KAMALNAYAN JAMNALAL BAJAJ FOUNDATION,NEW DELHI vs. ITO, EXEMPTION CIRCLE- 1(1), NEW DELHI

This appeal is filed by the assessee against the order dated 05/09/2017 passed by CIT(A)-40 Delhi for Assessment Year 2014-15.

The assessee is a Trust formed via Trust Deed and registered u/s 12A (a) of the Income Tax Act, 1961. For the A.Y. 2014-15 the return of income in Form ITR-7 was filed on 24.09.2014 declaring income of Rs. 48,020/- after claiming exemption u/s 11 of Income Tax Act and "Nil" tax payable as the assessee had complied with the provisions of section 11 & 12 of the Income Tax Act, 1961 being a charitable Trust. The assessee also filed Form 10 for accumulation u/s 11(2) of the Income Tax Act, 1961. The return was processed u/s 143(1) vide order dated 28.03.2016 denying the claim of deduction u/s 11(2) of income Tax Act, 1961 and considering the gross receipt instead of capital gain on sale of Birla Sun life as income and assessing the appellant as an AOP. Aggrieved by the above the assessee has filed the rectification request u/s 154 of the Income Tax Act on 08/06/2016 and received an order u/s 154 from CPC dt. 20/06/2016 received on 24/10/2016 stating that the fresh claim/removed the income cannot be made in Rectification Request.

Being aggrieved by the order u/s 143(1) dated 28/3/2016 passed by DCIT (CPC) (Bangalore). The assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

The Ld. AR contended that the capital gain of Rs.99,125/- only should be considered as part of total income instead of gross receipt of Rs. 2,06,00,000/- as done by the CPC. The Ld. AR further submitted that rectification being mistake apparent from record. Therefore, the claim made in the return should be allowed. The Ld. AR submitted that order u/s 143(3) was passed on 28/3/2016 thereby taking total gross receipt of Rs.2,06,00,000/- instead of taking net capital gain of Rs. 99,125/-. The Ld. AR submitted that the assessee during the previous year relevant to this Assessment Year has reflected in computation of income capital gains of Rs.99,125/- as part of the total income and has subjected the same for the provisions of Section 11(1) of the Income Tax Act, 1961. As against the said total income the CPC in the intimation u/s 143(1) has treated sum of Rs. 2,06,00,000/- being the gross consideration received as the capital gains. The Ld. AR submitted that the account statement of Birla Sun Life Mutual Fund in the name of the assessee wherein redemption of 1,03,206.023 units has been made resulting in receiving of gross sale proceeds of Rs. 2,06,00,000/-. As against this, the purchase cost is Rs. 2,05,00,875/- resulting in net gain of Rs.99,125/-. The acquisition of investments has not been considered as application of funds at any point of time. The consideration minus the cost is the gain of Rs.99,125/- which is duly reflected as income of the assessee. The Ld. AR submitted that the CIT(A) has dismissed the claim of the assessee along with the submissions thereby stating that there was change head of income as the assessee has filed rectification application and revised the income from capital gain to income from other sources and the same is not just and proper. The Ld. AR submitted that the original return has clearly reflected the net gain and the tax is only applicable on net gain and not on the gross consideration.

The Ld. DR relied upon the order of the CIT(A).

We have heard both the parties and perused the material available on record. It is pertinent to note that in the present case, the CPC has taken gross consideration of Rs.2,06,00000/- for which the original purchase cost is Rs. 2,05,00,875/- which was paid by the assessee during the relevant Assessment Year. This fact was not disputed by the Revenue Authorities. The original return has clearly reflected this amount at Page 7 Column (ii) (c) under the head capital gains. But the Assessing Officer instead of taking actual net gain of Rs. 99,125/- has taken sale proceeds at gross level without any substantive reason. It is a fact on record that the assessee has applied for rectification and filed revised return thereby changing the head of this particular transaction from capital gain to income from other sources but the amount and the actual net gain remains the same. The rectification might not be correct under the statute as there is a change of head but when we go by the original return it clearly set outs that the net gain of Rs.99,125/- has to be taken into account by the CPC. In the present case, the assessee Trust has accumulated and set apart an amount of Rs. 5,96,00,000/- for financial year ended on 31/03/2016 and furnished the said information to Assessing Officer by filing Form 10 on 29/09/2014 i.e. before the time specified u/s 139(1) of the income Tax Act and invested the said amount into fixed deposits. The assessee has also claimed accumulation u/s 11(2) of Rs. 5,96,00,000/-/in the return of income. Thus, the assessee satisfied all the conditions as specified in section 11(2) and the accumulation should be allowed. Further, the assessee reported the gain on sale of Birla Sun life mutual fund of Rs. 99,125 as income in return of income which should be considered as declared by the assessee instead of Rs. 2,06,00,000/. Therefore, the demand raised of Rs. 2,58,88,130/- and interest u/s 234B and 234C are hereby rejected and the benefit u/s 11 should be allowed to the assessee. Therefore, we are allowing the appeal of the assessee to this extent and the claim made in the return which was originally filed should be taken into account. Hence, the appeal of the assessee is allowed.