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2015 (12) TMI 448 - ITAT BANGALORE

2015 (12) TMI 448 - ITAT BANGALORE - TMI - Calculation of the deduction u/s. 11(1)(a) - e accumulation @ of 15% on net receipts by the AO compared to the calculation on gross receipts by the assessee - Held that:- The accumulation u/s 11(1)(a) of the Act should be allowed as claimed by the Assessee as relying on case of Jyothy Charitable Trust [2015 (11) TMI 1295 - ITAT BANGALORE] wherein held this issue is no longer res integra and has been decided by the Special Bench Mumbai in the case of Bai .....

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AM For the Petitioner : Shri V Srinivasan, CA For the Respondent : Shri Sunil Kumar Agarwala, Jt.CIT ( DR ) ORDER Per Asha Vijayaraghavan, Judicial Member This appeal by the assessee is against the order dated 19.01.2015 of the CIT(Appeals)-14, LTU, Bangalore relating to ay 2011-12. 2. The assessee is a public charitable cum public religious institution registered under the Mysore Societies Registration Act, 1960. It is engaged in carrying on educational activities in the nature of running of s .....

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activities, which are necessary for earning such income, would have to be factored in. The assessee's claim of accumulation at 15% of gross receipt has not been followed since the AO held that this method is applicable only to a Trust which is running purely on donations and where no amount has been spent for getting such donations. 5. The assessee relied upon the decision of the Hon'ble Supreme Court in case of CIT vs Programme for Community Organization 248 ITR 1 to emphasize its stan .....

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rmed by the assessee. 7. The assessee also referred to earlier ruling of the Hon'ble Supreme Court in the case of S.R.M. M.C.T.M. Tiruppani Trust vs Commissioner of Income Tax (1998) reported in 230 ITR 636 (SC) and Commissioner of Income Tax vs ALN Rao Charitable Trust (1995) reported in 216 ITR 697 (SC) which have dealt with this issue wherein it was held that the deduction or exclusion on account of accumulation of income under section 11(1)(a) of the Income Tax Act is to be granted at 25 .....

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, tutition fees, management fees, school development fees etc. while other sources from bank interest, voluntary contribution, donation, are also reflected therein. The principle of 15% of net income is to be applied only to receipts from activities for which a consideration has been charged and not to the entire gross receipts of the appellant. To the extent the appellant receives donations, the accumulation from such receipts are to be treated in terms of the Hon'ble Supreme Court's de .....

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e, directed to bifurcate the receipts from the consideration charging activities and those without consideration such as donation etc., and treat the accumulation in the former in terms of net receipt and in the latter in terms of gross receipts. In view of this discussion, the grounds raised are partly accepted." 9. Aggrieved, the assessee is in appeal before us on the following grounds:- "1. The orders of the authorities below in so far as they are against the appellant are opposed t .....

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Learned CIT[A] is not justified in upholding the computation of the amount accumulated u/s.11[2] of the Act at ₹ 33,61,725/- as against a sum of Rs.NiL computed by the appellant after reckoning 15% of the accumulation in terms of section 11[1][a] of the Act, on the net surplus after deducting revenue expenditure incurred by the appellant, instead of computing the same at 15% of the gross income from property held under trust, as done by the appellant under the facts and in the circumstance .....

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tract is reproduced below:- "15. The third issue that arises for consideration in this appeal is as to whether 15% accumulation for application in future has to be calculated on gross receipts or net receipts after deduction of revenue expenditure. The Assessee claimed accumulation of income for application for charitable purpose at 15% of the gross receipts. The AO was of the view that accumulation will be allowed only to the extent of 15% of the income after revenue expenditure. In other .....

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o be decided is therefore as to whether for the purpose of computing accumulation of income of 15% under section 11(1)(a) of the Act, one has to take the gross receipts or gross receipts after expenditure for charitable purpose i.e., the net receipts. This is issue is no longer res integra and has been decided by the Special Bench Mumbai in the case of Bai Sonabai Hirji Agiary Trust Vs. ITO 93 ITD 0070 (SB). The facts in the aforesaid case were that the assessee was a public charitable trust enj .....

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ome earned by the assessee is relevant or the income as computed in accordance with the provisions of IT Act. In other words, whether outgoings from out of gross income which are in the nature of application of income, should be first deducted from the gross income and 25 per cent of only the remaining amount should be allowed to be accumulated or set apart. The Special Bench of the ITAT on the issue held as follows:- 9. Coming to the merits of the issue, we are of the view that the same is clea .....

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ee received, in the sum of ₹ 2,57,376, would constitute its property and it is entitled to accumulate twenty-five per cent thereout. It is unclear on what basis the Revenue contended that it was entitled to accumulate only twenty five per cent of ₹ 87,010. For the aforesaid reasons, the civil appeal is dismissed." It is clear from the above that deduction of twenty-five per cent was held to be allowable not on total income as computed under the IT Act. Any amount or expenditure, .....

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he income is expected to have relation to the extent to which such income is applied to such purposes in India. It is thereafter the statutory provision proceeds further that such income is not to be understood to be in excess of 25 per cent of the income from such properties. In other words, the very language of the statutory provision under consideration sets apart 25 per cent of the income from the source of property with reference to the extent to which such income is applied for such purpos .....

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e trust under the relevant head of s. 11(1). In other words, income that is not to be included for the purpose of computing the total income would be the amount expended for purposes of trust in India. Their Lordships in the above case have emphasized on the clear and unambiguous language of s. 11(1)(a) and decided the matter on the basis of the same. It has been held that as per the statutory language of the above section the income which is to be taken for purpose of accumulation is the income .....

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