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2016 (9) TMI 1570 - AT - Income TaxExemption u/s 11 - property sold/asset sold were donated to the other public charitable trust/institutions - AO made the addition under capital gain - as per assessee income donated resulted into application of income liable for exemption under Section 11 - HELD THAT:- As per insertion of Sec.11(1A) of the Act, option of charitable trust to apply sale proceeds for application to charitable or religious purpose including donation to another charitable trust has not been taken away but rather one more avenue has been opened that is investment in new capital asset to be treated as deemed application to charitable or religious purpose. The CBDT in Circular No.72 dated 6th January, 1972 has explained the legislative intent behind insertion of Sec.11(1A) of the Act as a measuring for grating tax relief and removing certain anomalies and practical difficulties. Section 11(1A) of the Act does not place any restriction but it is enlarging the area of utilization. The Assessee trust has acquired land being capital asset for charitable purpose but due to abnormal increase in value due to establishment of Heart and Eye Hospital by group trust, it sold the capital assets and applied the proceeds by way of donation to group trust which is running ear and Eye Hospital. The trust is not allowed to do any business by its rules and regulations and the trust has not carried out any business and as such surplus on sale of land is not business income but is capital gain. Land Development expenses disallowance - AO has proceeded on a complete wrong footing. It is not true that most of the land development expenses have been incurred after the sale of land. Rather expenses were incurred prior to sale and payment was made after realization from sale of land. The AO’s note that there is no justification of fencing of land already sold by the assessee trust after sale of a land is not true rather by fencing land was made fit for sale - there is no reason to disallow land development expenses. Indexation for land sold should be allowed as contended earlier this is capital gain and not business income. Donation paid to Brahmanand Sewa Sadan should be allowed as application of income of trust for charitable purpose as:- a) Capital gains are part of income and can be applied for charitable purpose including donation to another charitable trust. b) Done Brahmanand Sewa Sadan is running Heart Hospital in association with Dr. Devi Shetty the renowned heart surgeon and Eye Hospital with renowned eye surgeon, Dr. Parth Biswas. c) Audited accounts of Brahmanand Sewa Sadan are being filed along with Nil Income Tax assessment order. Referring to legal position as explained in the decision of the ITAT Bangalore in the case of Al Ameen Education Socieity [2012 (11) TMI 346 - ITAT BANGALORE]we are of the view that the CIT(A) was justified in allowing relief to the Assessee. - Decided in favour of assessee.
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