Opinion Of Eminent Legal Luminaries On Controversial Issues

Benefit of indexation to Charitable Trust

QUERY: Section 11(1A) is not meant for calculation of capital gains tax but is to operate after capital gains are worked in accordance with the provisions of Sections 45 to 55 [Akhara Ghamanda Dass v. Asstt CIT [68 TTJ 244 (Asr)]. In the light of above, whether a charitable trust will get the benefit of indexation?
ANSWER: Yes, Explanation (ii) to this sub-section provides that "cost of the transferred asset" means the aggregate of the cost of acquisition (as ascertained for the purposes of Sections 48 and 49) of the capital asset which is subject to transfer and cost of any improvement there with the meaning assigned to that expression in Section 55(1)(b) of the Act.
Further, second proviso to Section 48 provides that where long term capital gain arisens from the transfer of a long term capital asset, other than capital gains arising to non-resident from the transfer of shares in, or debentures of an Indian company referred to in the first proviso, the provision of clause (ii) [i.e. the cot of acquisition of the asset and the cost of improvement thereto] shall have effect as if for the words "cost of acquisition" and cost of any improvement the words "indexed cost of acquisition" and "indexed cost of any improvement had respectively been substituted.
Thus reading the above, it is clear that capital gains has to be calculated by the assessee including trust as Per provisions of Section 45 to 55 of the Income tax Act, 1961. This is also supported in para 14 of Akhara Ghamanda Das v. ACIT [114 Taxman 27 (Asr)], which reads as under:
"In fact this section is to operate after capital gains are worked in accordance with Chapter E of the IT Act. This gives an additional benefit to the appellant, if, he has to make a claim that income arising out of capital gains is to be exempted under section 11(1) then he has to fulfil various conditions mentioned in section (1A)."

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