TMI Blog2011 (11) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... d to comply with the conditions enumerated in section 11(2). It has not filed form No. 10 before the completion of asstt. order - Decided against the assessee. It is also held that disallowance for the purpose of accumulation is to be restricted for the amount over and above of 15% of the limit and will not be applicable on the remaining 15% thereby allowing exemption u/s 11 - Decided against the Revenue. - IT APPEAL NOS. 2040 & 3293 (DELHI) OF 2011 - - - Dated:- 18-11-2011 - G.D. AGGRAWAL, RAJPAL YADAV, JJ. N.K.S. Chauhan and Vir Chand Yadav for the Appellant. Raj Tandon for the Respondent. ORDER Rajpal Yadav, Judicial Member The assessee and revenue are in cross appeals against the order of Ld. CIT(A) dated 10.2.2011 passed for asstt. year 2005-06. The grounds of appeal taken by the revenue read as under :- 1. "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the benefits of exemption u/s 11 of the I.T. Act, claimed by the assessee as the assessee has not complied with the provisions of section 11(2) of the I.T. Act, 1961." 2. The appellant craves leave to add, to alter or amend any ground of appeal rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumulated or set apart and the period for which the income is to be accumulated or set apart which shall in no case could exceed 10 years. The money so accumulated or set apart is to be invested or deposited in the forms or modes specified in sub section 5 of section 11. The assessee failed to submit form No. 10 exhibiting these details. Therefore, AO observed that assessee cannot accumulate the surplus over expenditure for future utilisation. The AO further observed that since assessee failed to comply with the conditions provided in Section 11(2). Therefore, it is not entitled for the benefit of section 11. He accordingly assessed the income of assessee at Rs. 12,31,16,398/-after giving a deduction of Rs. 1,20,000/- towards expenditure attributable for collecting such grants. 4. Dissatisfied with the action of AO, assessee carried the matter in appeal before Ld. CIT(A). It has raised manifold submissions before the Ld. First Appellate Authority. Ld. CIT(A) has reproduced the written submissions filed by the assessee which are not in coherence. From perusal of the orders of the Ld. CIT(A), it revealed that assessee has taken even contradictory stands. However, we are not concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of Hon'ble Supreme Court. He took us through page No. 11 of the Ld. CIT(A)'s order where observation of the Hon'ble court has been reproduced. With regard to the appeal of revenue, he relied upon the order of AO. 6. We have duly considered the rival contention and gone through the record carefully. Section 11 (2) has a direct bearing on the controversy. Therefore, it is imperative upon us to take note of this section. "Where eighty five percent of the income referred to in Clause (a) or Clause (b) of sub-section (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 of 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 and the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r will have to be reopened. According to the Hon'ble Court, the act does not contemplate such reopening of the assessment and, therefore, assessee will not be entitled for benefit of accumulation u/s 11 (2). The assessee in its ground of appeal has taken number of pleas that it is a charitable organisation which is governed by the applicable laws. There is no dispute qua such status, the dispute is that even in the case of charitable institution if such an assessee failed to utilise 85% of the income for fulfilment of its objects and wants to accumulate such income for the utilisation of its objects in future years then it has to comply with the procedure provided in section 11(2) of the Income Tax Act. No explanation is discernable as to why assessee failed to comply with this requirement. When AO had issued a show cause notice and confronted the assessee for non-fulfilment of this requirement atleast assessee ought to have applied under Form No. 10 for permission to accumulate as provided in section 11(2). The assessee has pleaded that as per the law, the delay is being generally condoned. But one has to provide the reasons for such a delay and apply for condonation of delay in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above, we are of the opinion that the stand of the revenue that the High Court erred in answering the first question in favour of the assessee is correct, and we reverse that finding and answer the said question in the negative and against the assessee. In view of our answer to the first question, we agree with Mr. Verma that it is not necessary to answer the second question on the facts of the case. 9. As far as the appeal of revenue is concerned, Ld. CIT(A) has observed that AO has erred in appreciating the provisions of section 11(1) and 11(2). According to the Ld. CIT(A), there are two types of permissible accumulation. There is accumulation of 15% of the income u/s 11(1) and such accumulation are not subject to application within the permissible period of 5 years. This 15% accumulation is possible for indefinite period. However, the second type of accumulation is beyond 15% is covered by the provisions u/s section 11 (2). Such accumulations are permissible for a maximum period of 10 years. The Ld. CIT(A) has held that disallowance of accumulation is upheld but such disallowance will be applicable only to those receipts which are over and above 15% of the limit. In ot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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