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2011 (10) TMI 193 - AT - Income TaxCharitable Trust- voluntary accumulations - trust was established by the State Government for the purpose of improvement of Karnal City within Municipal limits- accumulation of income u/s 11(2) for general public utility- income tax paid for earlier assessment years(then status'local authority'), & TDS on FDRs now claimed as application of income- Held that:- Additional condition by way of section 11(2) is intended only to apply in respect of accumulation in excess of 15 per cent and not to accumulation upto 15 per cent under section 11(1)(a) of the Act. The income applied u/s 11(1)(a) and accumulated for specified purpose to be spent in specified period u/s11(2) taken together should 85% in order to claim 100% exemption of the income derived by the assessee. See Bagri Foundation's case(2010 - TMI - 77103 - Delhi High Court) - there is short fall in application/accumulation of income of Rs. 72,535/- (12,09,91,502.40 -12,09,18,967). The amount of Rs. 72,535/- has neither been applied nor accumulated. Therefore, the amount of Rs. 72,535/- will be liable to be taxed. However, the purpose of accumulation to be specified should be a concrete one, an itemized purpose or a purpose instrumental to the implementation of its object or objects. It is not for all the objects of the trust, but where heavy amount is needed for meeting the cost of project falling within the objects of the trust or institution, accumulation of income to meet the cost of such project is permitted. Hence, the charitable trust cannot list all its objects as purposes for accumulation of income under section 11(2). See DIT [Exemption] v. Trustees of Singhania Charitable Trust (1991 - TMI- 21454 - Calcutta High Court). In present case, since A.O. has allowed accumulation for general public utility u/s 11(2) and it is not in appeal before Tribunal hence, allowed.Similarly, since CIT(A) has allowed payment of income taxes as application of income and the Revenue is not in appeal before Tribunal against the same hence claim of the assessee is allowed. - Decided partly in favor of the assessee.
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