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2020 (8) TMI 167 - AT - Income TaxAssessment of capital gains of trust after withdrawing exemption u/s 11 - assessee is not eligible for the benefit of section 13 - assessee trust is registered under section 12A - assessee while computing capital gain/loss on sale of mutual funds claimed the benefit of indexation on the cost of acquisition - AO and the CIT (A) rejected assessee’s computation of capital loss on sale of mutual funds on the premise that the assessee being charitable trust is not eligible for indexation on cost of acquisition - HELD THAT:- It is an admitted fact that the assessee in the impugned assessment year has sold mutual funds and had not applied funds of the trust in accordance with the provisions of section 11 of the Act. The authorities below have rightly denied the benefit of section 13 of the Act to the assessee. AO after withdrawing the benefit of Section 13 of the Act completed the assessment under normal provisions. The assessee while computing capital gain/loss on sale of mutual funds claimed the benefit of indexation on the cost of acquisition. AO and the CIT (A) rejected assessee’s computation of capital loss on sale of mutual funds on the premise that the assessee being charitable trust is not eligible for indexation on cost of acquisition. The denial of indexation has caused double whammy to the assessee. The assessee loses the benefit of section 13 and is assessed under normal provisions of the Act. At the same time under normal provisions, the assessee is denied the benefit of indexation. In Director of Income Tax (Exemptions) vs. Shardaben Bhagubhai Mafatlal Public Charitable Trust [2000 (9) TMI 45 - BOMBAY HIGH COURT] in a somewhat similar case, where the trust had made investments in violation of the provisions of section 11(5) and was denied the benefit of section 13; the assessee’s claim of deduction under section 80L was also denied by the Revenue. Hon’ble High Court following the judgement rendered in the case of CIT v. Marsons Beneficiary Trust [1990 (7) TMI 37 - BOMBAY HIGH COURT] upheld the decision of Tribunal in directing the Revenue to make assessment by treating the assessee as an individual. Thus we hold that while completing assessment under normal provisions of the Act, the assessee should be treated as individual. Since, benefit of section 13 has been withdrawn from the assessee, the benefit of indexation while computing capital gain/loss should be allowed. Benefit of carry forward of earlier year deficit and set off against current year income - Since assessment is made under regular provisions, the assessee is allowed to carry forward deficit of earlier years and set off against current year income, in accordance with the provisions of the Act. The ground No.3 of the appeal is allowed.
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