TMI Blog1988 (4) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... other capital asset so as to exempt it from the charge of capital gains tax resulting on sale of shares in question ? " The reference has been made at the instance of the Revenue. In order to appreciate the contours of the controversy reflected by these questions, it would be necessary to note a few introductory facts at the outset. The assessee trust is a charitable trust. The year of assessment is 1974-75. During the relevant year, the assessee trust sold three shares of Karamchand Premchand Private Limited and 377 shares of Calico Mills and realised a net consideration of Rs. 1,75,807. Some of the above shares had been received by way of donation whereas some of the shares were received by bonus accretion to the above mentioned shares. The Income-tax Officer sought to compute the capital gains on the above sales of shares. The assessee trust claimed before him that the amounts received on account of the sale of the shares had been in fact kept as deposit-bearing interest with the result that the provisions of section 11(1A) were attracted. According to the assessee trust, the consideration received on the sale of shares was utilised for the acquisition of the fixed deposits s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------------ Name of the company No. of shares Rate Total Name of the purchaser --------------------------------------------------------------------------------------------------------------------------------------------------- The A' bad Mfg. Ord. 377 443 1,67,011 Karamchand Premchand Calico Ptg. Co. Ltd. Pvt. Ltd. Karamchand Ord. 3 2932 8,796 Estate of Ambalal Premchand Pvt. Ltd. Sarabhai. ---------------- Total 1,75,807 ---------------- Price In the case of Calico Mills shares, the rate of Rs. 443 per share is the closing rate on Saturday 23rd June, 1973 (24th being Sunday), and in the case of shares of other companies, the rate is fixed on the basis of the value computed as per the Wealth-tax Rules. Mode of payment: 10% of the total price is received on delivery of share certificate on June 26, 1973. Balance will be kept by the purchasers as deposit carrying interest at 9 and half per cent per annum for the period as under: 1/9th, i. e., Rs. 17,881, for the period of one year ending on June 30, 1974. 2/9ths, i. e., Rs. 35,161, for the period of one year ending on June 30, 1975. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment account and not as debts due from sundry debtors, viz., concerned purchasers. It is in the background of this factual matrix that the questions referred to us for our consideration will have to be examined and answered. We may first turn to the statutory provisions. Section 11 (1) as applicable at the relevant time read as under : " 11. ( 1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total Income of the previous year of the person in receipt of the income (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India ; and where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty five per cent. of the income from such property;.." Section 11(1A) reads as under " (1A) For the purposes 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 consideration is utilised for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning 90% which otherwise could have been paid in cash by the purchasers to the seller was allowed to be retained by the purchasers as a fixed deposit to the credit of the seller. There is overwhelming evidence on record which clearly indicates that full consideration had passed at the relevant time and 90% thereof was invested by the seller-trust in the shape of fixed deposits which were permitted to be kept by the purchaser as fixed deposits to the credit of the seller-trust. Soparkar, for the Revenue, vehemently submitted that as only 10% of the consideration was received in cash by the seller-trust and 90% was not so received and remained in the hands of the purchaser, it must be held that this 90% remained the unpaid purchase price which was agreed to be paid up by the purchaser by easy instalments. Soparkar, however, fairly stated that if this 90% of the sale price was paid over to the seller and then immediately the seller had invested the same with the buyer, the Revenue would have no case. In our opinion, in the light of the salient features of the case which we have discussed earlier, it cannot be said that 90% of the price had remained unpaid. In fact, it had also been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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