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2015 (9) TMI 542

n (2000 (11) TMI 4 - SUPREME Court ) which was also applied by the Special Bench of the ITAT Mumbai in Bai Sonabai Hirji Agiary Trust. Versus Income-Tax Officer. [2004 (9) TMI 300 - ITAT BOMBAY-E] holding that the expression “such income” means gross income and not the net income after deducting the administrative expenditure. Thus to hold that the claim of assessee is in accordance with law. Since the expenditure incurred by the assessee was more than 93% of the gross receipts, no part of the gross receipts are liable to be taxed in the year under consideration, since the balance amount was set apart for application in the next year. With these observations, the appeal filed by the assessee-trust is allowed. - Decided in favour of assessee. - ITA No.664/Bang/2015 - Dated:- 25-8-2015 - SHRI D. MANMOHAN, J. For The Appellant : Shri P. Prathik, C.A. For The Respondent : Shri P.K. Sreehari, Addl. CIT(DR) ORDER This appeal by the assessee is directed against the order dated 30.01.2015 passed by the CIT(Appeals)-14, Large Taxpayers Unit, Bangalore and pertains to assessment year 2011-12. 2. The assessee is an educational society and it obtained registration under the provisions of secti .....

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said case law is applicable only in respect of amount received in the form of donations and not the amount received by carrying on the activity such as imparting education. As per the computation of the AO, the balance amount works out to ₹ 57,19,387, out of which the assessee has incurred capital expenditure of ₹ 38,75,380 and, to the extent of 15%, which works out to ₹ 8,57,908 the assessee is entitled to accumulate/set apart for application for charitable purposes u/s. 11(1)(a) and the balance was treated as taxable income. 5. In appeal filed by the assessee, the ld. CIT(Appeals) has adopted the same view and thus, the assessee is in appeal before the Tribunal. 6. At the time of hearing, the ld. counsel for the assessee submitted that the Circular issued by CBDT dated 19.6.1968, no doubt, speaks of the ambit of the expression income , but it has no application in this context inasmuch as the provisions of section 11(1)(a) uses the expression such income , which in turn refers to gross income. In this regard, he filed detailed written submissions which are reproduced below for the sake of convenience:- 9. It is also stated by the learned Commissioner that there .....

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. 10. The decision of the Hon ble Supreme Court in the case of CIT vs. Programme for Community Organisation [248 ITR 1] which while dealing with the issue, had held that a charitable or religious trust is entitled to accumulate twenty-five per cent of its gross income derived from property held under trust, was also brought to the attention of the learned CIT(Appeals). There, their Lordships had elucidated their view by stating that the limit of 25% (as applicable then) was to be construed with reference to the gross donations received by the Trust and not the net sum available after the application from out of such donations. But this decision was also distinguished by the learned Commissioner on the grounds that such decision was rendered only the context of a trust or institution running purely on donations and will therefore not apply to an educational institution which accepted fees and had to incur expenses to earn such fees. It is submitted that there is nothing in the aforesaid decision of the Hon ble Supreme Court to suggest that it is applicable only to a Trust or institution running purely on donations, and not in the case of any other charitable institution in receipt o .....

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that the sum of ₹ 1,70,369 which was spent and applied by the assessee for charitable purposes was required to be excluded for the purpose of taking amount to be accumulated. Having regard to the clear pronouncement of their Lordships of the Supreme Court it is difficult to accept that outgoings which are in the nature of application of income are to be excluded... 7. In particular, the assessee placed reliance upon the ITAT Mumbai Special Bench in the case of Bai Sonabai Hirji Agiary Trust [272 ITR (AT) 67] wherein, on identical issue, the Tribunal observed as under:- From the above, it would appear that the dispute is limited to correct amount of income from house property, whether it should be gross rent of ₹ 2,63,675 or the net income after deducting outgoings and depreciation. ………………… ………………… Shri V. H. Patil further submitted that the Kerala High Court (see [1997] 228 ITR 620), in the same case, has referred to the Board s Circular dated June 19, 1968, on the same subject and observed that income for the purposes of section 11(1), should be understood in its commerci .....

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