TMI Blog2011 (10) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. - ITA No. 5023 (Delhi) of 2010 - - - Dated:- 21-10-2011 - SHRI R.P. TOLANI, AND SHRI K.D. RANJAN, JJ Represented by: Shri Sanjay Aggarwal for the Appellant. Shri J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of income. The AO, therefore, disallowed the amount of Rs. 3,15,88,850/- while computing application of income for the objects of the trust. The assessing officer, however, allowed exemption of Rs 8,10,00,000/- which was accumulated u/s 11(2) of the Act. The AO determined an amount of Rs. 5,30,12,827/- {14,23,42,944- (3,99,18,967-3,15,88,850) -8,10,00,000} which was not applied to the objects of the trust and brought the same to income tax. 4. Before the ld. CIT (Appeals) it was submitted that the assessing officer was not justified in considering the claim of voluntary accumulations at the rate of 15 per cent under section 11(1)(a) of the Act amounting to Rs. 2,13,30,228/-. It was submitted that under section 11(1)(a) voluntary contributions at the rate of 15 per cent are allowed without any rider. The assessing officer had allowed same type of rebate in the case of Market Committee, Gharonda for assessment year 2006-07. ITAT in the case of Market Committee, Gharonda had allowed such claim and, therefore, rebate of accumulation at the rate of 15 per cent should be allowed. The ld. CIT (Appeals) considered the case of Market Committee, Gharonda and noted that the issue of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affirmed by Hon'ble Supreme Court in CIT v. Programme for Community Organisation [2001] 248 ITR 1 (SC). On the other hand, the ld. Sr. DR submitted that the facts of the decision of the ITAT in the case of Market Committee, Gharonda v. ACIT (supra) are different. In that case the issue of depreciation was there because of which the application of income was more than 85 per cent whereas no such issue is involved in the case of the assessee. The assessee had not applied 85 per cent of income and, therefore, exemption cannot be allowed as contended by the ld. AR of the assessee. He also submitted that the provisions of section 11(1)(a) does not prescribe any standard deduction that in all cases only 85 per cent of income is to be seen. He, therefore, supported the order of CIT(A) on the issue under consideration. 7. We have heard both the parties. The issue for our consideration is as to whether 15% of receipts are eligible for exemption under section 11(1)(a) of the Act. The assessing officer had brought the amount of income which was neither applied nor accumulated for application in future. The claim of the assessee is that the provisions of section 11(2) are applicable in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub-clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived.] ** ** ** (2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of subsection (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely: (a) such person specifies, by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cent of income is not applied, the assessee can accumulate such income for specific purpose to be spent in specified period not exceeding of 5 years. Thus in order to qualify for 100 per cent exemption, as mentioned above, the assessee has either to spend 85 per cent of income for its objects in the year of its receipt or accumulate u/s 11(2) for specified purpose to be spent in specified period. 9. Hon'ble Delhi High Court had an occasion to explain the decision of Hon'ble Supreme Court in the case of A.L.N. Rao Charitable Trust (supra) in the case of Bagri Foundation's case (supra) relied upon by the assessee. It has been observed that the exemption under section 11(1)(a) [then to the extent of 25 per cent and which was reduced to 15 per cent, also by the Finance Act, 2002] is unfettered and not subject to any conditions and is an absolute exemption. It was further held that if the conditions contained in section 11(2) are read as applicable to the exemption of upto 15 per cent under section 11(1)(a) also, then what is absolute and unfettered exemption of accumulated income guaranteed by section 11(1)(a) would become a restricted exemption as laid down in section 11(2). Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s treating the same as not spent for the purpose of the trust. The ld. CIT (A) has allowed this claim of the assessee and the Revenue is not in appeal before us against the amount Income Tax and TDS treated as application of income. Therefore, for the purpose of computation of exemption under section 11(1)(a) the amount of Rs. 3,99,18,967/- has to be treated as income applied for the object of the Trust. The assessee had accumulated another amount of Rs 8,10,00,000/- u/s 11(2) of the Act. Thus in order to claim hundred per cent exemption, the assessee should have applied/accumulated 85 per cent of Rs. 14,23,42,944/- i.e. Rs. 12,09,91,502.40 for the objects of the trust. However, the assessee had applied Rs. 3,99,18,967/- and accumulated a sum of Rs 8,10,000/- totaling to Rs 12,09,18,967/-. Thus 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. We order accordingly. 11. Before parting with the matter we may like to clarify that we have not examined the issue relating to payment of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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