SUVIPRA SHIKSHA SANSTHAN ,GHAZIABAD vs. ITO, EXEMPTION WARD , GHAZIABAD

This appeal is filed by the assessee against the order dated 09/01/2018 passed by CIT(A)- Ghaziabad, for Assessment Year 2014-15.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

The Ld. AR submitted that the main object of the assessee trust is incorporated in the Clause 3 of the Trust Deed being to establish, maintain and or run or assist educational institutions and without any prejudice to its generality includes schools, colleges, universities, engineering and technical colleges, medical colleges, primary/higher secondary/secondary schools, pharmacy colleges, dental colleges, graduate/post graduate colleges etc. Further, the Ld. AR submitted that Sub Clause Z of paragraph 3 of the trust deed explains the process of winding up of the trust wherein it has been provided that at any point of time, the whole of corpus fund and other funds of movable and immovable properties belonging to the trust or the institution run by the trust shall only be transferred to any other public charitable trust or institution having the same aims and object for the public charitable purposes. The main object and aim of the done Society was kept in depth and the property sold/asset sold were donated to the other public charitable trust/institutions. Therefore, the donations given by the assessee donor satisfies the provisions of Section 11(1) (a) of the Income Tax Act, 1961 and addition made by the Assessing Officer is unjustified and the same deserves to be deleted. The Ld. AR submitted that the Commissioner of Income Tax (Appeal), Ghaziabad both failed to appreciate the fact and erred in confirming the action of the assessing officer to apply the provisions of Section 11(1A) of the Act. The Ld. AR further submitted that the Commissioner of Income Tax (Appeal), Ghaziabad has failed to apply judicious mind so to observe that sale proceeds should be invested in the purchase of another land and wrongly proceeded to tax income as long term capital gain. The Ld. AR relied upon the decision of the Tribunal in case of ACIT Vs. M/s Bhartiya Yug Vashista Sanga, order dated 9/9/2016 and the decision of the Hon’ble Delhi High Court in case of DIT Vs. Bagri Foundation 377 ITR 193.

The Ld. DR submitted that the assessee trust has donated the fund generated from selling of immovable property instead of transferring immovable property to the other charitable trust which was clearly set out in Clause Z of Para 3 of the Trust Deed. Thus, this itself shows that the assessee has not properly fulfilled the conditions of Section 11(1)(a) of the Act.

We have heard both the parties and perused the material available on record. It is pertinent to note that the Trust Deed of the assessee clearly explained that at the time of winding up what procedure has to be followed of the corpus fund and other funds including movable and immovable property. Sub Clause ‘z’ of Clause 3 of the Trust Deed explains the process of winding up of the trust wherein it has been provided that at any point of time, the whole of corpus fund and other funds of movable and immovable properties belonging to the trust or the institution run by the trust shall only be transferred to any other public charitable trust or institution having the same aims and object for the public charitable purposes. The assessee at no point of time diverted any funds beyond the scope of its Trust Deed. In fact, the immovable property was sold and the amount of the sale proceeds were donated to the corpus of the other charitable society/trust. Section 11(1)(a) clearly sets out that the assessee is entitled to claim the benefit as the sale proceeds of property cannot be included in the total income of the assessee. The assessee has donated the sale proceeds to the corpus of another charitable society/trust. The Ld. AR relied upon the decision of the Hon’ble Delhi High Court in case of Bagri Foundations (supra) which is also apt in the present case. The Assessing Officer as well as CIT(A) both wrongly applied Section 11(1A) as there is no acquisition of another capital assets. In fact, the assessee society invoked the winding up clause of the Trust Deed. Therefore, the CIT(A) was not right in confirming the additions made under Section 11(1A) of the Act by the Assessing Officer. The appeal of the assessee is allowed.

In the result, appeal of the assessee is allowed.