The Society of the Sisters of othe Distiitute, Delhi V. ACIT,CPC, Bangalore

ITA 5372/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8012 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2014-2015
• Appeal Filed On: 21-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Assessee Lawyers: RAMAN MURALI
• Keywords: Capital asset; Charitable institution; Principle of natural justice; Cost of acquisition; Capital Gains
• Section: 143(1); 11(1A); 55A; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SH. KUL BHARAT, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 5372/DEL/2017 : ASSTT. YEAR : 2014-15 THE SOCIETY OF THE SISTERS OF THE DESTITUTE, JIVODAYA HOSPITAL, ASHOK VIHAR, NEW DELHI-110052 VS ACIT, CPC, BANGALORE (APPELLANT) (RESPONDENT) PAN NO. A A CTS9595A ASSESSEE BY : SH. RAMAN MURALI, CA REVENUE BY : SH. PRAKASH DUBEY, SR. DR DATE OF HEAR ING: 26 . 0 7 .20 2 1 DATE OF PRONOUNCEMENT: 25 .08 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE LD. CIT (A)-40, DELHI DATED 05.06.2017. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. THE LD. CIT (A) HAS ERRED IN LAW, FACTS AND CIRCUMSTANCES OF THE CASE BY WRONGLY CONFIRMING THE INCOME ASSESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.60,63,797/- INSTEAD OF NIL. 2. THE LD. CIT (A) HAS ERRED IN LAW, FACTS AND CIRCUMSTANCES OF THE CASE BY WRONGLY CONFIRMING THE DISALLOWANCE OF THE INDEXED COST OF PROPERTY PURCHASED AMOUNTING TO RS.69,09,302/-. ITA NO. 5372/DEL/2017 SOCIETY OF THE SISTERS OF THE DESTITUTE 2 3. THE LD. CIT (A) HAS PASSED THE ORDER BASED ON CONJECTURE AND SURMISE IN A STEREOTYPE MANNER WITHOUT JUDICIALLY ANALYZING ACTUAL FACTS. 4. THE LD. CIT (A) HAS IGNORED THE PRINCIPLES OF NATURAL JUSTICE WHILE PASSING THE APPELLATE ORDER DISMISSING THE APPEAL. 3. THE FACTS OF THE CASE ARE THAT RETURN ON INCOME WAS FILED ON 09.12.2014. IN THE RETURN OF INCOME, CAPITAL GAI NS WAS COMPUTED BY REDUCING COST OF ACQUISITION AFTER INDE XATION FROM THE FULL VALUE OF CONSIDERATION. NO COST OF IMPROVE MENT AFTER INDEXATION OR EXPENDITURE ON TRANSFER WAS CLAIMED. FURTHER, THE ENTIRE AMOUNT OF CAPITAL GAIN WORKED OUT AT RS. 1,8 7,49,198/- WAS CLAIMED AS EXEMPT UNDER SECTION 11(1A). 4. WHILE PROCESSING THE RETURN UNDER SECTION 143(1) (A), THE CPC HAVE TAKEN THE COST OF ACQUISITION AFTER INDEXA TION AS INCOME FROM CAPITAL GAINS AND THE SAME HAS BEEN ADD ED TO THE INCOME OF THE ASSESSEE AS PER COLUMN 6 OF THE INTIM ATION UNDER SECTION 143(1)(A). ACCORDINGLY, INCOME WAS COMPUTED AT RS. 60,63,797/- ON WHICH A DEMAND OF RS. 18, 67,466/- W AS RAISED. 5. AGGRIEVED BY THE ORDER UNDER SECTION 143(1)(A), THE APPEAL HAS BEEN FILED BEFORE THE LD. CIT (A) WHO AF FIRMED THE ORDER OF THE CPC. 6. SUBMISSIONS OF THE ASSESSEE ARE AS UNDER: 'DURING FY 2013-14 THE SOCIETY SOLD A PROPERTY FOR RS.2,56,58,500/- WHICH WAS PURCHASED IN 2005-06 FOR RS. 36,57,000/-. FOLLOWING NEW ASSETS HAVE BEEN PURCHAS ED DURING THE SAME FINANCIAL YEAR: ITA NO. 5372/DEL/2017 SOCIETY OF THE SISTERS OF THE DESTITUTE 3 BUILDING AFZALGARH RS.2,01,92,591/-(1,69,17,591 + 32,75,000) BUILDING DEHRADUN RS.76,99,200/- FLAT THUGLAKABAD RS.21,61,200/- BUILDING KHERAKHURD RS. 18,18,237/- (10,00,000+8,18 ,237) TOTAL RS.3,18,71,228/- 7. THE CPC IN THEIR COMPUTATION U/S 143 (1A) HAS DI SALLOWED THE INDEXED COST OF PROPERTY PURCHASED AMOUNTING TO RS.69,09,302/-. 8. EXTRACTS OF SECTION 11(1A) IS GIVEN BELOW: (1A) FOR THE PURPOSES OF SUB-SECTION (1),- (A) WHERE A CAPITAL ASSET, BEING PROPERTY HELD UNDE R TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, IS TRA NSFERRED AND THE WHOLE OR ANY PART OF THE NET CONSIDERATION IS U TILIZED FOR ACQUIRING ANOTHER CAPITAL ASSET TO BE SO HELD, THEN , THE CAPITAL GAIN ARISING FROM THE TRANSFER SHALL BE DEEMED TO H AVE BEEN APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT SPECIFIED HEREUNDER, NAMELY: - (I) WHERE THE WHOLE OF THE NET CONSIDERATION IS UT ILIZED IN ACQUIRING THE NEW CAPITAL ASSET, THE WHOLE OF SUCH CAPITAL GAIN; (II) WHERE ONLY A PART OF THE NET CONSIDERATION IS UTILIZED FOR ACQUIRING THE NEW CAPITAL ASSET, SO MUCH OF SUCH CA PITAL GAIN AS IS EQUAL TO THE AMOUNT, IF ANY, BY WHICH THE AMOUNT SO UTILIZED EXCEEDS THE COST OF THE TRANSFERRED ASSET; ITA NO. 5372/DEL/2017 SOCIETY OF THE SISTERS OF THE DESTITUTE 4 EXPLANATION. - IN THIS SUB-SECTION, - (II) COST OF THE TRANSFERRED ASSET' MEANS THE AGGR EGATE OF THE COST OF ACQUISITION (AS ASCERTAINED FOR THE PURPOSE S OF SECTIONS 48 AND 49) OF THE CAPITAL ASSET WHICH IS THE SUBJEC T OF THE TRANSFER AND THE COST OF ANY IMPROVEMENT THERETO WI THIN THE MEANING ASSIGNED TO THAT EXPRESSION IN SUB-CLAUSE ( B) OF CLAUSE (1) OF SECTION 55; 9. IN AL-AMEEN EDUCATIONAL SOCIETY VS. THE DIRECTOR OF INCOME-TAX (E) BANGALORE ON 14 TH SEPTEMBER 2012, THE ITAT, BANGALORE 'C' BENCH, BANGALORE HELD THAT THE EXPRES SION CAPITAL GAIN OR THE MODE OF COMPUTATION OF CAPITAL GAIN HA S NOT BEEN DEFINED FOR THE PURPOSE OF SEC.11 (1A) OF THE ACT A ND THEREFORE THE NORMAL EXPRESSION CAPITAL GAIN AND THE COMPUTAT ION OF SUCH CAPITAL GAIN AS LAID DOWN IN THE PROVISIONS OF SEC. 45 TO 55A OF THE ACT WILL APPLY. FOR DETERMINING THE QUANTUM OF CAPITAL GAIN WHICH WILL BE DEEMED TO BE APPLICATION OF INCOME FO R CHARITABLE PURPOSE AND BECOME ELIGIBLE TO GET EXEMPTION U/S. 1 1(1) OF THE ACT, THE PROVISIONS OF SEC. 11(1A) OF THE ACT HAVE TO BE APPLIED. 10. IN THE CASE OF TRUSTEES OF SHRI RAMANAGAR TRUST VS. ITO 13 ITD 426 (MUM) IT HAS BEEN HELD THAT ADVANCES RECEIV ED BY A TRUST IN THE PERIOD EARLIER TO THE PREVIOUS YEAR IN WHICH TRANSFER OF A CAPITAL ASSET BY A TRUST TAKES PLACE, IF INVES TED IN PURCHASE OF CAPITAL ASSET IN THE PERIOD EARLIER TO THE PREVI OUS YEAR IN WHICH TRANSFER OF THE CAPITAL ASSET TAKES PLACE SUC H PURCHASE SHOULD ALSO BE CONSIDERED AS APPLICATION OF CAPITAL GAIN FOR CHARITABLE PURPOSE. ITA NO. 5372/DEL/2017 SOCIETY OF THE SISTERS OF THE DESTITUTE 5 11. THE EXPRESSION 'COST OF THE TRANSFERRED ASSET' IS DEFINED IN EXPLN. (II) TO SEC. 11(1A) OF THE ACT, AND IT LAYS DAWN THAT 'COST OF THE TRANSFERRED ASSET' MEANS THE AGGREGATE OF TH E COST OF ACQUISITION (AS ASCERTAINED FOR THE PURPOSES OF SEC .48 AND 49) OF THE CAPITAL ASSET WHICH IS THE SUBJECT OF THE TR ANSFER AND THE COST OF ANY IMPROVEMENT THERETO WITHIN MEANING ASSI GNED TO THAT EXPRESSION IN SUB-CLAUSE (B) OF CLAUSE (1) OF SECTION 55. THUS THE DIFFERENCE BETWEEN THE CAPITAL GAIN UTILIZ ED IN ACQUISITION OF NEW ASSETS VIZ., RS.2,78,38,080/- AN D THE INDEXED COST OF ACQUISITION VIZ., RS.2,51,22,641/- VIZ., RS .27,15,449/- IS TO BE CONSIDERED AS APPLICATION OF CAPITAL GAIN FOR CHARITABLE PURPOSE WHICH WOULD BE ENTITLED TO EXEMPTION INCOME U/S. 11(1) OF THE ACT. 12. SECTION 11(1A) GIVES THE TREATMENT OF CAPITAL G AINS ARISING IN THE CASE OF CHARITABLE INSTITUTIONS. IT PROVIDES THAT THE CAPITAL GAINS WOULD BE DEEMED TO HAVE BEEN UTILIZED FOR THE PURPOSES OF SECTION 11(1)(A) IF THE NET CONSIDERATION RECEIV ED WAS REINVESTED IN ANOTHER CAPITAL ASSET. FURTHER, IF ON LY PART OF THE NET CONSIDERATION IS INVESTED IN ANOTHER CAPITAL AS SET, THEN THE APPROPRIATE FRACTION OF THE CAPITAL GAIN WILL BE DE EMED TO HAVE BEEN APPLIED FOR CHARITABLE AND RELIGIOUS PURPOSES. 13. FROM THE DETAILS SUBMITTED BY THE ASSESSEE IT C AN BE HELD THAT THE ENTIRE NET CONSIDERATION, WHICH AS PER THE DEFINITION IN CLAUSE (III) OF THE EXPLANATION BELOW SECTION 11(1A ) IS FULL VALUE OF CONSIDERATION AS REDUCED BY ANY EXPENDITURE INCU RRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER, H AS BEEN INVESTED BY THE ASSESSEE IN THE NEW CAPITAL ASSET. THE NET CONSIDERATION IN THE CASE OF THE ASSESSEE COMES TO ITA NO. 5372/DEL/2017 SOCIETY OF THE SISTERS OF THE DESTITUTE 6 RS.2,56,58,500/- WHICH IS ALSO THE FULL VALUE OF CO NSIDERATION. THE ASSESSEE AS PER THE DETAILS SUBMITTED DURING AP PELLATE PROCEEDINGS, HAS INVESTED RS.3,18,71,228/- IN NEW C APITAL ASSET WHICH IS MORE THAN THE NET CONSIDERATION. HENCE, ON THE BASIS OF THAT SUBMISSIONS MADE IN THE APPELLATE PROCEEDINGS, THE ASSESSEE SATISFIES THE CONDITIONS AS LAID DOWN IN S ECTION 11(1A)(A)(I) AND HENCE NO ADJUSTMENT BY THE CPC IS CALLED FOR. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/08/2021. SD/- SD/- (KUL BHARAT) ( DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 25/08/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR