TMI Blog1997 (10) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed to the CIT (A), but without any success. Therefore, the present appeal. 3. The first ground of appeal reads as under : 1. The income of the Council be considered as fully exempt on the ground of mutuality, on the ground that the surplus accruing as a result of mutual activity is not taxable, more particularly, in view of section 44A of the Income-tax Act. 4. This ground is dismissed as not pressed. 5. The second ground of appeal reads as under : 2. Grants-in-aid received from the Government of India be considered as not taxable. 6. This ground of appeal has also not been pressed, without prejudice to assessee';s right to contest similar ground in any subsequent year. This ground of appeal is also dismissed as not pressed. 7. Ground No. 3 reads as under : Deficit of earlier years be allowed to be carried forward and set off against total income of the current year. 8. The assessee had claimed adjustment of excess application in earlier years out of the income of the year under appeal. The Assessing Officer disallowed the claim of the assessee on the ground that firstly the deficit was not worked out in earlier years and secondly, the comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer. 12. The next ground of appeal is relating to computation of deduction under section 11(1)(a). Section 11(1)(a) allows accumulation of income for application to the extent of 25 per cent of the income. The dispute between the assessee and the revenue is relating to the computation of income for purposes of accumulation. The assessee claims that the gross receipts of the Trust forms income of the Trust for purposes of section 11(1)(a). The claim of the revenue is that the income has got to be computed after setting off of the non-code expenditure. The assessee calculated the 25% of income for purposes of accumulation as under : Gross Receipts : Rs. 30,05,200 Grant-in-aid : Rs. 35,52,000 Total : Rs. 65,57,200 25% for accumulation : Rs. 16,39,300 13. The Assessing Officer calculated the amount available for accumulation as under : Gross Receipts includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, there are several decisions throwing light on this issue. 20. In the case of CIT v. Ganga Charity Trust Fund (1986) 162 ITR 612/ 29 Taxman 413, their Lordships of the Gujarat High Court have held that income derived from Trust property must be determined on commercial principles and in doing so, all outgoings including outgoings by way of income-tax paid by the assessee-trust must be deducted and it is only from the surplus income in the hands of the trustees that the question of application or accumulation or setting apart of income can arise. 21. In the case of CIT v. Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485, their Lordships of the Madras High Court have held that the income to be considered for purposes of section 11(1)(a) is to be arrived at in the context of what is available in the hands of the assessee subject to an adjustment of any expenses extraneous to the Trust. It was further held that the application of income for charitable purposes will have to be excluded for the purposes of determination of the income available for accumulation. Their Lordships further held that the income from the properties held under Trust will have to be ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be attributed to the earning of the income of the assessee. The contention of the assessee that only a small portion of the expenditure is attributable to the earning of income shall have to be determined by the revenue authorities, after giving an opportunity of being heard to the assessee. For that purpose, the issue is set aside and remitted to the Assessing Officer for working out the expenditure to be deducted out of the gross income, for the purpose of determining the income and then working out the 25% of the same for accumulation. 28. The next ground of appeal is relating to the disallowance of expenses amounting to ₹ 4,16,013 incurred by the assessee outside India. 29. The relevant facts relating to this issue are that the Council had sent a Trade Delegation abroad, in respect of which an expenditure amounting to ₹ 4,86,975 had been spent outside India. The delegates had contributed a sum of ₹ 72,962 and the balance of ₹ 4,16,013 was incurred by the Council. The Assessing Officer refused to consider the expenditure of ₹ 4,16,013 as an expenditure in connection with the application of income, as according to the revenue, the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income from such property ; 33. A bare reading of the sub-section 11(1)(a) does not leave us in doubt that the requirement under section 11 is for application of income for purposes in India and it does not restrict the application of income within the territory of India. The charitable purpose for which the income should be applied for claiming exemption under section 11(1)(a) should be in India. In this case, it is not disputed that the Trade Delegation had been sent abroad for the benefit of the entire trade in India. The exports are made from India and the purpose for sending the Delegation was to increase the possibilities of exports out of India. We accordingly hold that since the assessee has applied the income for charitable purposes in India, the mere fact that the expenditure has been incurred out of India, does not disqualify the expenditure from exemption under section 11(1)(a). 34. The next ground of appeal is relating to the writing off of ₹ 6,04,639. The relevant facts relating to this deduction are that, in the year 1979, an institute by the name Indian Diamond Institute was formed, which had been treated as Branch of the assessee Council. A sum of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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