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TMI Blog2016 (9) TMI 1570X X X X Extracts X X X X X X X X Extracts X X X X ..... erty and the Long Term Capital Gains on sale of the aforesaid property was computed by assessee at Rs.83,42,447/-. The computation of total income made by the assessee for assessment year 2010- 11 was as follows:- Computation of total income & tax liability AY 2010-11 Income from capital gain Long term capital gain Sales proceeds 13,998,236.00 Less: index cost of acquisition A (index : 447) 60,981 B (index: 426) 124,026 (185,007.00) Less: cost of improvement (5,470,782.29) 8,342,446.71 Income from other sources Donation 7,100.00 Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .com 250 (Bangalore), wherein it was held that capital gains or sale of assets charitable trust if they are applied for charitable purpose cannot be brought to tax. 5. The AO, however, rejected the claim of assessee and held as follows:- "Conclusion:- A combined reading of the provisions of section 11(1A) as well as Board's Circular No. 72 of 1972 and understanding of the cited case laws makes it abundantly clear that the assessee has to utilize the net consideration on the sale of a capital asset for acquiring another fresh capital asset. The assessee is not entitled to use such amounts for paying out the same as contribution to another trust/organization. Further, it is also to be noted that the assessee is not engaged in any meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the order of the AO and the submissions of the assessee and I find considerable merit in the submissions of the assessee. There is no dispute that the assessee is a charitable society and has sold a landed property and the income/capital gain has arisen to the assessee which is required to be applied for charitable purposes as provided u/s 11(1)(a). The provisions of section 11(1)(a) is a basic provision for the application of the money for the charitable purposes and the provisions of section 11(1A) is an optional provision for the assessee in case the assessee chooses to buy another capital asset out of the capital gain and the basic idea for both the provisions is to allow exemption to a charitable society so longs the income is appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied on the order of AO and Ld. Counsel for the assessee relied on the order of Ld. CIT(A). 10. We have given a careful consideration to the rival submissions. A charitable trust can spend away the proceeds of the capital gain on sale of the capital assets in the following modes - A It can apply proceeds to charitable purposes as was allowed prior to insertion of Section 11 (1A) of the Actand as is allowed even after insertion of Section 11(1A) of the Act. B. It can accumulate proceeds within the limits generally and beyond the limits by following laid down procedure that is filing Form No. 10 under Section 11(2) of the Act. C. It can make donation to other charitable trusts. D. IT can invest proceeds of sale of capital assets in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p 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. 12. As regards Land Development expenses the 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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