Private Trust Eligible For Section 54F Capital Gains Exemption | ITAT

Case Details: ACIT v. Merilina Foundation - [2025] 178 taxmann.com 355 (Delhi - Trib.

Judiciary and Counsel Details

• Ms Madhumita Roy, Judicial Member
•  Manish Agarwal, Accountant Member
• Yogesh Jagia, Adv., Manoj Gupta &  Kundan D. Wahi, CAs for the Appellant
• Virender Kumar Singh, Sr DR for the Respondent

Facts of the Case

The assessee was a private trust established for the benefit of specific individuals. During the year under consideration, it sold a flat and claimed exemption under section 54F in respect of capital gains arising from the sale of the flat.

During the relevant assessment proceedings, the Assessing Officer (AO) disallowed the claim of the assessee on the ground that section 54F applied only to individuals and HUF and not to a trust. On appeal, the CIT(A) allowed the assessee’s claim. Aggrieved by the order, the AO preferred an appeal to the Delhi Tribunal.

Tribunal Held

The Tribunal held that it was a fact that the assessee was a private trust, established for the benefit of specific individuals. The trust income is taxable if it is the income of the beneficiary; it is not the case with a charitable trust. Furthermore, a charitable trust is treated as an AOP because its beneficiary is the public at large. In fact, if the beneficiary of the charitable trust is identified, the trust loses its charitable character.

In the instant case, the trust purchased certain land, and the sale of the flat thereon, through collaboration, generated income from capital gains. Against this, a residential house was purchased, and an exemption under Section 54F was claimed. If the assessee trust were not in existence, the same transaction would have been carried out in the name of beneficiaries therein, and the benefit would certainly be given to those beneficiaries under Section 54 of the Act as claimed.

Therefore, the order passed by the CIT(A) in granting relief under Section 54F of the Act, as claimed by the assessee under the facts and circumstances, was found to be just and proper.