TMI Blog2007 (10) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, admittedly, are entitled to the benefit of section 11 of the Act. It filed its income-tax return for the year under consideration on 24-10-2001, declaring nil income after claiming exemption under section 11 of the Act. The return was accompa-nied by the audit report in Form No. 10B, audited accounts and computation of income. In the course of the assessment proceed-ings, it was found by the Assessing Officer that the total receipts including entrance fees amounted to Rs. 11,68,05,181 while the expenditure towards the charitable objects amounted to Rs. 7,95,10,244. In view of the same, he was of the view that the assessee could not apply 75 per cent of income towards chari- table purposes. However, the assessee sought the accumulation of income under section 11(2) of the Act. The same was denied by the Assessing Officer on the ground that statutory Form No. 10 and copy of resolution in this regard had not been filed by the assessee along with the return of income or during the course of the assessment proceedings. Consequently, accumulation was allowed only to the extent of Rs. 2,92,01,295 being 25 per cent of the total receipts and thus the total income was computed at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11(2) as well as the contents of Form No. 10 in support of his contention. It was pointed out by him that in Form No. 10 the notice can be given not only for the relevant previous year but also in respect of subsequent previous years. If the filing of Form No. 10 was mandatory for each and every previous year then there was no need to include the subsequent previous year in the notice in Form No. 10 itself. According to him, the provisions of section 11(2) are beneficial provisions and, therefore, the same should be construed reasonably and liberally so as to achieve the object behind the Legislature. The Department cannot be said to be prejudiced by giving notice in advance. It was also submitted by him that accumulation is subject to the conditions prescribed in section 11(5) and in any case if the assessee fails to comply with the conditions and then its income would be chargeable to tax. On the other hand, the learned DR has strongly supported the order of the CIT(A) by contending that section 11(2) only refers to the income of the current previous year, 75 per cent of which is required to be applied for charitable purposes. Unless the income is determined and the applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e.]" "FORM NO. 10 ( See Rule 17) Notice to the Assessing Officer/Prescribed Authority under section 11(2) of the Income-tax Act, 1961 To The Assessing Officer/Prescribed Authority ..................................... ..................................... I ........ on behalf of ............. (name of the trust/institution/association) hereby bring to your notice that it has been decided by a resolution passed by the trustees/governing body, by whatever name called, on........(copy enclosed) that, out of the income of the trust/institution/association for the previous year(s) relevant to the assessment year 20... 20... and subsequent.... previous year(s), an amount of Rs. ........ per cent of the income of the trust/institution/association/such sum as is available at the end of the previous year(s) should be accumulated or set apart till the previous year(s) ending ........ In order to enable the trustees/governing body by whatever name called, to accumulate sufficient funds for carrying out the following purposes of the trust/association/institution : (1)........... (2)........... 2. Before expiry of six months commencing from the end of each previous y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad as a whole and in a harmonious manner. If two interpretations are possible, then the one which achieves the object should be preferred as against the interpretation which frustrates the intent of the Legislature. No doubt, the assessee can file notice in Form No. 10 in respect of each year along with the return of income whenever the assessee is unable to apply its income to the extent of 75 per cent to the charitable or religious purposes. But there is nothing in the provisions which prohibits the assessee to file the notice in Form No. 10 for more than one year. There may be cases where the assessee may intend to apply its income towards construction of huge building to be used for the charitable or religious purposes and considering the quantum of expenditure, the income of one year may not be sufficient. In such an event, the assessee may be required to accumulate its income for various years for future application towards construction of such building. In such an event, the Department cannot be said to be prejudiced if the assessee gives a notice in writing that it would accumulate or set apart the income relating to the current previous year, as well as the subsequent prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... research facilities having objects similar to that of the Council. ( iii )administrating the affairs of the Members of the Council and promoting and exports of cloth, yarn and made-up of all kinds." 11. In our opinion, all the conditions set out in section 11(2) have been complied with by the assessee. Consequently, the lower authorities were not justified in denying the benefit of accumulation for the year under consideration. However, the Assessing Officer would be at liberty to examine whether the provisions of section 11(5) have been complied with by the assessee or not. If the income so accumulated is ultimately either found to be not applied to charitable purposes or not invested as per section 11(5), then the same may be included in the total income of the assessee in accordance with the provisions of sub-section (3) of section 11. Subject to these observations, the order of the CIT(A) is set aside and consequently, the Assessing Officer is directed to allow the accumulation under section 11(2) of the Act. 12. The next issue arising in the appeal of the assessee relates to disallowance of 3 per cent of total expenses. The assessee has claimed expenditure on the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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