9911796707
TMI Blog2019 (4) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... rds re-purchase of mutual funds purchased out of sale consideration received from sale of investments u/s 11(1)(a) is either not discussed by the AO in his assessment order nor emanating from the records furnished by the assessee before the lower authorities. Although, the assessee has disclosed profit on sale of investments in the P&L Account, other facts with regard to the re-investment on sale consideration for purchase of mutual funds is not clear. The assessee neither made any claim in the return of income filed for the year nor sought to include such claim by way of revised return or revised statement of total income before the AO. When there is no claim with regard to deduction towards re-investment u/s 11(1)(a), before the AO and also the facts with regard to the issue is not placed at the time of assessment proceedings, the Ld.CIT(A) had no option but to proceed on the basis of materials brought out by the AO during assessment proceedings. Accordingly, we find no infirmity in the finding recorded by the CIT(A) in dismissing ground taken by the assessee regarding deduction towards capital gain income derived from sale of investments u/s 11(1)(a). Accumulation of income u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay High Court in the case of Director of Income-tax (Exemption) vs. Jasubhai Foundation (2015) 374 ITR 315 wherein it is held that income which is not to be included in Total Income as per the provisions of Act cannot be included in Taxable Income of the Trust entitled to exemption of certain income u7s,10 and u/s.ll of the Act and therefore 30% of income excluded from Income from Property u/s.24(a) of the Act cannot be charged to tax in the case of charitable trust for computing taxable income of CHARITABLE TRUST. 4. The Learned CIT(A) has erred in not allowing the ground raised before him vide ground no.l 1 of the detailed grounds of appeal and ground no.4 of the concise grounds wherein the Appellant claimed that while computing capital gain included in Total Income deduction should be allowed u7s.11(lA) for amount utilized in purchasing another capital assets and therefore amount of ₹ 49,22,3167- on account capital gains included in Income Expenditure Account should be allowed as deduction from Total Income as the Appellant has utilized the same in purchase of another capital asset during the year. 5. The Learned CIT(A) has erred in not allowing deduction of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has contested disallowance of deduction u/s 24(a) of the I.T. Act on the ground that income of a trust claiming exemption u/s 11 shall be computed in accordance with provisions of the Act, as applicable to other assessees. Therefore, there is no error in the computation of income arrived at by the assessee in respect of rental income after claiming standard deduction u/s 24(a) of the Act. The assessee further contended that while determining the income, the AO has not allowed actual repairs and maintenance expenses incurred by the assessee in respect of property from which rental income has been derived. Therefore, even if income is computed under normal commercial principles, expenditure incurred towards repairs and maintenance shall be allowed as application of income before arriving at income of the assessee. The assessee also made an alternative claim inasmuch as, if the disallowance is necessary in respect of deduction claimed u/s 24(a), an amount equal to deduction claimed u/s 24(a) may be allowed to carry forward and utilized for the objects of the trust as per the provisions of section 11(2) of the Act. 4. The Ld. CIT(A) after considering the relevant submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, cannot be charged to tax in the case of charitable trust for computing taxable income. 5. The Ld.DR, on the other hand, submitted that the issue is covered against the assessee by the decision of ITAT for earlier years, where the Tribunal, after considering relevant facts held that standard deduction on rental income @30% u/s 24(a) of the I.T. Act, 1961 cannot be allowed while computing income of a trust / institution claiming exemption u/s 11 of the Income-tax Act, 1961. 6. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. We find that the issue involved in the present appeal, i.e. deductibility of deduction u/s 24(a) against rental income in case of a trust / institution claiming benefit of exemption u/s 11 is a recurring issue in assessee s case for earlier period. The co-ordinate bench of ITAT, Mumbai Bench B in assessee s own case for AY 2005-06 in ITA No.200/Mum/2011 had considered similar issue in the light of provisions of section 24(a) and also section 11 of the Income-tax Act, 1961, and held that income of a trust / institution shall be computed under normal commercial principles w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 Act during the relevant period, the same would not enter the computation mechanism of the total income. This is as the capital gain or loss (which is only negative income) did not form part of the total income of the assessee which could be brought to charge, so that it was not required to be computed. Reference in this context may also be made to the following observation by the tribunal in the case of Pravin Shah Trust vs. Dy. CIT(in ITA No. 4782/Mum/2010 dated 05. 07. 2013): 3.3 . That is, an income exempt u/c. HI of 'the Act, not forming of the total income, would not enter the computation process determine the quantum of income under the relevant head of each of which has its own computation provisions. ' To the same effect and purport are its observationsin the case of LKP Securities Ltd.(in ITA Nos. 638 W93/Mum/20l2 dated 17.05.2013): '14 ....... The income (and loss, which is only negative income) failing under chapter in of the Ad d/iu, uius, exempt from the levy of the tax, would not form part of the computation of the income under Chapter IV of the Act. That in fact is a fundamental premise; the basis of sec. HA of the Act. The Revenue' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-under, would stand to be taxed directly and not enter the computation mechanism inasmuch as the same do not form part of the gross total income, as section 10A falls under Chapter HI of the Act, so that the provisions of Chapter Vl-A and, consequently, s. 80AD would not be applicable thereto. Before parting with the matter, we may also add that the assessee has been allowed ad the expenditure on repairs and maintenance as debited in its accounts, i.e., on actual basis (Rs. 11.97 lacs/PB 1 pg. 39), even as directed by the Id. CIT(A), and which fact was also clarified by us during hearing. Accordingly, the assessee fs ground/s for the claim of the standard deduction u/s.24 fail. We decide accordingly. Finally, the reliance by the assessee on the decision in the case of IAC, Mumbai vs. Saurashtra Trust [2007] 1061TO 1 (Mum) (SB) is, under the circumstances, misplaced. The said decision is, firstly, sansany reference to any precedents; nay, even without a discussion of the law in the matter. This aspect would in fact become clear in view of the questions referred to and answered by tribunal. As a reading of its order would show (refer para 1), are not directly connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be taken into account and against which actual expenditure incurred for the objects of the trust has to be considered as application of income. Therefore, while arriving at income u/s 11, the AO needs to allow deduction towards actual repairs and maintenance expenses incurred for ₹ 13,00,635. Therefore, we direct the AO to allow deduction towards actual repairs and maintenance expenditure incurred for ₹ 13,00,635 before arriving at income available for accumulation u/s 11(2) / taxable income of the trust / institution. 9. The next issue that came up for our consideration from ground 4 of the appeal is computation of income of a trust in respect of income derived from capital gain u/s 11(1)(a) of the Income-tax Act, 1961. The factual matrix of the impugned dispute are that the assessee has sold certain investments during the year and computed long term capital gain from sale of such investments. The assessee further claimed that it has reinvested sale consideration from sale of bonds / debenture for acquiring mutual funds. Therefore, while computing income of a trust / institution in respect of capital gain, amount invested for purchase of new capital asset needs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and the same to be utilised in the next five financial years commencing from 01-04-2019. In this regard, the Ld.AR for the assessee relied upon the decision of Hon ble Gujarat High Court in the case of CIT vs Mayur Foundation (2005) 274 ITR 562 (Guj). 12. We have heard both the sides, perused the material available on record and gone through the orders of authorities below. It is an admitted fact that the assessee has filed form No.10 alongwith return of income filed for the year and accumulated a sum of ₹ 210 lakhs for the objects of the Trust to be utilised in next five financial years. It is also an admitted fact that the AO has allowed accumulation of income u/s 11(2) as per the details filed by the assessee alongwith form 10. Now, the assessee has revised its claim and filed a revised form 10 alongwith copy of board resolution vide its from 10 dated 07-09-2018. We find that the assessee has passed a resolution to accumulate additional income of ₹ 63,81,840 for acquisition of land, building, structure for educational activities in additional to earlier accumulated income of ₹ 210 lakhs vide its resolution dated 20-09-2012. The reason for filing revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the income is accumulated, then the benefit cannot be allowed. In this case, the assessee has tried to use the benefit of accumulation after exhausting all possible options available to it to contest the issue of deduction u/s 24(a). Further, no doubt, the Hon ble Gujarat High Court has considered revised form 10 filed by the assessee accumulating additional income after a gap of six years, but on perusal of the ratio rendered by the Hon ble Gujarat High Court, we find that in that case, there was no dispute with regard to availability of funds for accumulation u/s 11(2) and investment of such funds in the investments specified u/s 11(5) of the Income-tax Act, because, the disputed issue in that case is taxability of corpus donation received by the asasessee under the provisions of section 11 of the Act. In this case, the facts with regard to the availability of funds for making investments are under dispute. The assessee failed to file any details with regard to the availability of funds for making investments in the modes specified u/s 11(5) of the Income-tax Act, 1961. Therefore, we are of the considered view that there is no merit in the argument of the assessee that it ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
