Income-tax--

----Charitable trust---Capital gains---Exemption---Sale of assets held by charitable trust---No finding on question whether entire proceeds were invested in acquisition of other capital assets---Matter remanded---Indian Income-tax Act, 1961, S.11(1-A).

The assessee-trust sold gold, received by way of a corpus donation in the preceding year, for a sum of Rs.7,38,500 and made a profit of Rs.41,000. The assessee claimed that the net consideration of the sale was kept in fixed deposit with a bank on December 12, 1981, and was thus utilised for acquiring a new capital asset. It was urged that the capital gain was, therefore, exempt under section 11(1-A) of the Income Tax Act, 1961. The Income-tax Officer found that the proceeds of sale of gold were lent on interest to two concerns and were subsequently repaid and credited in the assessee's bank account. Out of the amount received from the parties, the assessee-trust again gave a loan of Rs.7,50,00,000 to B. The Income-tax Officer did not, therefore, accept the assessee's contention that the net consideration from the sale of gold was deposited in the bank on December 12, 1981, as claimed, and was utilised in acquiring a new capital asset. The Income-tax Officer accordingly did not allow exemption in respect of capital gains under section 11(1A). The Appellate Assistant Commissioner, however, allowed exemption to the assessee and this was confirmed by the, Tribunal. On a reference:

Held that from the facts as stated by the Tribunal it was not very clear whether the assessee had advanced loans out of the income from the fixed deposits or invested the net consideration in fixed deposits and made renewals thereof. In the absence of necessary facts, the reference could not be answered.

[Matter remanded. Tribunal directed to examine the matter in the light of Circular F. No.180/54/72-IT(A-1)--dated 25-9-1975, and the decision in CIT v. Damodar Kalyanji Memorial Trust (ITR No. 101 of 1983-- 22-11-1989)].

JUDGMENT

AJIT K. SENGUPTA, J: --In this reference under section 256(1) of the Income-tax Act, 1961, for the assessment- year 1982-83, the following questions of law have been referred to this Court:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the entire proceeds of gold were invested in acquisition of other capital assets, within the meaning of section 11(1-A) of the Income-tax Act, 1961?

(2) Whether the Tribunal was justified in law in holding that the assessee rust was entitled to exemption under section 11(1-A) of the Income -tax Act, 1961, in respect of Rs.41,000 being capital gains arising on sale of gold?"

Shortly stated the facts are that during the relevant previous year the assessee-trust sold gold, received by way of a corpus donation in the preceding year, for a sum of Rs.7,38,500 and made a profit of Rs.41,000. The assessee claimed that the net consideration of the sale was kept in fixed deposit with Dena Bank, Calcutta, on December 12, -1981, and was thus utilised for acquiring a new capital asset. It was urged that the capital gain was, therefore, exempt under section 11(1-A) of the Income-tax Act, 1961.

The Income-tax Officer found that the sale proceeds of gold were lent on interest to two concerns, which were subsequently repaid and credited in the assessee's bank account with Dena Bank. Out of the amount received from the parties, the assessee-trust again gave a loan of Rs.7,50,00,000 to Messrs Bharat Petroleum Corporation. The Income-tax Officer did not, therefore, accept the assessee's contention that the next consideration from the sale of gold was deposited in Dena Bank on December 12, 1981, as claimed, and was utilised in acquiring a new capital asset. The Income Tax Officer accordingly did not allow exemption in respect of capital gains under section 11(1-A) of the Income Tax Act, 1961.

Against the order of the Income Tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, following the order of the Tribunal in the case of Damodar Kalyanji Memorial Trust in I.TA. No.1195(Cal.) of 1980, allowed the exemption to the assessee.

Being aggrieved, the Department filed an appeal to the Tribunal. The Tribunal upheld the order of the Appellate Assistant Commissioner and dismissed the appeal filed by the Revenue.

At the hearing, Mr. Poddar, learned counsel appearing for the Revenue, has drawn our attention to Circular No.F.180/54/72tIT(Al), dated September 25, 1975, where the Central Board of Direct Taxes has, inter alia, observed as follows:

"The Board had occasion to examine whether investments of the net consideration in fixed deposits with a bank would be regarded as utilisation of the amount of the net consideration for acquiring another capital asset within the meaning of section 11(1-A) of the Income Tax Act, 1961. The Board had been advised that investments of the net consideration in fixed deposit with a bank for a period of 6 months or above would be regarded as utilisation of the net consideration for acquiring another capital asset within the meaning of section 11(1-A) of the Income Tax Act, 1961 "

It is his contention that the attention of the Tribunal was not drawn to the said circular. It is therefore necessary that the Tribunal should decide the issue taking into account the aforesaid circular. He has also very fairly drawn our attention to the decision in I.T. Reference No.101 of 1983, in the case of C.I.T. v. Damodar Kalyanji Memorial Trust, where the judgment was delivered on November 22, 1989, in favour of the Revenue holding that the advances of loan cannot be equated with acquisition of capital assets.

From the facts as stated by the Tribunal it is not very clear whether the assessee advanced loans out of the income from the fixed deposits or invested the net consideration in fixed deposits and made renewals thereof. In the absence of necessary facts we are unable to answer the question in this reference.

We, therefore, decline to answer this question in this reference and remand this matter to the Tribunal. We direct the Tribunal to rehear the appeal afresh after giving the parties opportunity to lead fresh evidence. The Tribunal will examine the applicability of the said circular and the judgment of this Court in Damodar Kalyanji Memorial Trust in deciding the appeal.

Leave is given` to file Vakalatnama within one week after the long vacation.

BHAGABATI PRASAD BANERJEE, J.---I agree

M.BA./13/T.FCase remanded.