| The Tax Publishers2020 TaxPub(DT) 3142 (Mum-Trib) INCOME TAX ACT, 1961
Section 13 read with section 45
Where AO, after withdrawing the benefit of section 11, completed the assessment under normal provisions and assessee while computing capital gain/loss on sale of mutual funds claimed the benefit of indexation on the cost of acquisition which was rejected on premise that assessee being charitable trust was not eligible for indexation on cost of acquisition, since benefit of section 11 was withdrawn from assessee, the benefit of indexation while computing capital gain/loss should be allowed.
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Charitable trust - Bar to exemption under section 13 - Benefit of exemption under section 11 denied - Computation of capital gain under normal provision--Benefit of indexation
Assessee- trust filed its return of income declaring total income as 'Nil'. During the period, assessee had sold mutual funds and after reducing the indexed cost of acquisition of the mutual funds, assessee suffered long term capital loss. In scrutiny assessment, AO disallowed the benefit of section 11 as assessee had made investments in violation of provisions of section 11(5) as well as, denied the benefit of indexation. Assessee admitted that by making investment in mutual funds, it violated the provisions of section 11. However, benefit of indexation cannot be denied to assessee as assessment was made in case of assessee for assessment year under regular provisions. Held: Assessee sold mutual funds and had not applied funds of the trust in accordance with the provisions of section 11. AO after withdrawing the benefit of Section 13 completed the assessment under normal provisions. Assessee while computing capital gain/loss on sale of mutual funds claimed the benefit of indexation on the cost of acquisition. AO and CIT(A) rejected assessee's computation of capital loss on sale of mutual funds on the premise that assessee being charitable trust was not eligible for indexation on cost of acquisition. Assessee loses the benefit of section 13 and was assessed under normal provisions of the Act. While completing assessment under normal provisions, assessee should be treated as individual. Since, benefit of section 13 was withdrawn from the assessee, the benefit of indexation while computing capital gain/loss should be allowed.
Followed:Director of Income-Tax (Exemptions) v. Shardaben Bhagubhai Mafatlal Public Charitable Trust (2001) 247 ITR 1 (Bom) : 2001 TaxPub(DT) 0631 (Bom-HC) CIT v. Marsons Beneficiary Trust (1991) 188 ITR 224 (Bom.) : 1991 TaxPub(DT) 0341 (Bom-HC) CIT v. Sodra Devi 1957 TaxPub(DT) 0146 (SC)
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2013-14
APPELLATE TRIBUNAL RULES, 1963
Rule 34
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