TMI Blog2016 (1) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... itution 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 Act') to the extent available. 2.2 In the course of assessment proceedings the Assessing Officer noticed that the assessee had claimed accumulation under Section 11(1)(a) of the Act at 15% of the gross receipts of the educational institutions. After referring to CBDT s Circular No.5P(LLX-C) dt.19.6.1968, the Assessing Officer took the view that the income of the assessee trust is required to be computed on commercial principles. He, therefore, held that the accumulation under Section 11(1)(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 accumulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... past and therefore, the appellant ought to have regarded the entire sale price of ₹ 2,50,000 as income and not merely the sum of ₹ 1,61,118 that was credited as profit on sale of vehicle under the facts and in the circumstances of the appellant s case. 5. For the above and other grounds that maybe urged at the time of hearing of the appeal, your appellant humbly prays 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 submitted that the Assessing Officer was not justified in refusing to allow accumulation under Section 11(1)(a) of the Act. It was further submitted that the accumulation under Section 11(1)(a) of the Act requires to be computed on the basis of gross receipts and not on the net income / net r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 words income to be set apart u/s.11(1)(a) of the Act has to be computed at 15% of the net income i.e., gross receipts minus revenue expenditure and not on the gross receipts as claimed by the Assessee. Since in the case of the Assessee, the gross receipts after revenue expenditure was nil, the AO denied the benefit of accumulation to the Assessee. 16. On appeal by the Assessee, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffirmed the decision of Kerala High Court in (1997) 141 CTR (Ker) 502 : (1997) 228 ITR 620 (Ker) (supra) wherein it is held as under : At the outset, the statutory language of s. 11(1)(a) of the IT Act, 1961, relates to the income derived 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 income from the source of property with reference to the extent to which such income is applied for such purposes, charitable or religious. In other words, for the purpose of s. 11(1)(a) of the Act, the income in terms of relevance would be the income of the trust from and out of which 25 per cent is set apart in accordance with the spirit of the statutory provision. This means that, when it is established that trust is entitled to full benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. 18. The aforesaid decision clearly supports the plea of the Assessee. Following the same, we hold that the accumulation u/s.11(1)(a) of the Act should be allowed as claimed by the Assessee. Ground No.4 raised by the Assessee is accordingly allowed. 6.3.2 We find that the co-ordinate bench of this Tribunal in the case of Jyothi Charitable Trust (supra) in coming to the aforesaid conclusion has followed the decision of the Special Bench of the ITAT in the case of Bai Sonabai Hirji Agiary Trust V ITO 93 ITD 70 (SB). In the light of the above discussions, and following the decision of the co-ordinate bench of this Tribunal in Jyothi Charitable Trust (supra), 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. Grounds at S. Nos. 2 and 3 are allowed as indicated above. 6. In the result, the assessee's appeal for Assessment Year 2011-12 is allowed as indicated above. Order pronounced in the open court on 23rd October, 2015. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
