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TMI Blog2012 (12) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... Below Sec. 11(2) of the Act could be interpreted to draw a distinction between accumulation of income in excess of 15% and upto 15% of income particularly when no such distinction is contained in the said statutory provisions? 2. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) was correct in holding that there was no restriction to make inter-charity donations out of accumulation of income upto 15% of income as per Expn. below Sec. 11(2) of the I.T. Act, 1961? 3. Whether on the facts & in the circumstances of the case, inter-charity donations, made out of 15% of the accumulated income, would not be against the provisions of Expn. below Sec. 11(2) of the I.T. Act, 1961?" 2. The only issue for consideration relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would also cover the accumulation out of 15% or 25% of surplus income, the assessee had general free surplus of Rs.2,99,06,670/- which was available as on 31st March, 2002. Therefore, no part of the said donation was covered by the provisions of the Explanation. The assessee also placed reliance on CBDT Circular No.8 dated 27th August, 2002 which clarified that while donations from out of amounts accumulated or set apart would not be treated as application, there was no prohibition in making the donation from current year's income. There was surplus of Rs.1,11,62,401/- before considering the donation of Rs.2,50,00,000/-. Therefore, the amount of Rs.1,11,62,401/- representing current year's income would be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee had not accumulated any income u/s 11(2) of the Act. In the assessee's case there has been not a single year where accumulations were more than 15% or 25%. The Explanation appended to sec. 11(2) of the Act is intended to explain sec. 11(2) only and not sec. 11(1). There is nothing on record to indicate that Explanation was intended to explain sec. 11(1) also. It was also submitted that Explanation below particular clause/sub-section is intended to an Explanation to that specific or particular clause/sub-section but when the Explanation is at the bottom of the section, it is generally given to explain the entire section. The learned AR of the assessee also placed reliance on the decision of Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the income from such property, shall not be included in the total income. In other words, in a case of charitable or religious trust or institution, if the assessee applies 85% of the income, the entire income of the trust will be exempt. U/s 11(2) where 85% of income 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 respect of income provided the conditions listed in sub-sec. (2) are fulfilled. Explanation to sec. 11(2) specifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.1,38,37,599/- has come out of general accumulation over and above 75%/85% of the income. Hon'ble Delhi High Court in the case of Bagri Foundation (supra) while allowing relief to the assessee has held in Para 15 of order as under:- "15. The "Explanation" appended after section 11(2) is nothing but an additional condition attached to accumulation in excess of 15 per cent permitted under section 11(2). We are unable to hold it as a condition on accumulation up to 15 per cent as provided for in section 11(1)(a) also. We are unable to find any rational classification for imposing the restriction as contained in the "Explanation" to the accumulation of up to 15 per cent also when there is no such restriction to donating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to apply only to accumulations in excess of 15 per cent under section 11(2) and not to accumulation up to 15 per cent under section 11(1)(a). The Explanation is not found to be intended to take away something from the accumulation up to 15 per cent permitted without any conditions whatsoever under section 11(1)(a)."
7. Since the issue is squarely covered by the decision of Hon'ble Delhi High Court in the case of Bagri Foundation (supra), the learned CIT(A) has rightly deleted the addition. Accordingly, we do not find any infirmity in the order passed by the learned CIT(A) deleting the addition.
8. In the result, appeal filed by the Revenue is dismissed.
9. This decision is pronounced in the Open Court on 20th July, 2012. X X X X Extracts X X X X X X X X Extracts X X X X
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