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2015 (11) TMI 114 - ITAT CHENNAI

2015 (11) TMI 114 - ITAT CHENNAI - TMI - Eligibility for benefit U/s.11 - CIT(A) allowed the claim and not taxing the profit arising out of the sale of land since the proceeds were utilized for charitable activities of the Trust as per the provisions of sections 11, 12 & 13 of the Act - Held that:- It is apparent from the facts of the case that the assessee had sold its unutilized land for pursuing its main objects viz., education. In order to secure maximum revenue, the assessee has indulged in .....

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ust viz., Education. Hence as held by the Ld. CIT (A), the transaction of the sale of the land by the assessee in a wise manner by applying commercial prudence is only an activity which is incidental to the main objects of the assessee. Therefore, the view of the Ld. CIT (A) that the proviso of Section-2(15) will not be applicable to the facts of the assessee’s case is appropriate and justified considering the facts and circumstances of the case. Therefore, we hereby confirm the order of the Ld. .....

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n order of the Commissioner of Income Tax (A)-VII, Chennai dated 13.05.2015 in ITA No.169 & 1304/13-14 passed under Sec.143(3) read with section 250 of the Act for the assessment year 2010-11 & 2011-12. 2. The Revenue has raised six grounds in its appeal, however the crux of the issue is that the Ld. CIT(A) has erred in law by allowing the claim of the assessee for granting the benefit U/s.11 of the Act thereby not taxing the profit arising out of the sale of land since the proceeds were .....

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leted U/s.143 (3) of the Act on 31.03.2013 & 24.02.2014 by treating the income derived from sale of land as business income of ₹ 1,62,76,519/- & ₹ 44,23,266/- respectively. 4. During the course of assessment proceedings, it was noticed by the Ld. Assessing Officer that the assessee had disclosed an amount of ₹ 1,62,76,519/- and ₹ 44,23,266/- as profit on sale of land for the assessment year 2010-11 & 2011-12 respectively. On query, the assessee has replied for .....

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d to abandon the idea of medical college and old age home and decided to confine to running junior and egree colleges, drinking water and mortuary vans in the district of Nellore and Prakasam, in A.P. Consequently, when the above referred land was proposed to be disposed off, there were no buyers in view of the huge stretch of land. Therefore the assessee obtained permission from town planning authorities, converted the land into small plots and started selling the land in the layout from the F. .....

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to Capital Asset being property held under trust wholly for charitable or religious purposes. As explained in the para 2 above, the land originally purchased for setting up medical colleges and old age homes ceased to be a property held under trust wholly for charitable purposes since the assessee abandoned the plan of setting up medical college and old age homes. Since then the assessee endeavored to dispose of the property and utilize the proceeds in the charitable activities of the assessee .....

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to the facts of the assessee s case. A.Y 2011-12 4. During the relevant year the assessee sold Iwo plots of land for a consideration of ₹ 44.60 Iakhs. Copies of the sale deeds 5/01/2010 and 15/12/2010 are enclosed. A statement showing computation of Capital gains is enclosed. As regards the corresponding cost of land it is submitted that the assessee had purchased 71.89 Acres of land in Nellore during the years 1986-87 for setting up a medical college and old age homes. When these objectiv .....

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admitted profit on sale of such land as income derived from property of the trust and claimed exemption. Thus, the contention of the assessee that the land for sale is not the property of the trust cannot be accepted. (iii) The assessee had purchased 71.89 acres of land and at the time of sale of the property the assessee had obtained necessary permission from the Town Planning Authority to divide the land into smaller plots. (iv) The assessee had been consistently selling the plots of the appro .....

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ng plots in the layout is in the nature of business and therefore falls within the definition provided in Section-2(13) of the Act viz., an adventure in the nature of trade and commerce. 5. For the afore stated reasons, the Ld. Assessing Officer brought to tax the amount of ₹ 1,62,76,519/- & ₹ 44,23,266/- under the head income from business for the assessment year 2010-11 & 2011-12 respectively. 6. On appeal, the Ld. CIT (A) held that the assessee is not liable to tax on the .....

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to Section-2(15) of the Act will not be applicable to the case of the assessee, since the main activities of the assessee is education. (iv) The Ld. Assessing Officer has herself recognized the charitable nature of the trust and its genuineness. (v) The predominant object and purpose of the trust were charitable in nature and not for earning profit; however such characteristic of the trust will not alter merely because some profit is derived by the trust while pursuing its charitable activities .....

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exemption cannot be denied to the trust. 8. Before us, the Ld. A.R. reiterated his submissions made before the Revenue on either occasion as follows:- a) The Assessee Trust is constituted in the year on June 25th 1986 and is registered under section 12A(a) of the Income Tax Act. b) The principle object of the Assessee trust is to provide Medical relief for the needy, running of educational institution, supply of drinking water and other charitable activities. The appellant has been running educa .....

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ssee therefore confined itself to activity of running colleges, providing drinking water to rural areas and mortuary vans. d) In the meanwhile assessee had to face issues pertaining to encroachment of lands. After holding the land for a substantial period of 15 years the assessee therefore decided to part with the land and utilize the proceeds of the same to run the existing education institution and for purposes for which the trust was established. e) In view of the enormous size of land the as .....

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vity as defined in section 2(15) of the Act and has confined its addition only to issue relating to the sale of the immovable asset. 9. Ld. D.R vehemently argued in support of the order of the Ld. Assessing Officer and further submitted that the promotion of residential layout and sale of the same by plotting plots thereby deriving gain from real estate transactions cannot be construed as a charitable activity and therefore any income arriving out of the same should be taxed in the hands of the .....

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sources. Retaining land which is not required for the purpose of the assessee s trust will not help the assessee to comply with its objects in a constructive manner. Therefore, prudently the assessee trust has realized maximum revenue from the sale of the excess land, and utilized the same for complying with the main objects of the assessee trust viz., Education. Hence as held by the Ld. CIT (A), the transaction of the sale of the land by the assessee in a wise manner by applying commercial prud .....

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