TMI Blog1984 (11) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... of the net consideration is utilised for acquiring another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified therein. The ITO has observed that the assessee has invested Rs. 2,20,000 in fixed deposits with Maharashtra Transport Corporation and that it had been contended on behalf of the assessee that the said investment amounted to utilisation of the consideration for acquiring another capital asset to be held wholly for charitable purposes, and, as such, the said amount would be deemed to have been applied for charitable purposes as laid down in s. 11(1A). The ITO rejected the said contention. According to him, fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 in Maharashtra State Road Transport Corporation. Without prejudice to the above, your appellant submits that they are entitled to accumulation under s. 11(2) of the Act in respect of the amount of Rs. 2,17,210 as all the formalities in connection with the same were duly complied by them." 6. As regard the first ground of appeal, the ld. AAC held that the fixed deposit in Maharashtra State Road Transport Corporation was not a capital asset within the meaning of that expression in s. 11(1A) of the Act, and as such, the investment in the said fixed deposit would not amount to utilisation in acquiring another capital asset within the meaning of the said section. As regards Instruction No. 883 issued by the Board, he observed that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such, the said investment would not give rise to an inference that capital gain arising from the transfer had been applied for charitable of religious purposes. Our attention was drawn to several definitions of the term capital assets. 8. We have considered the rival submissions and facts on record. it is an admitted fact that the transfer of assets held by the assessee trust gave rise to capital gain of Rs. 2,17,210. The said capital gain amounted to the income of the trust. The assessee could get exemption under s. 11(1) of the Act only if the assessee applied the said income for charitable or religious purposes, or if the assessee accumulated or set apart the said income, and that the said accumulation or setting apart was not in exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere capital gains in acquiring new capital asset. The real inquiry before the ITO should have been whether the net consideration received on transfer had been utilised in acquiring new capital asset. That enquiry was not made. The enquiry appears to have been confined to the question whether the amount of Rs. 2,20,000 (which roughly represented the capital gains) had been utilised for acquiring another capital asset. Consequently, even if we hold that investment of Rs. 2,20,000 in fixed deposit with MSRTC amounted to acquisition of new capital asset, that would not entitle the assessee to claim exemption under s. 11(1A) of the Act in respect of the whole of the capital gains amounting to Rs. 2,17,210, that would entitle the assessee to clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposit with a bank. That instruction would not apply to investment in fixed deposit with any other person or company. 12. The contention on behalf of the assessee is that in Instruction No. 883, it had been mentioned that the Board had been advised on that point and this indicated that the said instruction applied to investment in fixed deposits with Government Corporation like MSRTC. We are unable to agree with this contention. There is nor indication in the Instruction No. 883 that the same should be applied to investment in fixed deposit with any other Government organisation. If the fixed deposit itself was a capital asset, the fixed deposit with a private person would equally be a capital asset. In that case a trust would invest the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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