What should be proper advice of CA Madhusudan to Mr. Z regarding implications of proposed sale of a capital asset and acquisition of another capital…

Under provisions of section 11(1A), where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely: (i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of such capital gain (ii) where only a part of the net consideration is utilised for acquiring the new capital asset, so much of such capital gain as is equal to the amount, if any, by which the amount so utilised exceeds the cost of the transferred asset In the given case, since whole of proposed net consideration is to be utilized in acquiring new capital asset to be so held, the whole of the capital gain arising from proposed sale shall be deemed to have been applied for charitable purposes.