixed Deposit with U-Co Bank Valsad. 2. Ld. CIT(A), NFAC, Delhi has erred in and or fact to allow deduction- exemption on account of deemed application of income under clause (2) of Explanation 1 to sub-section (1) of Section 11 of the Act in respect of accrued bank interest on FD of Rs. 4,41,961/- while computing taxable income of the appellant trust.” ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 2 2. Brief facts of the case are that the assessee is a charitable trust having registration under Section 12A/12AA and approval of funds under section 80G(5) of the Income Tax Act, 1961 (in short, the Act). The assessee filed its return of income for A.Y. 2016-17 on 29/10/2016 declaring income at Rs. NIL. The case was selected for scrutiny. The Assessing Officer recorded that the detailed questionnaire and notice under Section 142(1) of the Act was served upon the assessee for furnishing various details in connection with assessment. The Assessing Officer recorded that no details were furnished. The Assessing Officer recorded the fact that the assessee failed to comply with the notices, therefore, he proceeded to pass the best judgment assessment as per Section 144 of the Act. The Assessing Officer nowhere mentioned the date of notice and the manner of service thereof on the assessee. Yet, the Assessing Officer passed assessment order under Section 143(3) of the Act dated 16/12/2018. While passing the assessment order, the Assessing Officer last para/ para 3 of his order recorded that the total receipt as per income and expenditure is Rs. 1.54 crore. The Assessing Officer added the entire income and expenditure of Rs. 1.54 Crore to the total income of assessee. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed their detailed written submissions. Submissions of assessee are recorded in para 6 of order of ld. CIT(A). In its submission, the assessee stated that the assessment was completed under Section 143(3) of the Act by assessing total income of Rs. 1.54 crore. Though, in para 2 of assessment order, the Assessing Officer ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 3 proceeded under Section 144 of the Act. The assessee explained that Rs. 1.54 crore, is not at all gross receipt of assessee for the year under consideration. As per the computation of total income, the assessee has shown gross income of Rs. 52,94,497/- out of which Rs. 48,52,518/- is a capital gain and Rs. 4,41,961/- is interest income. No other income accrued, earned or received by the assessee during this year. The Assessing Officer has not mentioned as to how he has arrived at the figure of Rs. 1.54 crore. The Assessing Officer supplied computation sheet wherein he has taken a figure that Rs. 1.01 crore which is purely arithmetical error. The assessee filed working of computation of total income wherein capital gain is shown at Rs. 48,52,518/- and stated that the Assessing Officer has accepted the said figure. The Assessing Officer has not allowed deduction claimed by assessee of amount deposited in capital gain scheme with UCO bank. The assessee furnished copy of bank passbook of UCO bank under capital gain scheme showing investment of Rs. 50.00 lacs. On the basis of such fact, the assessee prayed that the Assessing officer be directed to allow deduction available under law at Rs. 48,52,518/-. In alternative, the assessee claimed that in case for any reason, if the addition is confirmed, then tax should be levied at the reduced rate of 20% as capital gain is accepted by Assessing Officer in his computation sheet. About the other interest income of Rs. 4,41,691/-, the assessee explained that the interest income cannot be taxed as per the computation of total income, detailed summary of which was furnished. The assessee explained that they have earned interest on savings bank account of Rs. 2,45,037/-, ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 4 interest on FDR of Rs. 1,95,972/-, interest on other FDR of Rs. 35,000/- and annual membership of Rs. 2200/-, total aggregating of Rs. 4,78,209/-. Out of which Rs. 36,248/- is applied for charitable purpose. The remaining accumulated amount of Rs. 4,41,961/- (Rs. 4,78,209 – Rs. 36,248) was invested in specified securities. The assessee reiterated that the assessee is a charitable trust registered with Charity Commissioner, Valsad having registration under Section 12A as well as 80(G5) of the Act. The assessee stated that they were allowed benefit of Section 11, 12 and 13 in all preceeding and subsequent assessment years. On the basis of such submission, the assessee prayed to direct the Assessing Officer to compute their income. 4. The ld. CIT(A) on considering the submission of assessee noted that the assessee is a public charitable trust and hence eligible for exemption under Section 11 of the Act if the receipts are applied towards object of the trust to the extent of 85% and remaining 15% is accumulated in the manner prescribed under Section 11 of the Act by filing Form-10, the entire income is exempt as per Section 11 of the Act. In the return of income, the assessee shown NIL income. The ld. CIT(A) prepared his own summary of computation of income on page No. 9 and 10 of his order wherein he recorded the sale consideration received by assessee of Rs. 75.00 lacs on sale of immovable asset. Indexation cost of acquisition of such asset is Rs. 26,42,482/-, thus long term capital gain is Rs. 48,52,518/-. Investment in capital gain account scheme is Rs. 50.00 lacs. Income claimed under head capital gain is NIL, interest income as other sources is Rs. 4,41,961/-. Total ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 5 income NIL. The Assessing Officer on the basis of his working and understanding noted that the assessee has computed the income under the head capital gain by applying provisions of Section 45 to 49 of the Act. The assessee is a trust and is governed by the provisions of Section 11(1A) to compute income under the head capital gain. The ld. CIT(A) reproduced Section 11(1A) in his order and prepared summary of revised working of computation of capital gain in the following manner: 1 Sale consideration 75,00,000 As per 50C documentation 2 Cost of the asset 11,75,570 Cost of the asset as on the date of acquisition. 3 Capital gain 63,24,430 Capital gain to be computed without indexation 4 Investment in new asset NIL Investment in new asset with be exempt if the entire sum is applied out of net consideration 5 Shortfall in reinvestment (1-4) 75,00,000 This amount is chargeable to tax as income of the trust 6 Capital gain deemed to have been applied (3-5) NIL 6. Income under the head business 75,00,000 Net consideration to be brought to tax under the head business 7 Income from other sources after application as submitted by the assessee 4,41,961 Stated that invested in specified securities as per Sec. 11 But to details available on record 8 Total income determined 79,46,961 By applying the provisions of Sec. 11 of the Act. 5. On the basis of aforesaid working, the ld. CIT(A) determined total income at Rs. 79,46,961/- and held that the assessee is allowed part relief from the total income computed by the Assessing Officer in his computation sheet at ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 6 Rs. 1,01,47,000/-. Further aggrieved, the assessee has filed present appeal before this Tribunal. 6. Perusal of record shows that there is delay of 24 days in filing appeal before the Tribunal. Impugned order was passed by the ld. CIT(A) on 22/12/2023, however, the present appeal is filed on 15/03/2024, thus, the registry of the ITAT has calculated 24 days’ delay in filing appeal. The assessee has filed application of condonation of delay in the form of affidavit of Acharya Giribala Niravbhai, Secretary of assessee-trust. The learned Authorised Representative (ld. AR) of the assessee submits that affairs of the trust used to be looked after by Dr. Dinesh d. Vaidya and Shri Mangubhai T. Vaidya, who had expired. Tax matter of trust is handled by him. Order of ld. CIT(A) dated 22/12/2023 was served through ITBA Portal. Since, there is complexity of the issue, he studied the matter and took final decision on the instruction of Secretary for filing appeal before the Tribunal. Though, the appeal fee was paid on 11/03/2024 but the appeal could be filed only on 15/03/2024. In the meantime, the time period for filing appeal was lapsed. The ld. AR of the assessee submits that the delay in filing appeal is not intentional or deliberate. The assessee is not going to be benefitted by filing appeal belatedly. The case of assessee trust never came in scrutiny. The minor delay is occurred only in taking decision by present Secretary in absence of trustee who is recently expired. The ld. AR of the assessee submits that the assessee has good case on merit and is likely to succeed if the matter is hearing on merit. ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 7 7. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue submits that the assessee has not shown good cause for condoning the delay. The cause shown by the assessee is not reasonable one. 8. We have considered the submissions of both the parties on the issue of limitation and perused the material on record carefully. We have also perused the contents of affidavit of Secretary of the assessee trust. We find that the impugned order was passed by the ld. CIT(A) on 22/12/2023 and the appeal was filed on 15/03/2024. Thus, there is delay of 24 days in filing appeal before the Tribunal. Before us, the Secretary of assessee trust has filed affidavit inter alia stating therein that earlier the affair of assessee trust was handled by Dr. Dinesh d. Vaidya and Shri Mangubhai T. Vaidya, who had expired. The delay in filing appeal is not intentional or deliberate. The ld AR for the assessee also fairly accepted at bar that due to complexity of issue he studied the matter and took final decision for filing present appeal. We find that the delay of only 24 days, therefore, keeping in view the principle that technical consideration should not be come in the way of substantial justice, therefore, the delay of 24 days in filing appeal is condoned. Now adverting to the merit of the case. 9. Ground No. 1 of the appeal relates to allowing deduction of capital gain on investment in capital gain account. The ld. AR of the assessee submits that the Assessing Officer while completing the assessment under Section 144 of the Act, assessed total income of Rs. 1.45 crore, however, total receipt as per the income and expenditure account. The ld. CIT(A) in his computation ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 8 of income under the head capital gain and directed to tax net consideration of Rs. 75.00 lacs to tax under the head business income as per para 12 and 13 of impugned order. There is no basis for Assessing Officer for arriving at the figure of Rs. 1.54 crore, there is no such receipts of Rs. 1.54 crore as per the income and expenditure account Rs. 67,50,134/-. Income and expenditure account for financial year as per the details available at page No. 8 and 9 of paper book is only Rs. 67,50,134/- only. The ld. CIT(A) is also misunderstood the facts and erred in denying deduction under Section 11(1A) of the Act which is lawfully allowable to the assessee-trust. The assessee in the computation of capital gain has shown sale consideration of the asset as per the sale deed dated 28/04/2015 at Rs. 75.00 lacs, copy of sale deed is filed as per page No. 19 to 40 of paper book. The assessee made investment in UCO bank in fixed deposits of Rs. 50.00 lacs on 29/04/2015 and Rs. 25.00 lacs on 09/06/2016 respectively. Copy of such details is filed on page No. 42 and 43 of paper book. Entire sale consideration received was kept in savings bank account with UCO bank and was converted into fixed deposit as expenditure. The fixed deposits were matured on 29/04/2008 which was further renewed up to 29/04/2021 which was later on converted into capital account scheme. Both the fixed deposits were converted into capital gain account with UCO bank. Copy of passbook is filed on page No. 47 to 49 of paper book. Investment in fixed deposits were held by the trust for the use of benefit of trust as well as in order to keep its corpus intact. Ultimately the entire fund was utilized for purchase of another immovable property in F.Y. 2022-23 and 2023-24. The ld. AR of the assessee submits ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 9 that the investment made in schedule/cooperative bank are qualifying mode of investment under Section 11(5) of the Act. There is no time limit for investment specified under Section 11(1A), however, the assessee’s investment in UCO bank is within time period specified under Section 11(1B) of the Act. The ld. AR of the assessee submits that once the assessee fulfilled all such condition, the assessee is eligible for exemption. To support such submission, the ld. AR of the assessee relied upon the CBDT Instruction No. 883 dated 24/09/1975 and the decision of Hon'ble Kolkata High Court in CIT Vs East India Charitable Trust (1994) 206 ITR 152/73 Taxman 380 (Cal), Amritsar Tribunal in Akhara Ghamanda Dass Vs ACIT (2000) 68 TTJ 244 (Asr- Trib). 10. In alternative submission, the ld. AR of the assessee submits that as per the sale deed the sale consideration of Rs. 75.00 lacs, was received by the assessee, the assessee was acquired at the cost of Rs. 11,75,570/- and indexation cost comes to Rs. 26,47,482/-. The assessee made investment as per the mode specified under section 11(5) thus, the assessee is qualified for exemption under Section 11(1A) a has been held in Shri Surat Pinjarpole Trust Vs ACIT (2011) 141 TTJ 567 (Ahd). 11. Against ground No. 2 of the appeal, which relates to addition of Rs. 4,41,961/-, the ld. AR of the assessee submits that there is no discussion of such disallowance in the assessment order. The ld. CIT(A) directed to tax such amount under the head income from ‘other sources’ after application on the ground that no detail is available for investment in specified securities. In the order of ld. CIT(A), the working is provided on page No. 7 and 8. The ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 10 major income is from FDs and savings bank account. Entire interest incomes were kept in UCO bank savings account which is clearly evident from the bank statement. Such interest income is duly reflected in audited balance sheet as per page No. 6 and 7 of paper book. The investment in bank is one of the mode specified under Section 11(5) of the Act so the assessee is eligible for deduction under Section 11(1) of the Act. 12. On the other hand, the ld. Sr. DR for the revenue relied on the order of ld. CIT(A) on both the issues. We may note here that this matter was heard at length on 20/05/2024, however, on the request of ld. CIT-DR to verify the fact that CBDT Circular No. 883 dated 24/09/1975 is still in existence or not. The ld. CIT-DR for the revenue on 31/05/2024 submits that he has verified the fact that CBDT circular mentioned above is still in existence. 13. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. First ground of appeal relates to the deduction of capital gain of Rs. 75 Lacs. We find that the Assessing Officer made addition of Rs. 1.54 Crore by taking view that the assessee has such receipt during the year. We find that before ld CIT(A) the assessee strongly objected to the additions by filing detailed written submissions, which we have recorded earlier. We further find that ld CIT(A held that the assessee is trust and is governed by section 11, 12 & 13 of Income tax Act. The ld CIT(A) prepared his summery of computation of total income of assessee, which we have extracted in para-4 (supra). Before us, the ld AR of the assessee vehemently argued that his case is covered by the CBDT Circular No. 883/1975. The assessee deposited the entire sale ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 11 consideration as per section 11(5) and ultimately purchased another immovable property for charitable purpose in AY 2022-23 & 2023-24. 14. We find that before us the assessee has shown filed sufficient evidence to prove that deposit of sale consideration in Nationalized Bank. The assessee made investment in UCO bank in fixed deposits of Rs. 50.00 lacs on 29/04/2015 and Rs. 25.00 lacs on 09/06/2016, copy of such details is available at page No. 42 and 43 of paper book. We find that entire sale consideration received was kept in savings bank account with UCO bank and was converted into fixed deposit as expenditure. The fixed deposits were matured on 29/04/2008 which was further renewed up to 29/04/2021 which was later on converted into capital account scheme. Both the fixed deposits were converted into capital gain account with UCO bank, copy of passbook is filed on page No. 47 to 49 of paper book. The assessee claimed that the investment in fixed deposits were held by the trust for the use of benefit of trust as well as in order to keep its corpus intact. 15. We find that CBDT in its instruction No. 883 of 1975 directed that Section 11(1A) of the Income-tax Act, 1961 provides that where a capital asset, being property held under trust wholly for charitable or religious purposes is transferred and the whole or any part of the net consideration is utilized for acquiring another capital asset to be so held, then the capital gain arising from the transfer shall be deemed to have been applied to charitable and religious purposes to the extent specified therein. It is referred in the circular that the Board considered whether investments of the net consideration in fixed deposits with a bank would be regarded as utilization of the amount of ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 12 the net consideration for acquiring "another capital asset" within the meaning of section 11(1A) of the Income-tax Act, 1961. The emerged view was that investments of the net consideration in fixed deposit with a bank for a period of 6 months or above would be regarded as utilization of the net consideration for acquiring another capital asset within the meaning of section 11(1A) of the Income-tax Act, 1961. 16. We find that Calcutta High Court in CIT Vs East India Charitable Trust (supra) held that investment or deposit in public sector company is first an asset and, secondly, a capital asset and thirdly a permitted capital asset under the special law relating to the assessment of charitable or public religious trust. Therefore, the contention of the revenue that the investment by way of deposit in the public sector company could not be treated as a new asset acquired with the net consideration in terms of section 11(1A) was not tenable. The investment or deposit in any public sector undertaking appears as one of the permitted forms or modes of investment or deposit. According to section 2(14), capital asset includes property of any kind held by an assessee. 'Deposits or investments' are a kind of property and do not fall in the exclusionary limb of the said section. By reason of the option exercised under the Explanation to section 11(1) the assessee was entitled to the benefit under section 11(1A) inasmuch as the definition of income as contained in section 2(24) includes capital gains as one of the species of income. That being so, the option as exercisable with regard to income should also avail to the capital gains, provided such option was exercised in ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 13 writing before the expiry of time allowed under section 139(1) for furnishing the return. Hence, the Tribunal was right in holding that the entire sale proceeds from shares were invested in the acquisition of other capital assets within the meaning of section 11(1A). As for the investment in Unit Trust, the assessee utilised the sale proceeds of the shares held by it as property wholly for charitable purposes in purchasing UTI units. So long as the investments were actually made during the accounting period, the issue of the units after the expiry of the accounting year was immaterial. 17. The coordinate bench of Amritsar Tribunal in Akhara Ghamanda Dass Vs ACIT (114 TAXMAN 27 [Amritsar]) on similar issue passed the following order; “17. We will now discuss the scope of section 11(1A) of the IT Act. The appellant is also entitled for exemption under section 11(1A). Section 11(1A) is attracted in cases where capital asset being property is held under trust for charitable and religious purposes. The facts of the case is that property is held under trust for charitable and religious purposes from historical times. The second condition is that if the asset is transferred and the whole or any part of the net consideration (full value of the consideration as reduced by expenditure) is utilized for acquiring another capital to be held as a part of corpus of the trust or held as an asset in any form but is used for the purpose of the trust, then the capital gain arising from the transfer will be regarded as having been applied to charitable and religious purposes. The facts of the case are that after the assets were acquired by the Government, the trust has purchased land, constructed Gurudwara, constructed shop complex and Sarai and utilised entire receipts for the creation of another capital asset for the purpose of aims and objects of the trust. The Hon’ble Supreme Court has confirmed the decision of the Hon’ble Gujarat High Court in the case of CIT v. Ambalal Sarabhai Trust (1988) 71 CTR (Guj.) 30 : (1988) 173 ITR 683 (Guj.) whereby it has been observed that even if sale consideration is invested in different assets but the same assets are utilised for the aims and objects of the ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 14 trust, it will be deemed that the such trust is entitled to exemption in respect of capital gains arising from sale as per provisions of section 11(1A). The Hon’ble Gujarat High Court has given following observations : "If any doubt is left about the real nature of the transaction between the parties, it is set at rest by Expln. (iii) to section 11(1A), which has been extracted earlier. Net consideration as per the said Explanation would mean full value for the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection will such transfer. Now, in the present case, even if 90 per cent can be said not to have been received in cash by the seller, it cannot be gainsaid that it had really accrued to the seller, on account of the sale transaction in question. It is because this Explanation was not noticed by the ITO, that he was promoted to take the view to the effect that share in accounts was not covered by the sweep of section 11(1A). His view was rightly upset by the higher authorities. As a result of the aforesaid discussion, it must be held, agreeing with the Tribunal, that the capital assets belonging to the assessee-trust which were held wholly for charitable purposes were transferred and the whole on the net consideration thereof was utilised by the assessee-trust for acquiring another capital asset, viz., 10 per cent being invested in Bank of India and balance in fixed deposits with the erstwhile purchasers of the capital asset. The provisions of section 11(1A), were, therefore, fully satisfied on the facts of the present case. As a result of this discussion, therefore, the questions referred for our opinion are answered. The facts and circumstances of the case are squarely applicable in the case of the appellant." 18. The amount receipts are existing in the balance sheet of the appellant and in subsequent year balance sheet clearly shows that the receipts are in the form of asset which are definitely for the charitable and religious purpose of the trust. It is also worthwhile to note for subsequent years also the Assessing Officer has treated the spending as well as receipt of trust to be fully covered under section 11(1)(a) of the IT Act. It will, therefore, be illogical to come to a conclusion that during the year under consideration, the appellant is not entitled to the benefit of earlier section 11(1)(a) or 11(1A). It is also interesting to note that the balance sheet for the subsequent year also revealed that net consideration has totally been invested in constructing the assets for the charitable and religious purpose of the trust. The circular of CBDT has clarified this matter that the consideration received from the sale of asset can be utilised in any other asset and CBDT has clarified that the subject-matter gives clear understanding for the purpose of section 11(1)(a). If the subject-matter of corpus is transferred and changed to ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 15 different subject matter, even under those provisions, the purchase of different asset other than the corpus of the trust will also be entitled for exemption under section 11(1A) of the IT Act. 19. The authorities below have relied on the decision of Hon’ble Madras High Court in the case of CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485 (Mad.) and also on the decision of Bombay High Court in the case of Trustees of Shri Kot Hindu Stree Mandal v. CIT {1994] 116 CTR (Bom.) 22 : (1994) 209 ITR 396 (Bom.). These cases were cited by the appellant before the Assessing Officer. The case goes in favour of the appellant. The reason developed by the Hon’ble Madras High Court that the income is to be understood in proper perspective. The Hon’ble Madras High Court has held that income from the properties held under trust would have to be arrived at in the normal commercial manner without reference to the provisions which are attracted by section 14. This shows that receipt from the sale transaction of the property to the appellant is to the tune of Rs. 50 lacs out of this appellant has spent Rs. 22 lacs. Rs. 2 lacs and odd for revenue expenditure and Rs. 20 lacs for acquiring new assets. In Accordance with the decision and interpretation of the Hon’ble Madras High Court, the income of the appellant does not become taxable in a commercial sense because all the provisions of section 11(1A) have been fulfilled. We have not appreciated the relevance regarding reliance on the decision of Bombay High Court in the case of Trustees of Shri Kot Hindu Stree Mandal v. CIT (supra) which has been referred in the order. The ratio is not relevant on the facts and circumstances of the case, even remotedly. The learned CIT(A) has relied on the decision of Addl. CIT v. A.L.N. Rao Charitable Trust (1995) 129 CTR (SC) 205 [1995] 216 ITR 697 (SC). The ratio decided in A.L.N. Rao Charitable Trust was dealing with section 11(2) r./w. section 11(1)(a) of the Act. The learned CIT(A) has not applied ratio correctly because what was to be decided before applying section 11(1)(a) was the income earned from the property. During the year under consideration, the income earned from the property is to be taken from the commercial sense. The income earned from the property can never be gross receipt in case of sale of the property but can only be net profit whatever one may call the net receipt. For the tax purpose, we can the same as capital gain. The cost can never be income but cost is to be reduced from ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 16 the receipts. The gross sale proceeds of the appellant during the year under consideration are only to the tune of Rs. 50,66,300. The cost of the property is much more both from sentimental as well as commercial aspect. The property was compulsorily acquired by the Punjab Government for safety of Golden Temples Complex. The Assessing Officer has accepted that the cost of property was valuable and worked at Rs. 30 lakhs. We have estimated the same at Rs. 38,62 lakhs. The income from property cannot be more than Rs. 11.38 lakhs. Under no circumstances, it can be more than Rs. 22 lakhs which was admitted to have been spent for religious and charitable purpose. 20. The Hon’ble Supreme Court in the case of J.K. Trust v. CIT [1957] 32 ITR 535 (SC) has given broader meaning to the word ‘property’ mentioned in section 11(1)(a) of the IT Act. The Hon’ble Supreme Court has observed that the property also includes business or any interest which a person may acquire, hold and enjoy. The Hon’ble Supreme Court, applied this decision again in the case of CIT v. P. Krishna Warriar [1964] 53 ITR 176 (SC) and Dharmaposhanam Co. v. CIT 1978 CTR (SC) 114 : [1978] 114 ITR 463 (SC). In the case of Dharmadeepti Co. v. CIT 1978 CTR (SC) 120 : [1978] 114 ITR 454 (SC), the Hon’ble Supreme Court has held that if the business income is applied for charitable purpose, the income from such business will be exempt under section 11(1)(a) of the IT Act. 21. The Hon’ble Supreme Court in the case of CIT v. A.L.N. Rao Charitable Trust (supra), has given finding of law that provisions of sub-section (2) of section 11 gets attracted if any income is left over after application of income for charitable and religious purpose as envisaged by section 11(1)(a) of the IT Act. In the case of the appellant, as discussed earlier, in this order, there is no income left over which requires to be applied under section 11(2) of the IT Act. The Hon’ble Supreme Court has observed that section 11(1)(a) is a separate operative statute of the Act. The trust has to apply income earned during the year from the properties which includes business and has to actually spend for the charitable and religious purpose. It is only out of unspent accumulated income, the section 11(1)(a) is attracted whereby 25 per cent of such property income is to be accumulated and invested in listed investments. ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 17 22. We are, therefore, of the opinion that the appellant has satisfied the condition laid under section 11(1)(a) of the IT Act and therefore, he is entitled for exemption of the income received from the property under consideration from both commercial sense as well as from the interpretation of income in accordance with the IT Act. We have also given our finding that the appellant has also fulfilled the conditions envisaged under section 11(1A) of the IT Act. We have given our finding regarding the original cost of the property as on 1st April, 1974 which we have estimated at Rs. 38,62,500 and the capital gain is to be calculated in accordance with the law relatable to capital gains including relief under section 80T. We, therefore, are of the opinion that the appellant has fulfilled all the conditions envisaged under section 11(1)(a) of the IT Act. Therefore, income of the appellant is exempted from the IT Act.” 18. Thus, in view of the above factual and legal position discussed above the assessee qualify of exemption under section 11(1A). However, we find that the assessee for the first time before Tribunal disclosed that entire amount of capital again was utilized for purchasing other immovable property in FY 2022-23 and 2023-24, therefore, the jurisdictional Assessing Officer is directed to verify said facts and allow relief to the assessee. With these directions the ground No. 1 of the appeal is allowed. 19. Ground No. 2 relates to disallowance of application of interest income of Rs. 441,961/-. We find that no separate disallowance of this income was made by Assessing Officer while passing the assessment order. Further, we find that while making such separate disallowance by ld CIT(A), no specific show cause notice was issued to the assessee. The ld CIT(A) while passing impugned order directed the Assessing Officer to treat such income from interest under the head “other sources”. Before us, the ld AR for the assessee vehemently submitted that major income is from FDs and savings ITA No. 281/Srt/2024 Vaishnav Samaj Trust Vs ITO 18 bank account. Entire interest incomes were kept in UCO bank savings account, copy of bank statement is placed on record. On verification we find that such interest income is duly reflected in audited balance sheet as per page No. 6 and 7 of paper book. Further, the investment in bank is one of the mode specified under Section 11(5) of the Act. Considering the submissions of ld AR of the assessee we find merit in his submissions that the assessee is eligible for deduction under Section 11(1) of the Act. In the result, ground No. 2 of the appeal is allowed. 20. In the result, this appeal of assessee is allowed. Order announced in open court on 03 rd July 2024. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 03/07/2024 *Ranjan Copy to: 1. Assessee – 2. Revenue – 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat