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2015 (12) TMI 1499 - ITAT HYDERABAD

2015 (12) TMI 1499 - ITAT HYDERABAD - [2015] 43 ITR (Trib) 650 (ITAT [Hyd]) - Disallowance of the accumulation of income - rejection of Form 10 - Held that:- The assessee is a charitable trust and has been registered under section 12AA of the Act. During the relevant financial year, the assessee has excess of income over expenditure and has sought to set apart the said excess for the purposes of objects of the trust. Though in Form 10, the assessee has not mentioned specific purpose for which th .....

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ontention that the funds set apart have been utilised for the purpose mentioned by the assessee in its letter filed before the Assessing Officer during the assessment proceedings, I am of the opinion that the assessee is eligible for accumulating the excess of income over the expenditure for the relevant assessment year. - Decided in favour of assessee - I. T. A. No. 1014 /Hyd/ 2015 (assessment year 2008-09). - Dated:- 23-9-2015 - SMT. P. MADHAVI DEVI (Judicial Member) K. C. Devdas for the appel .....

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e assessment year 2008-09 on January 22, 2009 declaring "nil" income after claiming exemption under section 11 of the Income-tax Act. Along with the return of income the assessee also filed Form 10 seeking permission to accumulate income for application in subsequent years. During the assessment proceedings under section 143(3) of the Act, the Assessing Officer observed that Form 10 does not mention the specific purpose for which the amount is being accumulated. He, therefore held Form .....

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atholic Christians and all persons . . ." and since the assessee has not filed any extract of the minutes/book or resolution passed by the trustees of the society in support of the purpose mentioned, i.e., "establishment of schools/hospitals etc.," the explanation dated December 22, 2010 was treated as invalid. He accordingly brought the excess of income expenditure of ₹ 10,46,695 as per the income and expenditure statement to tax. Aggrieved, the assessee preferred an appeal .....

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e over expenditure as sated in Form 10 was to enable the association/institution/ members of the trust to accumulate sufficient funds for carrying out the objects of the trust. He submitted that during the course of the assessment proceedings, the assessee has furnished the specific purpose for which the funds have been set aside and in such circumstances, the accumulation cannot be denied. He submitted that this issue is covered by the decision of the jurisdictional High Court in the case of Sa .....

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said order before us. He further submitted that the amount which has been accumulated or set apart for construction of schools/hospitals, etc., has been utilised for the very same purpose in the subsequent years and therefore, the disallowance is not called for. The learned Departmental representative, on the other hand, supported the orders of the authorities below. 4. Having regard to the rival contentions and the material on record, I find that the assessee is a charitable trust and has been .....

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Officer's refusal to accept the subsequent letter of the assessee giving specific purpose of accumulation is that the assessee has not filed the resolution of the society for the specific purpose mentioned in the letter. As far as the decision of the jurisdictional High Court is concerned, we find that the hon'ble High Court has held that as long as the assessee is able to furnish the required information before the completion of the assessment, it is due compliance of the law and the a .....

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01 (SC) for coming to this decision. The relevant portion of the decision is reproduced hereunder for ready reference (page 511 of 376 ITR) : "5. Section 11(2) of the Act reads as follows : 'Where eighty-five per cent. of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set ap .....

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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) . . ." 6. A perusal of the above provision makes it clear that the assessee should supply the information in Form 10 and indicate the purposes for which the accumulated funds were meant to be utilised. 7. The said provision came up for consideration in Director of I.T (Exemption) v. Trustees of Singhania Cha .....

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purpose of accumulation of income as provided in section 11(2) of the Income-tax Act, 1961, which requires specification of the purposes ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in cancelling the order of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961, holding that the assessment of the Income-tax Officer allowing accumulation of the income under section 11(2) of the Income-tax Act, for all the objects for which the .....

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ponse, he set aside the order of assessment and ordered for de novo enquiry. The assessee preferred an appeal to the Tribunal. The Tribunal held that since a plurality of charitable purposes is not ruled out under the scheme of the Act, no objection could possibly be taken to the assessee's listing out all the objects of the trust in Form 10. The matter was taken by the Revenue to the High Court. It was contended that one purpose is interlinked with the other and, therefore, the mention of a .....

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of the purpose if it did not have in mind the particularity of the purpose or purposes falling within the ambit of the objects clause of the trust deed. Accordingly, it answered question No. 2 in the negative and declined to answer question No. 1. It remanded the matter to the Tribunal to allow the assessee to adduce fresh evidence whether in the form of any resolution or otherwise showing that the specific purpose for which the trust requires the accumulation of the income exists and observed t .....

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