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2016 (5) TMI 65 - ITAT HYDERABAD

2016 (5) TMI 65 - ITAT HYDERABAD - [2016] 45 ITR (Trib) 23 - Entitlement to exemption u/s 11(2) - Held that:- There is no dispute that the funds accumulated were utilised for carrying out the aims and objectives of the assessee which was to work for the welfare of the economically weaker section of the society and to undertake projects for rural health and sanitation in the needy area. The assessee utilised the accumulated funds as per the minutes of the governing body dated April 22, 2011. This .....

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avour of assessee. - I. T. A. No. 592 /Hyd/2015 - Dated:- 4-11-2015 - P. Madhavi Devi (Judicial Member) And S. Rifaur Rahman (Accountant Member) For the Petitioner : G. V. N. Hari For the Respondent : G. Surya Prasad ORDER S. Rifaur Rahman (Accountant Member) 1. This appeal by the assessee is directed against the order dated February 6, 2015 of the learned Commissioner of Income-tax (Appeals)-9, Hyderabad for the assessment year 2011-12. 2. Briefly the facts are, the assessee is a society regist .....

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is not covered by its aims and objectives in the Form 10, that while plurality of purpose was permitted but these purposes had to be specific, realistic and definite and that it was only by mentioning the object specifically would the Assessing Officer be enabled to monitor its utilisation. To come to the aforesaid conclusion, he relied on few case law. The Assessing Officer finally held that in view of the failure of the assessee to furnish specific purpose of accumulation in the Form 10, broug .....

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or specification of the purpose if it did not have in mind the particulars of purpose, that the expenditure out of the accumulated funds had been totally within the objects of the assessee, that this was clear from the data available as per the return for the succeeding assessment year 2011-12 and that in matters of taxation, substance and not only form, must be looked at for ascertaining the real nature of the transaction. For this proposition, the assessee relied on the decision in the case of .....

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dence is 'to be utilised for the following socio-economic programmes' whereas the phrase used in the resolution filed along with Form 10 was merely 'to be generic description what was to follow'. The phrase used in latter was meant as an end, an object and the purpose in itself. As held earlier, such a generalised purpose amounted to stating that the funds were to be used for charitable purpose and had no meaning rendering the provisions of section 11(2) otiose. 7.10 Secondly, th .....

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of the resolution, as per the additional evidence filed, has been reproduced above. As can be seen, it barely runs into one typed sheet. The appellant has failed to explain why this could not have been typed, particularly when the appellant has thought nothing of filing grounds of appeal running into seven sheets. Indeed, the appellant had enclosed copy of the resolution to the Form 10. The appellant has failed to explain why a photocopy of the resolution could not have been enclosed. 7.12 Four .....

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ssessing Officer goes probing it specifically. Had it been the intention of the statute to make the information available to the Assessing Officer only when asked for, there would have been no need to provide for the filing of Form 10 at all." 6. Still aggrieved, the assessee is in appeal before us raising the following grounds of appeal : "1. The order of the learned Commissioner of Income-tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. .....

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tax at the maximum marginal rate." 7. The learned authorised representative submitted that the intention of the trust is to utilise the accumulated funds in socio-economical programmes. He explained that the term "socio" denotes the upliftment of socially backward class and "economical" denotes economically backward class, i.e., poor people. Both these are the main objects of the trust. Hence, the term used are perfectly within its objects. The learned authorised represe .....

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in question : Statement of total income for the assessment year 2011-12 I Receipts (Rs.) (Rs.) 1. Voluntary contributions 2,00,25,585 2. Bank interest 1,14,57,25 3. Other income 23,25,170 2,34,96,480 Gross receipts 2,34,96,480 Less : Amount set aside under section 11(2) of the Income-tax Act, 1961 as per resolution passed on April 22, 2011 85,00,000 II Utilisation : 1,49,96,480 1. On revenue account 1,94,88,244 2. On capital account 1,45,371 1,96,33,615 Utilisation 1,96,33,616 Less : Amount set .....

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ation : 1,97,36,466 1. On revenue account 2,33,97,041 2. On capital account 19,57,915 2,53,54,956 Utilisation 2,53,54,956 Less : Amount set aside under section 11(2) of the Income-tax Act as per resolution passed on April 11, 2010 85,00,000 1,68,54,956 Net surplus 28,81,510 Refund due 66,375 9. The learned authorised representative also relied on the decision of the hon'ble Delhi High Court in the case of DIT (Exemption) v. NBIE Welfare Society [2015] 370 ITR 490 (Delhi). 10. The learned aut .....

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the objects of the trust. 11. The learned Departmental representative relied on the order of the Commissioner of Income-tax (Appeals) and stressed that the purpose of accumulation has to be for specific object of the trust and not on general objects. 12. Heard arguments of both sides. The Assessing Officer and the learned Commissioner of Income-tax (Appeals) have relied on various case law on the aspect of accumulation of funds for carrying out the objects of the trust and the objects has to be .....

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s, etc., in such cases, the trust has to specify clearly why they are accumulating huge funds and also over a period of time say 5 10 years. In these cases, the Assessing Officer may not be able to monitor the cases, hence, it is imminent to mention the objects clearly in Form 10. 14. In the present case, as per the records available, the assessee has accumulated the funds and followed the procedure for accumulation as per the provisions of the Act, Since, the object to accumulate the funds were .....

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d in the immediate following financial year. It is evident from the return of income filed by the learned authorised representative as above. The accumulated funds of the assessment year 2009-10 are applied in the assessment year 2010-11. Similarly, accumulated sum of ₹ 85,00,000 in the assessment year 2011- 12 are applied in the assessment year 2012-13. This was verified and assessment order under section 143(3) was passed in the assessment year 2012-13. It is very clear that the assessee .....

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cumulated 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 income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely :- (a) such person specifies, by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which th .....

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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 years' at both the places where they occur, the words 'five years' had been substituted. Explanation.-Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or instit .....

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accumulate the funds for the purpose of utilising the funds for the objects of the trust. It can be for the long term as well as short term like utilising them in immediately following assessment year. The relevant question would be, whether the accumulated funds were applied for the objects of the trust in India. In the present case, the accumulated funds were applied for the objects of the trust. 16. In the case relied upon by the learned authorised representative, i.e., DIT (Exemption) v. NB .....

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clarified and stated that the money in question would only be used for the purpose of making payments to the members or their legal representatives in case of their death, retirement or permanent disability. The Tribunal in the impugned order has also referred to the scheme floated by the respondent assessee under which the employees who were desirous of becoming members had to deposit ₹ 10 as admission fees and thereafter pay ₹ 25 per month for a period of 25 years. The scheme devi .....

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er shall subscribe a sum of ₹ 25 per month for a period of 25 years. Benefits : (a) in case of death : (i) Members in the age group of below 50 years (as on 31-7-85) will be entitled to the following benefits : (a) A sum of ₹ 500 p.m. shall be paid to the nominee of the deceased member for a period of 15 years. (b) Lump sum additional payment of ₹ 15,000 shall be made to the nominee of the deceased member in addition in the benefit referred to above if the member dies during th .....

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fits are also there which are in case of retirement and these have been given in part 'B' of this scheme to the extent that a sum of ₹ 500 per month shall be paid to the members as per calculation given in the same. Further, other benefits in the cases of death and permanent disability have also been given. Lastly, benefit have been given on resignation from bank prior to the retirement. The contention of the learned counsel is that this is the only object of the assessee and there .....

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