ITAT Mumbai Upholds Indexation Benefit for Charitable Trust on Capital Gains, Dismisses Revenue Appeal

Background

The Mumbai “G” Bench of the Income Tax Appellate Tribunal has dismissed the Revenue’s appeal in a case involving Seth Damji Laxmichand Jain Dharma Sthanak for Assessment Year 2012–13, affirming significant tax relief granted to the charitable trust. The dispute arose after the trust sold an immovable property for ₹50 crore and claimed indexation on the cost of acquisition while computing long-term capital gains, followed by exemption under Section 11 of the Income Tax Act. The Assessing Officer had denied indexation, relying on an old CBDT circular and arguing that income of a charitable trust should be viewed in a “commercial sense.” Rejecting this approach, the Tribunal held that Explanation to Section 11(1A) expressly links capital gains computation to Sections 48 and 49, which statutorily permit indexation.

Order

It ruled that statutory provisions override administrative circulars, and therefore indexation could not be denied. The ITAT also dismissed the Revenue’s contention of “double deduction” in respect of accumulation under Sections 11(1)(a) and 11(1A), noting that the provisions operate independently with no express legal bar. On donations made out of accumulated income, the Tribunal upheld the CIT(A)’s direction for factual verification.

With all grounds rejected, the Revenue’s appeal stood dismissed in full.