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

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ITA 4581/DEL/2018Status: DisposedITAT Delhi12 June 2023AY 2014-155 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the expression 'income' should be understood in its general sense. It directed the Assessing Officer to re-examine the nature of the loss and whether it should be reduced from total income rather than being treated as an application of income.

What were the facts?

The assessee-trust invested in mutual funds as permitted by Section 11(5) of the Income Tax Act. In the previous year, it had capital gains from these investments, which were accepted as income. In the current year, the trust incurred a loss of Rs. 1,49,80,675/- on the sale of mutual funds.

What were the issues?

Whether a capital loss on the sale of mutual funds, which were permitted investments for a trust, can be set off against the trust's income, and whether it was incorrectly claimed as an application of income.

Which sections of the Income-tax Act were involved?

Section 11(5)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,

Before: SHRI N.K. BILLAIYA, & SHRI ANUBHAV SHARMA

For Appellant: Shri Anil Bhalla, CA
Hearing: 08.06.2023Pronounced: 12.06.2023

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

1.

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.

2.

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/-.

3.

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.

4.

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.

5.

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

6.

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.

7.

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

8.

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.

9.

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.

10.

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

The order is pronounced in the open court on 12.06.2023.

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