Addition of capital gains arising on sale of assets

This Income Tax Appellate Tribunal case concerns a charitable trust appealing a tax assessment for the 2011-12 financial year. The core issue was whether a deposit in Canara Bank qualified as an 'eligible investment' under Section 11(5) of the Income Tax Act. The tribunal, referencing a Supreme Court ruling, ruled that the trust was entitled to claim depreciation as an application of income, allowing the appeal for statistical purposes.

IN THE INCOME TAX APPELLATE TRIBUNAL
“A’’ BENCH : BANGALORE
BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND
SHRI B.R BASKARAN, ACCOUNTANT MEMBER
ITA No.1129/Bang/2017
Assessment year : 2011-12

Sri Sathya Sai Central Trust,
Brindavan, Kadugodi,
Bengaluru-560 067.
PAN – AABTS 4384 C

vs

The Addl. Director of Income-tax
(Exemption), Range 17,
Bengaluru.

Assessee by : Shri V Chandrashekar, Advocate
Revenue by : Shri Sunil Kumar Singh, CIT (DR)

Date of hearing : 08.12.2021
Date of Pronouncement : .12.2021

O R D E R

The assessee has filed this appeal challenging the order date 27/2/2017 passed by ld.CIT(A)-14, Large Taxpayers Unit, Bengaluru and it relates to the assessment year 2011-12.

2. The assessee is a public charitable trust registered u/s 12A of the Act. The assessee also has got approval u/s 10(23C)(iv) of the Act. The Ld A.R submitted that the assessee filed its return of income for the year under consideration declaring Nil total income after claiming exemption u/s 10(23C)(iv) of the Act. The Assessing Officer completed the assessment by making certain disallowances. We notice that the AO has examined the return of income by considering the provisions of sec.11 as well as sec.10(23C)(vi) of the Act. The appeal filed by the assessee before ld.CIT(A) was partly allowed. Still, aggrieved by this, assessee filed appeal before us.

3. The ld.CIT(A) upheld the view taken by the AO. He further held that the assessee is entitled to make investment only in those assets mentioned in sec.11(5) of the Act ( hereinafter referred to as “eligible investments”). The list of eligible investments listed out in sec.11(5) included “investment of deposit in public sector company” under clause (vii). The ld.CIT(A) took the view that Canara Bank is not a public company since it is regulated by Banking Regulation Act 1949. Accordingly, the ld.CIT(A) took the view that any deposit made in Canara Bank cannot be considered as an eligible investment u/s 11(5) of the Act. Accordingly, he directed the AO to
re-compute the claim of the assessee in r/o sec.11(5) of the Act.

4. Court in the case of CIT vs. Rajasthan & Gujarati Charitable Foundation Poona (2018)(89 taxmann.com 127)(SC). Accordingly, we set aside the order passed by LD CIT(A) on this issue and direct the AO to allow the depreciation claimed by the assessee as application of income.  In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 20th December 2021.

Please find attached the enclosed file for the full judgement.