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2015 (4) TMI 305 - BOMBAY HIGH COURT

2015 (4) TMI 305 - BOMBAY HIGH COURT - [2015] 374 ITR 315 (Bom) - Exemption u/s. 10(33) - whether income forms a part of the income from property held under trust and therefore can only be claimed to be exempt u/s. 11, if applied for charity and not u/s. 10 - ITAT allowed the claim - Whether Tribunal was justified in holding that the entire foundation of section 11 is based on the premise that the income is otherwise chargeable to tax, which is not supported by the provisions of the Act ? - Held .....

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not to be included in computing total income of a previous year of any person, then, that which is excluded from section 10 could be included in the total income of the previous year of the person / assessee. That may be a person who receives or derives income from property held under trust wholly for charitable or religious purposes. Thus, the income which is not to be included in computation of the total income is a matter dealt with by section 10 and by section 11 the case of an assessee who .....

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er clause (a) of sub-section (1) of section 11 who would be claiming the exemption or benefit. That is a income derived by a person from property. It is that which is dealt with and if the property is held in trust for the specified purpose, the income derived therefrom is exempt and to the extent indicated in section 11(1)(a) of the Income Tax Act, 1961. There is nothing in the language of sections 10 or 11 which says that what is provided by section 10 or dealt with is not to be taken into con .....

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not a matter covered or dealt with by section 10 that the Tribunal's view cannot be termed as perverse or vitiated by any error or law apparent on the face of the record. The clear language of these provisions enables us to uphold the order of the Tribunal. It is, accordingly, upheld. The Revenue's appeal does not raise any substantial question of law. - Decided against revenue. - I T A NO. 1310 OF 2013 - Dated:- 1-4-2015 - S.C. Dharmadhikari And A.K. Menon, JJ. For the Appellant : Mr. A.R. Mal .....

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passed by the Commissioner of Income Tax (Appeals) on 14th February, 2011. Mr. Malhotra, the learned counsel appearing on behalf of the Revenue in support of this appeal submits that this appeal raises substantial questions of law. They are formulated at pages 4 and 5 of the paper-book. They read as under : A. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in granting exemption u/s. 10(33) and 10(38) to the tune of ₹ 25.96 lakh .....

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of the Act ? C. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in granting exemption u/s. 10, when the same amounts to allowance of exemption within exemption whereby dividend income and long term capital gain derived from property held under trust but not applied for purposes of the trust is held to be exempt ? D. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in giving .....

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ntre but donated to another Trust i/e. Synapse, which cannot be constructed to have been fulfilled the purpose of accumulation ? 3. In relation to the first three questions Mr. Malhotra would submit that the Assessing Officer committed no mistake and his understanding of the provisions of law was accurate. Chapter III of the Income Tax Act, 1961, according to Mr. Malhotra, is entitled 'Incomes Which Do Not Form Part of Total Income'. Mr. Malhotra submits that the term total income appear .....

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the previous year of the person in receipt of the income offered therein. Therefore, the Assessing Officer held that for the purposes of fulfillment of the conditions of section 11 and section 12, particularly on application of the income derived from property held under trust wholly for charitable or religious purpose had not been further subjected to any exclusion. It is only the exemption in terms of section 11 which would apply and in relation to persons like the assessee before us. From the .....

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come , as far as section 10 is concerned, that deals with incomes not included in total income and as far as section 11 is concerned income from property held for charitable or religious purposes is dealt with by it. There is no scope for the argument that from the total income of any person which may include a trust or an assessee before us, the exclusion in terms of section 10 would not apply. It is after such exclusions that the income from property held for charitable or religious purposes w .....

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rticularly formulated as Questions (A) to (C). 5. In relation to the other three questions, Mr. Malhotra would submit that the Tribunal erred in holding that the Commissioner's direction to the Assessing Officer to reconsider the assessee's claims deserves to be set aside. The Commissioner had directed that the Assessing Officer should verify whether ₹ 30,00,000/- which was accumulated and set aside under section 11(2) was utilised for the specified purpose and within the stipulate .....

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d that all the details were before the Commissioner. Out of the total expenses of ₹ 48,78,000/- incurred during the period relevant to assessment year 2002-03, a sum of ₹ 30,00,000/- has been spent out of accumulated amount. When the amount accumulated for the assessment year 2001-02 has been fully spent during the period relevant to assessment year 2002-03, then, the condition was fully satisfied. There was no reason to send the matter back. This finding recorded in paragraph 5 of t .....

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and by assessee claiming to be a charitable organization needs scrutiny in the light of the legal provision and namely section 11 of the Income Tax Act. The Assessing Officer noted that a sum of ₹ 25,96,287/- received on account of dividend income is claimed as exempt under section 10(33) of the Income Tax Act. However, this income forms a part of the income from trust property and, therefore, can only be claimed to be exempt under section 11 of the Income Tax Act if applied for charity a .....

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of section 11, 12, and 13 of the Income Tax Act are the governing provisions and relate to exemption claimed by charitable institutions, then, the assessee has no option to choose whether it wants to avail the exemption under section 10(33) or section 11 of the Income Tax Act, 1961. He relied upon a circular of 1968 issued by the Central Board of Direct Taxes. He also relied upon the language of section 11(1) and the expression total income defined in section 2(45) of the Income Tax Act, 1961, .....

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and clear. The provisions, namely, sections 10 and 11 fall under a Chapter which is titled Incomes Which Do Not Form Part of Total Expenditure (Chapter III). Section 10 deals with incomes not included in total income whereas section 11 deals with income from property held for charitable or religious purposes. We have not found anything in the language of the two provisions nor was Mr. Malhotra able to point out as to how when certain income is not to be included in computing total income of a p .....

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r trust only for charitable or religious purposes to the extent to which such income is applied to such property in India and that any such income is accumulated or set apart for application for such purposes in India to the extent of which the income so accumulated or set apart in computing 15% of the income of such property, is dealt with. Therefore, it is a particular assessee and who is in receipt of such income as is falling under clause (a) of sub-section (1) of section 11 who would be cla .....

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