Loading judgment…
Facts
The assessee, a charitable trust, sold an immovable property and declared nil income. The Assessing Officer (AO) initially accepted this, but later the Commissioner of Income Tax (Exemption) (CIT(E)) invoked Section 263, holding the AO's order to be erroneous. The CIT(E) believed the AO had not considered the difference between the sale consideration and the stamp duty value, and had not examined the applicability of Section 50C.
Held
The Tribunal held that Section 50C of the Income Tax Act is not applicable to charitable trusts, as per Section 11(1A). Furthermore, the property in question was transferred in AY 2016-17 and accepted by the revenue, rendering the action under Section 263 for AY 2018-19 unwarranted. The Tribunal quashed the order passed by the CIT under Section 263.
Key Issues
Whether the CIT was justified in invoking Section 263 to revise the assessment order when Section 50C is not applicable to charitable trusts and the property transfer was in an earlier assessment year.
Sections Cited
Section 143(3), Section 144B, Section 263, Section 50C, Section 11(1A), Section 48, Section 12A, Section 11, Section 36
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRIANIKESH BANERJEE, JM
O R D E R PER PRASHANT MAHARISHI, AM:
Anjuman-E-Shiateali[ The Assessee/ Appellant] against the appellate order passed by the Commissioner of Income Tax (Exemptions) [the learned CIT(E)], Mumbai for Assessment Year (A.Y.) 2018-19 dated
06.03.2024 u/s. 263 of the Income Tax Act, 1961 (the Act) wherein it was held that the assessment in this case was completed by the National Faceless Appeal Centre (NFAC), Delhi under Section (u/s.) 143(3) read with section 144B of the Act dated 26.05.2021 assessing the total income of the assessee at ₹52,52,52,525/- is erroneous and prejudicial to the interest of the Revenue and it was set aside with the direction to verify the sale transaction of property and examineapplicability of provisions of Section 50C of the Act after giving the assessee sufficient opportunity of hearing. Thus, the assessment order was restored back to the file of the learned Assessing Officer.
The assessee is aggrieved with that appellate order and has preferred following grounds of appeal.
“The appellant objects to the order dated 6 March 2024 (date of service of order dated 6 March 2024) passed under Section 263 of the Income Tax Act by the CIT (Exemptions), Mumbai, Income Tax Department for the aforesaid assessment year on the following among other grounds.
The learned CIT(Exemptions), Mumbai have not considered the fact that the issue regarding applicability of provisions of Section 50C was already caused by the learned AO during AY 2017-18 and closed after justification provided by the appellant during the course of assessment. The contention of the learned CIT(Exemptions), Mumbai in stating that the order passed by the learned AO was without verification of facts is not correct.
The learned CIT(Exemptions), Mumbai have not considered the claim of the appellant that the provisions of Section 50C are not applicable in case of charitable trusts whose income is computed under Section 11.12 and 13 of the Income tax Act, 1961. The learned CIT(Exemptions), Mumbai have set aside all the decisions passed in the previous years and have not made any mention about this point in the order under Section 263 of the Income Tax Act 1961.
The learned CIT(Exemptions), Mumbai has erred on facts and in law in taxing the same Income twice i.e., the same amount of Rs 52,52,52,525/-in AY 2017-18 as well as in AY 2018-19 which is against the principles of Taxation as it amounts to double taxation. The learned CIT(Exemptions). Mumbai have not shown caused appellant to know the reason why it was considered in AY 2017-18 4. Such other consequential reliefs as the facts and circumstances demand.”
The brief fact of the case shows that the assessee is a trust who e-filed its return of income for A.Y. 2018-19 on 29.09.2018 declaring total income at Rs.NIL. The trust is registered u/s. 12A of the Act vide Registration dated 28.01.1976 and the assessee has also claimed exemption under Section11 of the Act. This return of income of the assessee was picked up for complete scrutiny as per e- assessment scheme 2019 on the issue of one sale of immovable property by the Trust and investment in immovable property. Notice u/s. 143(2) of the Act was issued on 11.08.2018 and thereafter the assessment proceedings commenced.
The Assessing Officer has notedthat the assessee has purchased and sale immovable property and on verification of the Income Tax return assessee has not shown any receipt in the capital gain schedule of income tax return. Though the assessee has furnished the details of purchase of immovable property at Marathon Innova I.T. Park for a consideration of ₹23,03,08,550/- on 27.07.2017 and Shop No.1, Hushayni Mahal (tenancy rights) at ₹2,42,82,660/- on 15.02.2018. The specific notices were issued on 14.11.2020 for furnishing the details.
As per the ITS information based on return submitted by the Joint Sub Registrar, Andheri 7, assessee has sold a property for consideration of ₹52,52,52,525/- on 17.05.2017 which has the stamp duty value of ₹82,31,00,500/-. This property was jointly purchased by Summer Radius Realty Pvt. Ltd and Summer Buildcorp Pvt. Ltd. The parties have confirmed the above transaction. On issue of the notice assessee submitted that the sale deed was executed on 02.12.2016 but registered on 17.05.2017 of property of land situated at CTS No. H/395 admeasuring 51 sq. mtrs. or CTS No. H/397 admeasuring 163.9 sq. mtrs. and H/398 admeasuring 4046.90 sq. mtrs. collectively admeasuring 4325.30 sq.mtrs in village Bandra, Santacruz (West) Mumbai. Thesale of land and development right is at ₹52,52,52,525/-.
The assessee submitted that income derived from property held under trust is exempt,which also includes capital gains. The learned Assessing Officer was of the view that the assessee hasnot disclosed the capital gain in his return of income and, therefore, as per the registered sale deed, the addition of ₹52,52,52,525/- was made to the total income of the assessee by passing an assessment order under Section. 143(3) read with section 144B of the Act on 26.05.2021.
Subsequently, the record of the assessee was examined by the learned CIT(E) and noted that the assessee has sold property at ₹52,52,52,525/- on 17.05.2017 having a stamp duty value of ₹82,31,00,500/-. The net capital gain of ₹25,45,91,210/- has been invested against the above capital gain. As the assessee has not furnished the details in the income tax return the cost of purchase was not available. It was further recorded that as per Section 36 of Maharashtra Public Trust Act permission of charity commissioner is mandatory for transfer of the property which is also not available on record. Therefore, show cause notice was issued on 18.01.2024 wherein it was mentioned that assessee sold property for consideration of ₹52.52 crores which was assessed by stamp duty authority at ₹82,31,00,00/- thus capital gain has resulted of ₹ 29,78,47,975/- is not assessed. Therefore, provisions of Section 263 were invoked.
In response to theshow cause notice assessee has furnished the reply on 08.02.2024. Assessee submitted that.
i. Assessee has already offered the capital gain as the sale deed was executed on 2/12/2016 in AY 2017- 18 . Copy of computation of total income and ROI was submitted. ii. Sale deed was registered on 17/05/2017 in AY 2018-19, but as sale was already shown in AY 2017-18 same was not shown in AY 2018-19. iii. stamp duty value of ₹82.31 crore is higher than the consideration of Rs 52.52 Crs for the reason that there was no development potential and property was dilapidated with meager rental with a narrow nexus. iv. In case of trust capital gain was utilized for purchase of other properties and hence not chargeable to tax , funds are invested in specified securities as per section 11 (1A) of the Act. v. Provision of section 50 C does not apply to trust.
The learned CIT(E) after considering the submission of the assessee held that learned Assessing Officer has not considered the value of the property as per provisions of Section 50C and therefore, difference between the stamp duty value and transaction value was not examined by the Assessing Officer and no explanation was submitted by the assessee. It was also submitted by the assessee that sale transaction tookplace on 17.05.2017 which is pertaining to A.Y. 2018-19 and in the assessment order for that assessment year also the Assessing Officer has not discuss the issue of sale of property. Therefore, it was held that the Assessing Officer has not made verification on the impugned issue and thus the order passed by the learned Assessing Officer is erroneous so far asprejudicial to the interest of the Revenue and was set aside with a direction to verify the same transaction of property and examined the applicability of provision of Section 50C of the Act. Assessing Officer was further directed to give sufficient opportunity of hearing. Accordingly, the order u/s. 263 was passed on 06.03.2024.
The assessee aggrieved with the same has preferred this appeal stating that.
i. There is no error in the order of the learned Assessing Officer because the provision of Section 50C of the Act does not apply in the case of the Trust. He referred to the provisions of Section 11(1A) and submitted that net consideration arising out of transfer of asset shall be deemed to have been applied for charitable purposes and that section does not prescribe how such capital gain is to be calculated. ii. He further submitted that Section 48 and Section 50C of the Act does not apply in case of a charitable trust and accordingly the order under Section. 263 of the Act is bad in law. iii. The learned Authorized Representative also made that such revision under Section. 263 of the Act is bad inlaw for several reasons. iv. The learned Authorized Representative referred to factual paper book containing 199 pages wherein the assessment proceedings communication and reply thereto under Section. 263 of the Act were also made. v. The learned Authorized Representative further relied upon several judicial precedents of the coordinate Benches wherein it has been held that the assessee being a charitable trust, provisions of Section 50C of the Act does not apply. He relied upon the several judicial precedents.
Therefore, it was submitted that the order is neither erroneous and nor prejudicial to the interest of the Revenue. It was claimed that the solitary issue for which action u/s. 263 of the Act is taken is only for the reason of substituting sale value by a deemed sales consideration in the case of sale charitable trust by invoking the provisions of Section 50C of the Act.
The learned Departmental Representative vehemently supported the order of the learned CIT(E). It was submitted that the learned assessing officer has failed to verify that the sale consideration recorded by the assessee is less than the amount of stamp duty value of the property. Failure to examine the same has made the assessment order erroneous as far as prejudicial to the interest of the revenue. It was submitted that there is no sanctity of the argument that provisions of section 50 C does not apply in case of a trust.
We have carefully considered the rival contentions and have perused the orders of the learned CIT(E).
The brief facts of the case show that i. Assessee is Charitable Trust registered under the Maharashtra Public Trust Act 1950 and consequently granted approval u/s. 12A of the Act. The assessee is regularly assessed to tax.
ii. During an A.Y. 2017-18, the assessee sold immovable property at a consideration of ₹52,52,52,525/- which was duly offered to tax sale deed was executed on 2/12/2016. iii. For A.Y. 2017-18 the return of income filed by the assessee shows that assessee has received a net consideration of ₹52,52,52,525/-. and incurredexpenditure on transfer of ₹5,76,800/- resulting into net consideration of ₹52,46,75,752/-. The cost of the asset was ₹2,98,13,284 and thus capital gain of ₹49,48,62,462/- was computed. Out of that an investment in new assets was made of ₹21,75,78,750/- resulting into shortfall in reinvestment of ₹30,70,97,03/- . Therefore, a capital gain of ₹18,77,65,465/- was considered as capital gain deemed to have been applied for charitable purposes. iv. Assessee is assessed by the Assessing Officer u/s. 143(3) of the Act as per order dated 16.12.2019. Accepting the return of income and computation of the capital gain determining total taxable income at ₹ NIL. v. Therefore, it is apparent that assessee has offered capital gain in A.Y. 2017-18, which is accepted by the learned Assessing Officer by passing an assessment order on scrutiny accepting the claim of the assessee. Such assessment order is placed at page 102 of the paper book and computation is at Page 108 of the paper book. vi. Subsequently, the return of income for A.Y. 2018-19 was filed by the assessee declaring income at ₹ NIL. vii. This return of income was picked up for scrutiny for reason that assessee has sold immovable property by way of a registration of sale deed on 17.05.2017 (relevant to A.Y. 2018-19), which has the stamp duty value of ₹ 82,31,00, 500/-. The show cause notice was issued to the assessee and thereafter the learned
Assessing Officer once again the determined the total income of the assessee for A.Y. 2018-19 at ₹ 52,52,52,525/-. viii. As the stamp duty value of the above property is found to be of ₹ 823,100,500/– as it was registered on 17/05/2017, the learned assessing officer despite above information did not make any addition of the stamp duty value of the property in the hands of the assessee. ix. The learned assessing officer has categorically referred to the provisions of section 11 (1A) of the act at page number 3 – 4 of the acts after considering the explanation of the assessee, as assessee has not disclosed the capital gain, made an addition of undisclosed income is of ₹ 525,252,525/–. x. The learned CIT has invoked the provisions of section 263 of the income tax act stating that the learned assessing officer should have taken the deemed sale consideration of ₹ 823,100,500/– and should have examined the applicability of provisions of section 50 C of the act and held that the order passed by the learned assessing officer is erroneous so far as prejudicial to the interest of the revenue. xi. It is apparent that the assessee has offered capital gain in assessment year 2017 – 18, the property was transferred in that year, property got registered in current assessment year. The capital gain offered by the assessee have been assessed to income tax in assessment year 2017 – 18 under section 143 (3) of the act. Therefore, even if, the action under section 263 is required to be taken, it should have been taken in assessment year 2017 – 18 and not in assessment year 2018 – 19. xii. Even otherwise in the case of the assessee, a trust, according to provisions of section 11 (1 A) where a capital asset is sold, transferred, the net consideration is required to be utilized for acquisition of another capital asset in those circumstances, the net consideration is deemed to have been applied for charitable purposes to the extent consideration is utilized. Net consideration is defined in explanation (iii) meaning the full value of the consideration received or accruing as a result of the transfer of the capital asset. Therefore, there is no provision under section 11 (1A) to substitute the net consideration with full value of the deemed consideration. xiii. Section 50 C of the act applies only for the purposes of computation of capital gain under section 48 of the act. Provisions of section 48 of the act does not apply to a charitable trust in view of provisions of section 11 (1A) of the act, so far as the facts of this assessee are concerned. xiv. Though assessee has relied upon several judicial precedents to support its case that in case of a charitable trust provisions of section 50 C does not apply, but even on the facts of the present case also we do not find that there should have been any addition on account of stamp duty value of the property in assessment year 2018-19 , when the property is transferred in assessment year 2016 – 17 and revenue has accepted the same by framing an assessment order under section 143 (3) of the act. Therefore, even otherwise, the stamp duty value of the property would not have any impact on the income of the assessee for assessment year 2018 – 19. Thus, the order itself is not prejudicial to the interest of revenue.
Therefore, for the reason stated above, we do not find that the assessment order passed by the learned assessing officer for assessment year 2018 – 19 is erroneous insofar as prejudicial to the interest of the revenue. Accordingly, we quash the order passed by the learned CIT passed u/s 263 of the Act .
Appeal of assessee is allowed.
Order pronounced in the open court on 07/10/2024.
Sd/- Sd/- (ANIKESH BANERJEE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 07.10.2024 Aks/- Copy of the Order forwarded to : The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai