ACIT (E), CIRCLE-1, AHMEDABAD vs. KARNAVATI MEDICAL AND EDUCATIONAL TRUST, AHMEDABAD

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ITA 2191/AHD/2026Status: DisposedITAT Ahmedabad15 October 2026AY 2022-236 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO's order was passed mechanically without application of mind. The Ld. CIT(A) had correctly noted that the assessee had duly accounted for the Rs. 30 Crores received from United Eduplus Pvt. Ltd. and declared it as income in its return, claiming the permissible 15% accumulation after applying 85% of the income. The Tribunal found that the assessee had sold only the building and furniture, while the land belonged to the buyer. It was also noted that the value of land increases over time, while the superstructure depreciates. The assessee explained the sale was at actual cost, not WDV, and the AO did not establish a lower FMV or a lesser sale price. The AO's addition of the entire receipt was incorrect, as Section 13(1)(c)(ii) pertains to disallowing deductions on application of income, not adding the entire receipt. The Tribunal found no infirmity in the CIT(A)'s order and upheld it, dismissing the Revenue's appeal.

What were the facts?

The Revenue appealed the order of the CIT(A), NFAC, Delhi, dated 30.03.2026, for Assessment Year 2022-23. The assessee, Karnavati Medical And Educational Trust, a registered charitable trust, transferred a hostel building to United Eduplus Pvt. Ltd., a specified person under Section 13(3). The assessee claimed a consideration of Rs. 30 Crores, which was credited as 'capital receipt' in its balance sheet. The Assessing Officer (AO) observed the amount was not in the P&L account and treated the transfer as without consideration. The AO also noted the building was sold as per Written Down Value (WDV) and suspected the Fair Market Value (FMV) might be higher. The AO added the entire Rs. 30 Crores to the assessee's income, disallowing deductions under Section 11 and denying accumulation claims.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC, was justified in deleting the addition of Rs. 28,73,62,285/- (Rs. 30,00,14,921 - Rs. 1,26,52,636) on account of violation of provisions of Section 13(1)(c)(ii) of the Income Tax Act, 1961, for the year under consideration? 2. Whether, on the facts and in the circumstances of the case, the Ld. CIT(A), NFAC, was justified in deleting the addition of Rs. 4,41,76,701/- on account of accumulation under Section 11(1)(a) of the Act for the year under consideration? Assessee's Contentions: The assessee argued that the building and furniture were sold for Rs. 30 Crores, and this amount was duly credited to its account as a 'capital receipt'. The land belonged to United Eduplus Pvt. Ltd., which had provided it for constructing the hostel. The sale was at the actual cost incurred, not WDV, and the AO failed to establish a lower FMV or a lesser sale price. Revenue's Contentions: The Revenue contended that the AO was justified in making the additions as the transfer violated Section 13(1)(c)(ii) and that the accumulation claim under Section 11(1)(a) was also not valid.

Which sections of the Income-tax Act were involved?

Section 13(1)(c)(ii),Section 11(1)(a),Section 11,Section 13(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI GANGADHAR PANDA

For Appellant: Shri Kiran Unavekar, CIT.DR, Shri TejMohan Singh & Shri Sunil M
For Respondent: Shri TejMohan Singh & Shri Sunil M
Hearing: 30/09/2026

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI GANGADHAR PANDA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 2191/Ahd/2026 (िनधा�रण वष� / Assessment Year : 2022-23) ACIT (E) बनाम Karnavati Medical And / Circle-1, Ahmedabad Educational Trust Vs. 605, Samedh Complex, Nr. Associate Petrol Pump, Ellisbridge, Ahmedabad, Gujarat - 380006 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAATK7408C (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Kiran Unavekar, CIT.DR ��यथ� क� ओर से/Respondent by : Shri TejMohan Singh & Shri Sunil M. Makhija, ARs. Date of Hearing 30/09/2026 15/10/2026 Date of Pronouncement (आदेश)/ORDER Per Sanjay Garg, Judicial Member: The present appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 30.03.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2022-23.

ITA No.2191/Ahd/2026 [ACIT(E) vs. Karnavati Medical And Educational Trust ] A.Y. 2022-23 - 2 – 2. The Revenue has taken following grounds in this appeal: “1. Whether on the facts and in circumstances of the case, Ld.CIT(A), NFAC is justified in deleting the addition of Rs.28,73,62,285/- (Rs.30,00,14,921-Rs.1,26,52,636) on account of violation of provisions of Section u/s.13(1)(c)(ii) of the Act for year under consideration. 2. Whether on the facts and in circumstances of the case, Ld.CIT(A), NFAC is justified in deleting the addition of Rs.4,41,76,701/- as account of accumulation u/s 11(1)(a) of the Act for year under consideration.” 3. The brief facts of the case are that the assessee is a registered Charitable Trust. The Assessing Officer (in short ‘the AO’) noticed that the assessee during the year has transferred hostel building to United Eduplus Pvt. Ltd., which was noted as specified person as provided u/s 13(3) of the Act. Though, the assessee claimed that the said building has been transferred for a consideration of Rs.30 Crores, however, the AO noted that the said amount was not included in the P&L account of the assessee. He, therefore, observed that the said building had been transferred by the assessee trust without any consideration. Further, the AO noted that the building was allegedly claimed to have been sold as per the Written Down Value (‘WDV’) of the property in the block of assets of the assessee trust. He observed that Fair Market Value (‘FMV’) of the property might have been higher than the WDV.

3.1 The assessee explained that the assessee has only sold the building and the furniture, whereas, the land belonged to the said United Eduplus Pvt. Ltd., itself. The said United Eduplus Pvt. Ltd. gave land to the assessee trust for use of the same by

ITA No.2191/Ahd/2026 [ACIT(E) vs. Karnavati Medical And Educational Trust ] A.Y. 2022-23 - 3 – constructing the hostel building and the assessee, accordingly, constructed hostel building thereupon. However, during the Covid period, the building remained vacant and the trustees decided to sell the same and, accordingly, the building and furniture was sold to the said United Eduplus Pvt. Ltd. at Rs.30 Crores and the amount was duly credited into the account of the assessee trust as ‘capital receipt’ in the balance sheet. However, the AO rejected the aforesaid contention of the assessee and added the entire amount of Rs.30 Crores shown to have been received by the assessee as not eligible for deduction u/s 11 of the Act and added the same into the income of the assessee. He also denied the claim of accumulation of 15% on such income treating the same as bogus claim.

4.

Being aggrieved by the said order, the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A) duly considering the contention of the assessee observed that the finding of the AO, that the assessee has not received any such amount of Rs.30 Crores from the said United Eduplus Pvt. Ltd., was factually incorrect. He noted from the accounts of the assessee that the said amount of Rs.30 Crores was duly credited into the account of the assessee. He further observed that the same was declared as ‘income of the assessee’ at the time of filing return of the income and the assessee, accordingly, claimed deduction u/s 11 of the Act in respect thereof, after claiming 15% accumulation. He, accordingly, deleted the additions, so, made by the AO.

ITA No.2191/Ahd/2026 [ACIT(E) vs. Karnavati Medical And Educational Trust ] A.Y. 2022-23 - 4 – 5. We have heard the rival contentions and going through the record. We note that the assessment order has been passed by the AO in a mechanical manner without application of mind and without going through the records. The Ld. CIT(A) has categorically noted that the assessee has duly accounted for the amount of Rs.30 Crores received by the assessee from United Eduplus Pvt. Ltd. Further, the assessee has duly explained that the assessee has sold the building and furniture only to said United Eduplus Pvt. Ltd., whereas, the land beneath the building belonged to the United Eduplus Pvt. Ltd., itself. It is commonly known that the value of the land with the time increases and whereas, value of the super structure upon it goes on decreasing with the passage of time. The assessee has explained that it has sold as per the actual cost incurred by the assessee and not at WDV. Therefore, it cannot be said that the said building was sold at a lesser rate than the FMV of the property. Even, the AO has not mentioned as what was the FMV of the property and for what amount the property was sold at a lesser rate, instead, he goes on to add the entire amount of Rs.30 Crores received by the assessee. The AO, u/s13(1)(c)(ii) of the Act can disallow the deduction u/s 11 of the Act in respect of the application of income. However, the AO goes on to add the entire receipts of the assessee. He has neither disputed the application nor has calculated the differential amount between the property sold and the FMV. Moreover, so far as the quantum of accumulation is concerned, the assessee has claimed total application of income @ 85% of Rs.1,87,87,39,302/- which comes at Rs.1,59,77,51,706/- and claimed accumulation of

ITA No.2191/Ahd/2026 [ACIT(E) vs. Karnavati Medical And Educational Trust ] A.Y. 2022-23 - 5 – Rs.28,09,87,596/-, out of which, the AO denied the accumulation of Rs.4,41,76,701/-. The AO, however, has not stated that the assessee has not made application of income of Rs.1,59,77,51,706/-. If we go by the calculation of the AO himself, the income of the assessee for the year under consideration has been claimed by the assessee will be taken by him at Rs.1,57,87,39,302/-, then, the total application of income more than actual income of the assessee and there will not be any question of claim or denial of accumulation to the assessee. The entire order of the AO is cryptic. On the other hand, the Ld. CIT(A), after duly considering the accounts of the assessee and deliberating thereupon, has held that the assessee had duly shown the consideration of Rs.30Crores in its accounts and which was added into the income of the assessee in the return of income, whereupon 15% accumulation was claimed in accordance with law after duly making application of 85% of such income, in accordance with law. We do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld. There is no merit in the appeal of the Revenue and the same is, accordingly, dismissed.

6.

In the result, the appeal of the Revenue is dismissed.

This Order is pronounced on 15/10/2026

Sd/- Sd/- (GANGADHAR PANDA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 15/10/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1.

ITA No.2191/Ahd/2026 [ACIT(E) vs. Karnavati Medical And Educational Trust ] A.Y. 2022-23 - 6 – ��यथ� / The Respondent. 2. संबंिधत आयकर आयु� / Concerned CIT 3. आयकर आयु�(अपील) / The CIT(A)- 4. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad

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