CARITAS INDIA,NEW DELHI vs. ACIT (E), CIRCLE- 1(1), DELHI

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] - 40, Delhi dated 03.04.2018 pertaining to assessment year 2014-15.

The solitary grievance of the assessee is that the ld. CIT(A) erred in not allowing loss on mutual fund amounting to Rs. 1,49,80,675/-.

Briefly stated the facts of the case are that the assessee-trust made investment in mutual fund in earlier year as permitted u/s 11(5) of the Income tax Act, 1961 (hereinafter referred to as 'the Act'). The assessee trust made capital gain of Rs. 88,02,824/- in A.Y 2013-14 which was included in the income of the trust and accepted as such by the Assessing Officer in the assessment order dated 18.03.2016 framed u/s 143(3) of the Act.

During the year under consideration, the assessee trust disposed of its mutual fund and suffered loss of Rs. 1,49,80,675/- which was inadvertently claimed as application of income by the assessee as is evident from the computation of income exhibited at pages 11 and 12 of the Paper Book.

The Assessing Officer denied this set off holding that it cannot be allowed as application of income.

Before us, it was strongly contended that the assessee trust returned capital gains. It was allowed to be part of the income of the trust and, therefore, when the assessee trust has incurred capital loss on sale of mutual fund, the same should be allowed to be reduced from the income.

Supporting the order of the lower authorities, the ld. DR stated that the assessee had, in fact, claimed the same as application of income.

We are of the considered view that the expression “income” has to be understood in popular or general sense and not in the sense in which the income is arrived at for the purpose of assessment to tax by application of some artificial provisions either giving or denying deduction.

Therefore, in the interest of justice and fair play, we restore this issue to the file of the Assessing Officer. The assessee is directed to explain the nature of loss in the mutual fund and to show that the same has to be reduced from the total income of the assessee trust and not an application of income. The Assessing Officer is directed to examine the same and decide the issue afresh as per provisions of law.

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