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2016 (1) TMI 493 - ITAT AHMEDABAD

2016 (1) TMI 493 - ITAT AHMEDABAD - TMI - Benefit of accumulation as specified under section 11(2) denied - application of the assessee in form no.10 - Held that:- In the case of the assessee the Assessing Officer has nowhere examined the utilization of funds of previous years as to whether the separate records were kept for each year of accumulation and whether the fund has been utilized for the purpose of the trust within the time limit mentioned in the provisions of the Act relevant to the As .....

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m no.10 for the purpose of the trust has duly been accepted by the Assessing authorities and the same is being continued in the years after the year under appeal before us.

Also in the case of DIT (Exemption) vs. Guru Nanak Vidya Bhandar Trust (2004 (1) TMI 11 - DELHI High Court), Hon’ble Delhi High Court has dealt with the issue wherein assessee’s claim for accumulation set out in form no.10 were accepted in the preceding and subsequent years to held CIT(A) was not justified in upho .....

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andhinagar, Ahmedabad dated 28.9.2011 in appeal No.CIT(A)GNR/115/2010-11. Assessment for Asst. Year 2008-09 was framed by DCIT, Gandhinagar Circle, Gandhinagar under section 143(3) of the Income-tax Act, 1961 (in short the Act) on 10th December, 2010. Assessee has raised following grounds of appeal: 1. Ld. CIT(A) erred in law and on facts in confirming action of AO rejecting accumulation of funds u/s 11(2) of the Act. Ld. CIT(A) ought to have held the appellant eligible for benefit of accumulati .....

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cting accumulation in absence of assigning any specific reasons to the vagueness of objects listed in form no.10. Both the lower authorities failed to appreciate that the objects for which accumulation was sought were specific and concrete in nature. 4. Both the lower authorities erred in law and on facts in not taking into cognizance case laws relied upon by the appellant directly applicable to the facts of the case and without distinguishing them rejected the claim of accumulation of funds tha .....

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time of or before the hearing of the appeal. 2. Briefly stated facts of the case are that the assessee i.e. Gujarat Chief Minister Relief Fund filed its return of income at Rs.NIL on 08/12/2008. The case was selected for scrutiny and notice u/s 143(2) was issued on 7.9.2009 and duly served on the assessee. During the assessment proceedings, the Assessing Officer came through that the assessee has set apart ₹ 8,21,58,996/- as specified under section 11(2)(a) of the Act for being used in su .....

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of the assessee. 3. Aggrieved, assessee went in appeal before the ld. CIT(A) who confirmed the addition made by Assessing Officer by observing as under :- 6. I have gone through the assessment order and the submissions of the assessee. Both the appellant and the revenue agree that the assessee has given the same and all the purposes for accumulation of funds which are the purposes of charitable Trust itself. The issue was examined by Hon ble Madras High Court in the case of CIT vs.M.CT. Muthiah .....

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or religious purposes will be exempt from income-tax. Where the income or the entire income is not so spent, but is accumulation, it will be exempt to the extent of 25 per cent of its total income or ₹ 10,000 whichever is higher. Under s.11(2) if the trust desires to accumulate more than 25 per cent of its income and wants to claim exemption from income-tax it has to comply with the conditions which are laid down in s.11(2)(a) and (b). The first condition is that a notice in writing shoul .....

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e its income for a maximum period of ten years. The condition is that the trust should specify in the prescribed form the purpose for which the income is accumulated or set apart. It is not enough for the trustees to repeat the objects of the trust but must specify a particular purpose for which the income is being accumulated (emphasis supplied). We are in agreement with the view of the Calcutta High Curt in Director of IT vs. Singhania Charitable Trust (1993) 199 ITR 819 (Cal) : TC 23R.1317 wh .....

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ld specify its purposes and the requirement is that the purposes must have some individuality and mere repetition of the objects of the trust would not meet the requirements of s.11(2) of the Act. (emphasis supplied) In the instant case, there is no individuality of the purposes which is the essential requirement as per the Hon ble Madras and Calcutta High Court. It is merely repetition of the objects of the trust which would not meet the requirements of sec.11(2) of the Act as has been held by .....

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ome specific purpose, by the trust. In the instant case, the accumulation is sought without any specific purpose in mind but just to postpone the application of funds it was required to make for all the objects of the trust. This defeats the purpose of the sub-section and is not permissible as clearly held by the Hon ble Courts. The decision of the AO is therefore upheld and the grounds of appeal are dismissed. 4. Aggrieved, assessee is now in second appeal before the Tribunal. The ld. AR of the .....

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od, drought etc. All these activities of the trusts are similar to the objects of Prime Minister Relief Fund. 5. The ld. AR further submitted that the trust regularly receives fund/contribution during the year and since the objects of the trust also include providing relief in case of natural calamity, financial assistance to widows of solders and these objects are not certain to occur every year and there are always possibility of such incidents in the near future and for this very reason certa .....

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bjects for which the trust works but plurality of purpose is permitted and if it so happens that the trust has only few objects it may well utilize the funds for all the objects and purposes. 6. The ld. AR also took us through the form no.10 and assessment orders for the previous years wherein assessee s claims for setting apart of funds have been accepted by the Assessing Authorities even when the assessee has mentioned the purpose of setting apart of the funds has to be applied for the objects .....

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has been consistently allowing the assessee to set apart the funds for the purposes of the trust under section 11(2) of the Act and also allowing the claim in the years after the year under appeal. To support his case, the ld. AR also relied on the judgment of Hon ble Delhi High Court in the case of Director of Income-tax (Exemption) vs. Guru Nanak Vidya Bhandar Trust (2005) 272 ITR 379 (Del). 8. On the other hand, the ld. DR supported the orders of lower authorities and could not controvert to .....

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visions of section 11(2) of the Act - 11. [(2) [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 apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total .....

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forms or modes specified in sub-section (5)]:] [Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded:] [Provided further that in respect of any income accumulated or set apart on or after the 1st day of April, 2001, the provisions of this sub-section shall have effect as if for the words ten yea .....

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rred to in sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.] From above we can see that section 11(2)(a) of the Act says that the assessee has to give a notice in writing i.e. in form no.10 specifying the purpose for which the income is being accumulated and the period for which income is to be accumulate .....

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filled by the assessee in respect of the provisions of section 11(2)(a). The only point of the discussion remains is whether any specific purpose for example -construction of a hospital, school building etc. is necessary to be mentioned in form no.10 or mentioning of the purpose for which the trust/charitable organization has been established is for a sufficient purpose for its accumulation. Section 11 of the Act deals with income from property held for charitable or religious purpose and mentio .....

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the State and Secretary, Department of Revenue of State of Gujarat and its main purpose is elevation by grant of money or otherwise of distress caused by partial or complete failure of rains and its consequent effect in the shape of partial or total failure of crops or by any other calamity in the State of Gujarat. Further as per the rules of Gujarat Chief Minister Relief Fund moneys and other assets available from fund shall be spent in one or more of following ways - (i) In supplementing the r .....

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urists, maldharis (cattle breeders) and others who have lost their whole or substantial portion of their means of likelihood due to the calamity or distress. (vi) In relieving distress, due to shortage of fodder, by free or subsidized sale of grass or concentrates to institutions and individuals. (vii) In providing for any object which the committee may consider fit for relieving the distress of human beings or cattle in any area of Gujarat State. 11. Further in the past Gujarat Chief Minister R .....

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is round the clock. In other words the incidents may happen in a year or more is not under the control of the trust. For this very reason the assessee has set apart/accumulated the funds for the objects of the trust and nothing specific possible happening could have been written in the application. Certainly the section 11(2)(a) has a check for the utilization of such fund by way of restricting the period for which the fund can be accumulated which is for 5 years relevant to Asst. Year 2008-09 .....

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the separate records were kept for each year of accumulation and whether the fund has been utilized for the purpose of the trust within the time limit mentioned in the provisions of the Act relevant to the Assessment Year in which it has been accumulated. Rather the Assessing Officer has only dealt with the issue, of whether the accumulation of fund is for a specific purpose or not, which in the case of assessee was properly done as they have mentioned that they are accumulating/setting apart fu .....

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