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South Point Education Society Versus Income Tax Officer (Exemption) -II, Kolkata

2015 (9) TMI 1352 - ITAT KOLKATA

Exemption u/s 11 - application of capital gains arising out of disposal of investments - acquisition of new capital assets (Fixed Deposits) which was not existing on the last day of the previous year - Fixed Deposits got matured before 31st March - Held that:- There is no condition that capital asset should be held till the end of the financial year. We are not inclined to accept the interpretation placed by the ld. CIT(Appeals) that the term ‘so held’ implies that the capital asset which was ac .....

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against the order of ld. Commissioner of Income Tax (Appeals)-XIV, Kolkata dated 10.09.2010 for the assessment year 2007-08. 2. The assessee in its appeal has raised the following effective grounds of appeal:- 1. That on the facts and in the circumstances of the case the learned commissioner of Income Tax (Appeals) erred in not holding that the income of the appellant being exempt u/s.10(23C)(vi) of the IT Act and therefore the learned ITO was not correct in applying the provisions of Sec. 11 w .....

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in the circumstances of the case the learned Commissioner of Income Tax (Appeals) erred in law in holding that in order to get the benefit of Sec. 11(1A), the capital asset acquired out of sale consideration should be held in the same form till the end of the financial year of that year. 3. Brief facts of the case are that the assessee-Society, in the relevant assessment year, was registered under section 12A of the Income Tax Act, 1961. The main activities of the Society were educational in nat .....

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charges. There was income from interest and dividends also. The expenses had been claimed at ₹ 16,90,81,042/-. Apart from this, there were capital expenditures to the tune of ₹ 44,30,340/-. After considering the assessee s submission, the Assessing Officer determined the total income at ₹ 47,81,423/- as detailed below:- Income as per Income & Expenditure account Less: Statutory accumulation @ 15% of ₹ 17,66,21,082/- Rs.17,66,21,082/- ₹ 2,64,93,162/- Rs.15,01,27, .....

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2007-08 on 21.01.2009, which was still pending before the authority. However, since the approval had not been granted till the date of passing of assessment order, the Assessing Officer had considered the assessee s income only under section 11 of the Income Tax Act. 4. Before the ld. CIT(Appeals), the assessee had informed that application of the assessee-Society for exemption under section 10(23C(vi) had been rejected by the competent authority. Before we proceed further to consider the main .....

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the Act was not complete in as much as the Assessing Officer did not give effect to the provisions of section 11(1A) of the Act in framing the assessment. The assessee in its written submission had pointed out that it was evident from the assessee s balance-sheet and income & expenditure account read with schedules 4 and 11 thereto that during the previous year relevant to the assessment year 2007-08, the assessee disposed of some of its investments giving rise to capital gains of ₹ 7 .....

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of the Act to the extent specified there under. The assessee had submitted copies of the audited accounts of the assessee and a statement showing reinvestment of the proceeds from transfer of capital assets during the previous year relevant to the assessment year 2007-08. The assessee s claim was that it utilized the whole of the net consideration of ₹ 5,90,08,073.08 for acquiring other capital assets held under Trust wholly for charitable purposes and as such the capital gains of ₹ .....

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s contention to the extent of ₹ 67,54,288/-. However, in respect of reinvestment which was not held as capital asset up to the end of the year i.e. 31.03.2007, the Assessing Officer denied the assessee s claim. The main contention of the Assessing Officer was that exemption under section 11 was not allowable to the assessee for capital gain to the extent of ₹ 1,34,233/- earned on sale of DSP Merrill Lynch Mutual Fund dated 04.08.2006 and 22.08.2006 because the FDs in which the sale p .....

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e main issue is whether the Assessing Officer s plea of holding the investments till the end of the financial year, which was accepted by the ld. CIT(Appeals), needs to be considered in the light of the provisions of section 11(1A). The provisions of section 11(1A) are reproduced hereunder:- 11(1A) for the purpose of sub-section (1),- (a) Where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net conside .....

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o the amount, if any, by which the amount so utilized exceeds the cost of the transferred asset; (b) Where a capital asset, being property held under trust in part only for such purposes, is transferred and the whole or any part of the net consideration is utilized for acquiring another capital asset to be so held, then, the appropriate fraction of the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to be extent specified hereunder, .....

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