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2015 (9) TMI 128 - ITAT AHMEDABAD

2015 (9) TMI 128 - ITAT AHMEDABAD - TMI - Addition of accumulated income of trust - as per AO appellant trust had not filed the requisite application as contemplated u/s.11 - operation of the injunction of the District Court - whether the period in which the order of the Jt.Dist.Judge was in operation to be excluded for reckoning the period of 10 years as mentioned in section 11(2)(a) of the Act under the facts of the present case? - Held that:- Affairs of the assesseetrust were taken over by th .....

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or set apart. In that situation, the Assessing Officer may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub-section(3) shall apply as if the purpose specified by such person in the application under this sub-section for a purpose specified in the notice given to the .....

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section 11(2) of the Act. Therefore, we hereby set aside the orders of the authorities below and restore the issue to the file of AO for decision afresh. The AO would verify the period during which the affairs of the assessee-trust were managed by the Court appointed receiver. He would exclude such period in the light of first proviso to section 11(2) of the Act and would verify whether the money so accumulated or set apart was invested or deposited in the forms or modes specified in Section 11 .....

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essee has raised the following grounds of appeal:- Your appellant being aggrieved by the order passed by the learned Commissioner of Income Tax (Appeals)-VI, Baroda presents this appeal against the same on the following amongst other grounds. 1. The learned CIT(Appeals)-VI, Baroda has erred & confirming the provisions of section 11(3)(c) and has incorrectly and illegally erred in confirming the addition of ₹ 1,35,70,420/-. It is submitted that on the facts and circumstances of the case .....

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st not possible for the trust to spend the amount of ₹ 1,35,70,420/- accumulated. It is submitted that in view of this, the trust should be allowed to spend the money, as per the resolution, as and when the orders, which are challenged in the courts are cancelled and the trust in a position to buy the land and spend the amount as per the resolutions. It is submitted that it be held so now. 3. Without prejudice to the above it is submitted that the trust be allowed to spend the amount accum .....

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eld so now. 5. Your appellant craves leave to add, alter and/or to amend all/or any of the grounds before final hearing of the appeal. 2. Briefly stated facts are that the case of the assessee was reopened and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 31/03/2014, thereby the Assessing Officer (AO in short) made addition of accumulated income pertaining to AY 2003-04 of ₹ 1,35,70,474/-. Against the said assessment .....

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properties and affairs of the Shree Kalika Mataji Temple, a registered public trust. He submitted that during the period, the trustees of the appellant trust were restrained from managing the affairs of the trust. The affairs of the trust were managed by Court appointed receivers. The ld.counsel for the assessee submitted that the period when the court order was in operation such period should be excluded for the purpose of computing the period of ten years in terms of provision to section 11(2 .....

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, therefore, erred in considering that accumulation income available to AY 2003-04 exigible to tax as per section 11(3) of the Act. The ld.counsel for the assessee submitted that the ld.ACIT ought to have appreciated that the provisions of section 11(2) of the Act read with the second proviso thereto below were applicable to the case of the appellant-trust and therefore the appellant-trust had not contravened the provisions of sec.11(3)(c) of the Income-tax Act 1961 in any manner whatsoever and .....

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dia. Section 11(3A) starts with the non-obstante clause restricted to the provisions of section 11(3). The period referred to in clause (c) of section 11(3) refers to the period referred to in clause(a) of section 11(2). The proviso below section 11(2) carves out an exception with respect to the period that needs to be computed as per the provisions of section 11(2)(a) and due to the operation of the injunction of the District Court the case of the appellant squarely falls within this exception. .....

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f the Act. He submitted that the appointment of Receiver would not ipso facto be sufficient to not to comply with the mandatory provisions of the Act. He submitted that the Ld.Court had not restrained the Receiver from applying the fund as per the provisions of the Act. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The reasons for issuing notice u/s.148 of the Act are recorded in the assessment order at para .....

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s observed that the trust has not applied 75% of its income as required u/s.11(2) of the I.T. Act till financial 2008-09 of F.Y. 2002-03. During the course of assessment proceedings the AR of the assessee and the undersigned have depth discussion regarding accumulations. Based on the assessment record available in this office, and the assessee s submission dated 26.12.2012 regarding accumulation the undersigned come to know that the trust did not spend accumulated fund in the concern financial y .....

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to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart. The facts as brought out in A.Y. 2010-11 and as mentioned above are applicable to the case of the assessee for A.Y. 2009-10 and the point pertinent to note that the AR agreed vide order sheet entry dated 26.12.2012 that he does not have any objection about the addition made on the same ground during assessment proceeding for A.Y. 2010-11. Accordingly I have reason to believ .....

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similar additions were confirmed by the ld.CIT(A). 4.2. The only question which arises for our consideration is whether the period in which the order of the Jt.Dist.Judge was in operation to be excluded for reckoning the period of 10 years as mentioned in section 11(2)(a) of the Act under the facts of the present case. For the sake of clarity, section 11(2) and 11 (3) are reproduced hereinbelow:- Section 11 [(2) [Where [eighty-five per cent] of the income referred to in clause (a) or clause (b) .....

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] (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 for which the income is to be accumulated or set apart, which shall in no case exceed ten years ; [(b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) :] [Provided that in computing the period of ten years referred to in clause (a), the period .....

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redited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that subsection, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section .....

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rpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof, [(d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of sect .....

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n accordance with the provisions of clause (b) of sub-section (2) cannot be applied for the purpose for which it was accumulated or set apart, the [Assessing Officer] may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub-section (3) shall apply as if the purpose spec .....

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f clause (b) of subsection (2), is dissolved, the Assessing Officer may allow application of such income for the purposes referred to in clause (d) of sub-section (3) in the year in which such trust or institution was dissolved.] 4.3. From the material available on record, the undisputed facts are: (i) That, the order dated 01/10/1994 was passed by the Ld.Jt.District Judge, Panchmahal, Godra in the following terms:- ORDER 1. The applications are allowed. 2. Ad-interim injunction as prayed for in .....

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e shall take all steps to realize the dues of the trust. He will be entitled to a monthly remuneration of ₹ 1,500/- (Rupees one thousand five hundred only) tentatively from the date of issue of Receiver Patra in addition to reasonable expenses incurred by him for the management of the trust. He shall commence the work of Receiver forthwith. 5. Shri M.M.Parmar, C.O.C., District Court Panchmahals, at Godhra is also appointed as Co-Receiver to assist Shri N.B.Patel, the Receiver, appointed ab .....

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restrained from managing the properties and affairs of the public trust known as Kalika Mataji Temple, at Pavagadh, registered under Bombay Public Trust Act No.421/Panchmahals, during the pendency of this appeal. 9. The Receiver is also directed to make an inventory of the trust properties and affairs belonging to the public trust, known as Kalika Mataji Temple. The pltff is directed to pay additional remuneration for the said work of inventory of the trust properties at ₹ 1,000/- (Rupees .....

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ections filed by the defendants vide exh.23 are hereby rejected. 3. It is hereby ordered and declared that the defendants are nto entitled to get the relief as claimed for in the WS exh.23. 4. The defendants shall pay the costs of this application to the plaintiff and bear their own. Pronounced in the Open Court today this 29th day of October, 1994 4.4. As per Ad-interim order dated 01/10/1994 Shri N.B.Patel, Sr.Advocate & Notary Godhra Bar was appointed as Receiver to manage properties of t .....

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ver was directed to make an inventory of the trust properties and affairs belonging to the public trust known as Kalika Mataji Temple. 4.5. From the above order, it is clear that the affairs of the assesseetrust were taken over by the Court appointed Receiver and, therefore, it can be inferred from the material available on record that the trustees of the assessee-trust were restrained from managing the affairs. It is the contention of the assessee-trust that the above order remained in force ti .....

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of the assessee is that the delay in making application by the assessee-trust was due to sufficient cause and the authorities below ought to have condoned the delay and excluded the period during which the affairs of the trust was taken over by the Court Receiver trust. However, no such situation is contemplated under the Act where the affairs of the trust are taken over by the Court appointed Receiver and compliance of the provision by the Receiver. Sub-section(3A) of section 11 contemplates a .....

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