Capital gains in case of a trust

Dear all,

I have a query regarding tax treatment of Sale Proceeds of a Capital Asset held by a trust.

A trust registered under section 12A of the Income Tax Act is in possession of an Urban Agricultural Land.

This trust has started an Engineering College. For this college, a huge investment in Building and other Equipment has already been made.

To meet the fund requirements, loan was taken from a Bank.

Unfortunately, the trust could not repay the Loan Installments and thus, it has decided to sale the land and apply the sale proceedings to repay the Bank loan fully.

1. I have gone through the provisions of section 11(1A) of the Act. It shows that if the whole or any part of the Net consideration of sale of the Capital Asset being a property held under the Trust is applied for acquiring another Capital Asset to be held under the Trust, then the Capital Gain arising thereon shall be deemed to be applied for the objects of the Trust. I want to know whether Repayment of Loan as stated above would amount to application of Capital Gains for the Objects of the Trust. What would be the Tax Treatment of the same?
2. The Trust may also require the funds for the purpose of Expansion of the College in coming 1-2 years. If the Sale Proceeds are kept in a Bank Account say Fixed Deposit Account, Can an application be made under explanation (2) to section 11(1) of the Act for availing benefit of the Extended Period for the purpose of Application of Funds for Charitable Purpose. What will be the Tax Consequences in this case?

Please guide me.

Thanks & Regards.