2024 (11) TMI 1014 - AT - Income Tax

Revision u/s 263 - Section 50C applicable to a charitable trust - AO has not considered the value of the property as per provisions of Section 50C and therefore, difference between the stamp duty value and transaction value was not examined by the AO and no explanation was submitted by the assessee - HELD THAT - It is apparent that the assessee has offered capital gain in assessment year 2017 18, the property was transferred in that year, property got registered in current assessment year. The capital gain offered by the assessee have been assessed to income tax in assessment year 2017 18 under section 143 (3) of the act. Therefore, even if, the action u/s 263 is required to be taken, it should have been taken in assessment year 2017 18 and not in assessment year 2018 19. Even otherwise in the case of the assessee, a trust, according to provisions of section 11 (1 A) where a capital asset is sold, transferred, the net consideration is required to be utilized for acquisition of another capital asset in those circumstances, the net consideration is deemed to have been applied for charitable purposes to the extent consideration is utilized. Net consideration is defined in explanation (iii) meaning the full value of the consideration received or accruing as a result of the transfer of the capital asset. Therefore, there is no provision under section 11 (1A) to substitute the net consideration with full value of the deemed consideration. Section 50 C of the act applies only for the purposes of computation of capital gain under section 48 of the act. Provisions of section 48 of the act does not apply to a charitable trust in view of provisions of section 11 (1A) of the act, so far as the facts of this assessee are concerned. Though assessee has relied upon several judicial precedents to support its case that in case of a charitable trust provisions of section 50 C does not apply, but even on the facts of the present case also we do not find that there should have been any addition on account of stamp duty value of the property in assessment year 2018-19, when the property is transferred in assessment year 2016 17 and revenue has accepted the same by framing an assessment order u/s 143 (3) of the act. Therefore, even otherwise, the stamp duty value of the property would not have any impact on the income of the assessee for assessment year 2018 19. Thus, the order itself is not prejudicial to the interest of revenue. Therefore, we do not find that the assessment order passed by the learned assessing officer for assessment year 2018 19 is erroneous insofar as prejudicial to the interest of the revenue - Assessee appeal allowed.

Summary

Issues Involved:

1. Applicability of Section 50C of the Income Tax Act to a charitable trust.
2. Alleged double taxation of income for Assessment Years 2017-18 and 2018-19.
3. Legitimacy of the order passed under Section 263 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Applicability of Section 50C of the Income Tax Act to a Charitable Trust:

The primary issue was whether the provisions of Section 50C, which pertain to the substitution of the sale consideration with the stamp duty value for computing capital gains, apply to a charitable trust. The assessee, a charitable trust, argued that Section 50C does not apply to trusts because their income is computed under Sections 11, 12, and 13 of the Act, which provide for exemptions on income applied for charitable purposes. The assessee contended that the net consideration from the sale of a capital asset, when reinvested in another capital asset, is deemed to be applied for charitable purposes under Section 11(1A), and thus, the provisions of Section 50C are not applicable. The Tribunal agreed with the assessee, noting that Section 50C applies for the computation of capital gains under Section 48, which is not applicable to charitable trusts due to the provisions of Section 11(1A). The Tribunal also referenced several judicial precedents supporting this view, concluding that the substitution of sale consideration with deemed consideration under Section 50C is not warranted for charitable trusts.

2. Alleged Double Taxation of Income for Assessment Years 2017-18 and 2018-19:

The assessee argued that the income from the sale of the property was already offered and assessed in AY 2017-18, as the sale deed was executed in December 2016. The registration of the sale deed in May 2017, relevant to AY 2018-19, led to the CIT(E) invoking Section 263, alleging that the assessment order for AY 2018-19 was erroneous and prejudicial to the interest of the Revenue. The Tribunal noted that the capital gain was correctly offered and assessed in AY 2017-18, and the property was effectively transferred in that year. The Tribunal found that the CIT(E) should have considered the facts of AY 2017-18 rather than AY 2018-19, as the capital gain was already accounted for and taxed in the earlier year. Therefore, the Tribunal concluded that there was no double taxation, and the CIT(E)'s invocation of Section 263 for AY 2018-19 was inappropriate.

3. Legitimacy of the Order Passed Under Section 263 of the Income Tax Act:

The CIT(E) invoked Section 263, arguing that the Assessing Officer failed to verify the applicability of Section 50C and the discrepancy between the sale consideration and the stamp duty value, rendering the assessment order erroneous and prejudicial to the interest of the Revenue. The Tribunal examined whether the order passed by the Assessing Officer was indeed erroneous and prejudicial. It found that the capital gain was correctly assessed in AY 2017-18, and the provisions of Section 50C did not apply to the trust. The Tribunal also noted that the Assessing Officer had considered the explanations provided by the assessee, and there was no need for further verification under Section 263. Consequently, the Tribunal quashed the order passed by the CIT(E) under Section 263, determining that the original assessment order was neither erroneous nor prejudicial to the interest of the Revenue.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, concluding that the assessment order for AY 2018-19 was not erroneous or prejudicial to the interest of the Revenue. The provisions of Section 50C were deemed inapplicable to the charitable trust, and the income from the sale of the property was correctly assessed in AY 2017-18, negating any claims of double taxation. The order under Section 263 was quashed, and the appeal was allowed in favor of the assessee.