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2016 (1) TMI 569 - ITAT BANGALORE

2016 (1) TMI 569 - ITAT BANGALORE - TMI - Refusal to allow accumulation under Section 11(1)(a) - Held that:- Following the decision of the co-ordinate bench of this Tribunal in Jyothi Charitable Trust (2015 (11) TMI 1295 - ITAT BANGALORE), we hold and direct the Assessing Officer to allow the accumulation of income at 15% of the gross receipts as claimed by the assessee and not on the basis of net income as held by him and accordingly set aside the orders of the authorities below. - I.T. A. No.3 .....

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e is a public religious cum public charitable institution registered under the Karnataka Societies Act, 1960 and also registered under Section 12A of the Income Tax Act vide order No.PRO 718/10A/Vol.A1/A-280 dt.23.4.1975 as a religious-cum-educational institution. The assessee filed its return of income for Assessment Year 2011-12 on 27.3.2012 declaring a taxable income of NIL after claiming application of income and accumulation under Section 11(2) of the Income Tax Act, 1961 (in short 'the .....

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a) of the Act cannot be allowed on gross receipts but must be computed after reducing the expenses for earning such income. Therefore, however, in the computation of total income, the Assessing Officer did not allow any deduction towards accumulation under Section 11(1)(a) of the Act at all and the entire income computed after the application allowed was treated as accumulation under Section 11(2) of the Act, for which Form No.10 was filed. In this manner, the Assessing Officer completed the ass .....

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grieved by the order of the CIT (Appeals) - 14, LTU, Bangalore for Assessment Year 2011-12 dt.30.10.2014, the assessee has preferred this appeal before the Tribunal raising the following grounds :- 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT (Appeals) is not justified in upholding the action of the learned Assessing Officer in not granting .....

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e appellant by reckoning 15% of the accumulation in terms of section 11(1)(a) of the Act, on the net surplus after deducitng 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 circumstances of the appellant s case. 4. The learned CIT (Appeals) is not justified in sustaining the addition of ₹ 88,882 as income of the appellant being the cost / WDV of the ve .....

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that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 4. The Grounds at S.Nos.1 and 5 are general in nature and not being urged before us are rendered infructuous and accordingly dismissed. 5. Ground No.4 was not urged before us and is accordingly dismissed as infructuos. 6.1 In Grounds at S.Nos.2 and 3, the learned Authorised Representative for the assessee .....

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Apex Court in the case of CIT V Programme for Community Organisation reported in 248 ITR 1 (SC) affirming the decision of the Hon'ble Kerala High Court reported in 228 ITR 620 (Ker). Reliance was also placed on the judgment of the Hon'ble Apex Court in the case of S.R.M.M.C.T.M. Tiruuppani Trust reported in 230 CTR 638 (SC) and CIT V A.L.N. Rao Charitable Trust reported in 216 ITR 697 (SC). The learned Authorised Representative also drew the attention of the Bench to the decision of the .....

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1 (supra) as not being applicable to the assessee in the case on hand. 6.3.1 We have heard the rival submissions and perused and carefully considered the material on record; including the judicial decisions cited and placed reliance upon. We find from a perusal of the assessment order that the Assessing Officer has discussed the issue relating to the manner of computation of the accumulation under Section 11(1)(a) of the Act; i.e. whether the same should be allowed on gross receipt or net income .....

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the Act is to be computed on the basis of the gross receipts. The relevant portion of the Tribunal s order at paras 15 to 18 is extracted hereunder :- 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 th .....

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e CIT(A) confirmed the order of the AO. Hence ground No.4 raised by the Assessee before the Tribunal. 17. The issue to be decided is therefore as to whether for the purpose of computing accumulation of income of 15% under Sec.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 .....

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ng the aforesaid 25 per cent, the important question which arose was as to whether for this purpose, the gross income 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 .....

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cent of its income derived from property held under trust. For the present purposes, the donations the assessee 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 p .....

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ved by the trust from property. The trust is required to be wholly for charitable or religious purposes, and the 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 i .....

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to get the benefit of twenty-five per cent and this twenty-five per cent has to be understood as income of the 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 sta .....

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ps have pointed that the same has to be taken on "commercial" basis and not "total income" as computed under the IT Act. Their Lordships in the decided case rejected the contention of the Revenue that the sum of ₹ 1,70,369 which was spent and applied by the assessee for charitable purposes was required to be excluded for 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 .....

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