2024 (2) TMI 165 - HC - Income Tax

Benefit u/s 11(1A) - Whether property was not held under Assessee Trust wholly for the charitable/religious purposes? - ITAT allowed exemption - HELD THAT - ITAT, in our view, rightly came to the conclusion that Assessee was entitled to claim the benefit. This was because admittedly, Assessee was the owner of the property and the sale deed was executed with Dilip Estates only on 20th April 2007. Even the Charity Commissioner has accorded his permission for the sale. Once the year of sale is taken to be AY 2008-09, then admittedly, the possession of said property is deemed to have been given in the said assessment year. Once the AO has accepted the plea that transfer took place in AY 2008-09 and assessed income under long term capital gains in the hands of Assessee, the ITAT correctly concluded that it cannot be said that the possession was not transferred in AY 2008-09. Once legal possession has been handed over by Assessee only in 2008-09 then it is presumed and accepted that the said capital asset was held by Assessee trust wholly for charitable purposes till the date of its sale. Decided against revenue.

Summary

Issues involved:
The main issue in this case is whether the Assessee, a public charitable trust, is entitled to claim the benefit under Section 11(1A) of the Income Tax Act, despite not holding the property under the trust wholly for charitable or religious purposes.

Comprehensive details of the judgment:

1. The Respondent-Assessee, a public charitable trust, entered into an agreement in 1994 to sell a property and needed permission from the Charity Commissioner to dispose of it. The Charity Commissioner granted permission subject to conditions, including investing the sale proceeds in fixed deposits for charitable activities. A dispute arose with the buyer, leading to a settlement where the property was transferred to the buyer's nominee.

2. The Assessee invested the sale proceeds in fixed deposits with nationalized banks, claiming that no capital gain should be assessed under Section 11(1A) of the Act if the proceeds are reinvested in long-term investments for charitable purposes.

3. The Assessing Officer disagreed, stating that since the property was not in the trust's possession for 12 years until the sale deed was executed, the trust did not fulfill the requirement of holding the property wholly for charitable purposes under Section 11(1A).

4. The Commissioner of Income Tax (Appeals) ruled in favor of the Assessee, allowing the appeal and granting the benefit under Section 11(1A).

5. The issue before the ITAT was whether the Assessee was entitled to claim the benefit under Section 11(1A). The ITAT concluded that the Assessee was eligible for the benefit, considering that legal possession was transferred in the assessment year 2008-09, and the property was held by the trust wholly for charitable purposes until its sale.

6. The High Court upheld the ITAT's decision, stating that once legal possession was transferred in 2008-09, it was presumed that the property was held by the trust wholly for charitable purposes until the sale. No substantial question of law arose, and the appeal was dismissed.

This summary provides a detailed overview of the judgment, highlighting the key issues and the court's decision regarding the Assessee's entitlement to the benefit under Section 11(1A) of the Income Tax Act.