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2022 (2) TMI 45 - HC - Income TaxExemption u/s 11 - ITAT allowed the deduction and issues of application of income - Capital asset transferred by the charitable trust and utilized for acquiring another capital asset - HELD THAT:- A legal fiction has been created by Section 11(1A) to consider such transfer of capital asset and the investment of sale proceeds for acquiring another capital asset to be so held by the Trust as applied to charitable or religious purposes under Section 11(1)(a). At any stretch of imagination, this legal fiction created under Section 11(1A) cannot be considered as a proviso to carve out an exception to the main provision. It is in the background of the circular instructions, referred to supra, in order to give statutory force, this provision has been inserted. Capital asset transferred by the charitable trust and utilized for acquiring another capital asset would alone cannot be the criteria for granting exemption under Section 11(1A) or in other words, no denial could be made if the sale proceeds are transferred to another charitable trust. Such inter-se transfer between two charitable trusts being not disputed by the department, cannot be a ground to deny the benefit under Section 11(1A) of the Act. The sale proceeds need not always be invested in another capital asset to be held in the name of the charitable trust. There may be circumstances where a charitable trust is not applying for charitable or religious purposes to the extent to which such income has to be applied to such purpose in India directly and intends to invest in another capital asset to be so held by such charitable institutions. Certainly, it is not a circumstance involved herein. No doubt, the sale proceeds are transferred to another charitable and religious purpose, the same would necessarily come within the ambit of Section 11(1A). Hence, the finding of the Tribunal placing reliance on the judgment of Al Ameen Educational Society, supra, though has not reached finality on the merits of the case for want of monetary reliefs, the same cannot be held to be invalid or illegal in view of the provisions of the Act as discussed above. As in the case of Commissioner of Income Tax v. Maria Social Service Society [2018 (11) TMI 1056 - KARNATAKA HIGH COURT] had considered the question relating to the return of income filed by the assessee and some foreign benefits received by the charitable trust and made over such remittance to another charitable trust which was newly constituted held to be not in contravention of the provisions of Section 11 of the Act as long as the subject matter of application of money is for the purpose of objects of the trust as envisaged under Section 11 and as such the said transfer could not be a ground for cancellation or rejection under Section 12AA - Decided in favour of assessee.
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