BAHADURLAL AMRITLAL JAIN CHARITABLE TRUST,MUMBAI vs. ITO (EXEMPTION) - 1(1), MUMBAI

We heard the parties and perused the record. The assessee is a trust registered u/s. 12A of the Act and accordingly claimed exemption u/s. 11 of the Act. The main object of the assessee is to provide educational and medical help for the benefit of the general public. During the year under consideration, the assessee earned capital gains of ` 51.99 lakhs on sale of an asset. The assessee treated the same as “income derived from property held under trust”. The provisions of sec. 11(1)(a) provides for accumulation of income upto 15% of income derived from property held under trust. The assessee claimed

The Assessing Officer noticed that the sec.11(1A) of the Act provides deduction for the capital gains, if the conditions specified therein is satisfied. The AO noticed that the assessee has claimed deduction of the capital gain as per provisions of section 11(1A) of the Act by fulfilling the conditions specified therein. The Assessing officer also noticed that the assessee has availed deduction of accumulation of income u/s 11(1)(a) of the Act on the amount of capital gain, referred above. He took the view that the assessee will not be entitled to claim deduction for accumulation of income u/s. 11(1)(a) of the Act on the capital gains, since capital gains was claimed as deduction u/s. 11(1A) of the Act. Accordingly, he allowed the claim for accumulation of income u/s. 11(1)(a) of the Act on other income of the assessee. The learned CIT(A) also confirmed the same and hence the assessee has filed this appeal before us.

The Learned AR submitted that the assessee would be entitled for accumulation of income u/s. 11(1)(a) of the Act in respect of capital gains also, since the provisions of section 11(1A), only, deals with the “application of income derived by way of capital gains. The provisions of sec. 11(1)(a) dealing with accumulation of income, does not prohibit accumulation of income out of capital gains. Accordingly he contended that the assessee is eligible for accumulation of income u/s 11(1)(a) of the Act on the capital gains portion also.

On the contrary, learned DR submitted that the learned CIT(A) has followed the decision rendered by the ITAT in the case of Dawat Institute of Dawoodi Bohra Community (22 SOT 359) in deciding the issue against the assessee.

In the rejoinder, learned AR submitted that the decision rendered in the case of Dawat Institute of Dawoodi Bohra Community (supra) does not deal

We noticed that the learned CIT(A) has placed reliance on the decision rendered by the Tribunal in the case of Dawat Institute of Dawoodi Bohra Community (supra). The issue before the Tribunal in the above said case was relating to eligibility of the assessee to claim accumulation of income u/s 11(1)(a) of the Act, when it has applied 100% of its income towards its objects. However, in the instant case, the issue is whether the assessee is entitled for deduction of accumulation of income u/s. 11(1)(a) of the Act in respect of capital gains or not, when it has availed deduction u/s 11(1A) of the Act. Hence we are of the view that the above said decision may not be relevant to the issue under consideration. In this view of the mater, we are of the view that this issue requires fresh examination at the end of the learned CIT(A). Accordingly, we set aside the order passed by the learned CIT(A) and restore the above said issue to the file of the learned CIT(A) for adjudicating it afresh, after affording adequate opportunity of being heard to the assessee.

In the result, appeal filed by the assessee is treated as allowed for statistical purposes.