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Issues Involved:
1. Liability to capital gains tax under Section 2(47) of the IT Act. 2. Entitlement to exemption under Section 11 of the IT Act. Issue-Wise Detailed Analysis: 1. Liability to Capital Gains Tax under Section 2(47): The primary issue was whether the assessee-trust was liable for capital gains tax during the assessment year 1992-93. The assessee contended that no transfer of property occurred within the meaning of Section 2(47) of the IT Act as no possession of the property was handed over during the relevant year. The trust had entered into an agreement for sale of land and received an advance of Rs. 22,00,000, but the physical possession was to be transferred only upon the execution of the final sale deed. The necessary permissions from the Charity Commissioner and the Collector of Junagadh were obtained only in April 1992, which falls in the subsequent assessment year 1993-94. The Tribunal noted that the definition of "transfer" under Section 2(47) had been widened by the Finance Act, 1987, but clarified that a transfer is considered complete when possession is allowed in part-performance of a contract. Since the possession was not handed over during the year under appeal, there was no transfer within the meaning of Section 2(47). The Tribunal concluded that the capital gains should be assessed in the subsequent year when the actual transfer took place. 2. Entitlement to Exemption under Section 11: The second issue was whether the assessee-trust was entitled to exemption under Section 11 of the IT Act. The AO had denied the exemption on several grounds, including late filing of the return, non-fulfillment of statutory requirements, and lack of charitable activities. The Tribunal found these grounds unjustified. It noted that the trust was registered under Section 12A and had not contravened any provisions of Section 13. The late filing of the return does not automatically lead to forfeiture of exemption under Section 11; the appropriate recourse would be to initiate penalty proceedings under Section 272A(2)(e). The Tribunal also observed that the trust did not have liquid resources to carry out charitable activities until the sale of land. The funds raised from the sale were subsequently used for charitable purposes, and the trust was treated as a charitable entity in both preceding and subsequent years. The Tribunal dismissed the AO's contention regarding the non-filing of Form No. 10, stating that more than 75% of the income was spent during the year, making the filing of the form a matter of academic importance. Conclusion: The Tribunal reversed the findings of the lower authorities, holding that the assessee-trust is a genuine charitable trust entitled to exemption under Sections 11 and 12 of the IT Act. It also ruled that the trust is not liable to pay tax on capital gains during the year under appeal, as the transfer of property did not occur within the relevant assessment year. Result: The appeal was allowed.
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