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2016 (6) TMI 295 - ITAT MUMBAI

2016 (6) TMI 295 - ITAT MUMBAI - TMI - Entitlement for benefit u/s 11(2) of the Act of the accumulation of funds - Held that:- Merely because the Resolution is passed after the end of the previous year relevant to the assessment year will not be sufficient to disentitle the assessee-trust of its claim for accumulation of fund u/s 11(2) of the Act as the assessee-trust has demonstrated that it was in-fact in the process of setting up hospital on its 10 acre plot of land at Jogeshwari for which Ma .....

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benefit of accumulation u/s 11(2) of the Act which cannot due to the reasons cited by the authorities below be denied to the assessee-trust. In our considered view, the assessee-trust is entitled for the benefit of accumulation of funds u/s 11(2) of the Act to the tune of ₹ 1,89,10,525/- as claimed by the assessee-trust. - Decided in favour of assessee - I.T.A. No. 2150/Mum/2015 - Dated:- 31-5-2016 - Shri Saktijit Dey, Judicial Member And Shri Ramit Kochar, Accountant Member For the Asses .....

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by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income Tax Act,1961(Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee-trust in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1. On facts and in circumstances of the case and in law the Commissioner of Income Tax (Appeals) {CIT (A} and Assessing Officer (AO) has erred in holding that Form No.10 filed in respect of .....

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ble u/s 11(2) of the Income Tax Act suffered from absolute generality and complete lack of specific purpose. In doing so, both the CIT(A) as well as the AO have erred in not granting the appellant benefit of accumulation of income as contained in Section 11 (2) of the Income Tax Act. 3. On facts and in circumstances of the case and in law the Commissioner of Income Tax (Appeals) {CIT(A)} and Assessing Officer (AO) has erred in rejecting the appellant's plea for granting deduction of 15% of t .....

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ome of the appellant Trust on the grounds of commercial principles and not exempt from the charge of income tax as claimed by the appellant, since it being in the nature of a capital receipt. 3. The brief facts of the case are that the assessee-trust is registered as a charitable organization with DIT (E), Mumbai u/s 12A of the Act vide Registration No. TR/327 and with the Charity Commissioner, Mumbai vide registration No. E-3142(Bom). The assessee-trust claims to be engaged in charitable activi .....

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he Form No. 10 reads as under:- It is resolved that amount of ₹ 1,89,10,525/ the excess of income over the expenditure for the year ending 31.03.2010 be carried forward for future project. It was observed by the A.O. that the accumulation u/s 11(2) of the Act is sought to be made for various general purposes and no specific and concrete projects are contemplated for utilization of these accumulated funds but the purpose of accumulation is vague. Moreover, no specific fund is created in the .....

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shed before the A.O. within the stipulated time i.e. before the expiry of the time limit prescribed u/s 139(1) of the Act, and the Resolution was passed on 24th September, 2010 that is after the end of the financial year and hence, therefore the AO observed that it is not a valid Resolution. The assessee-trust was show caused by the AO as to why this income of ₹ 1,89,10,525/- not be taxed as income of the assesseetrust for the year under assessment denying the benefit of accumulation u/s 1 .....

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e assessee-trust for which the money is being accumulated u/s 11(2) of the Act and in support the assesseetrust also enclosed the relevant documents to show the assessee-trust has started the basic activity for its project to set up the hospital at Jogeshwari. The A.O. considered the replies of the assessee-trust including the Resolution passed which read as : It is resolved that amount of ₹ 1,89,10,525/ the excess of income over the expenditure for the year ending 31.03.2010 be carried fo .....

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tta High Court in the case of DIT (E) v. Trustees of Singhania Charitable Trust, (1993)199 ITR 819(Calcutta HC). The assesseetrust has not replied about the submission of Form No. 10 as required under Rule 17 of Income Tax rules, 1962 within the stipulated time and the Resolution for the purposes has been passed on 24th September, 2010 that is after the end of the financial year. Hence, the A.O. denied the benefit of accumulation u/s 11(2) of the Act to the assessee-trust for not being for defin .....

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ment proceedings u/s 143(3) read with Section 143(2) of the Act. A copy of the Resolution along with the Form No. 10 seeking accumulation of ₹ 1,89,10,525/- was also filed before the learned CIT(A). The assessee-trust submitted that it was in the process of building a multi-specialty hospital and educational institution in the field of medicine in the plot of land owned at Jogeshwari and the monies in question were accumulated in respect of this project which would take substantial long ti .....

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learned CIT(A). It was submitted that the assessee-trust had demonstrated the purpose of running of a hospital and medical educational institution at Jogeshwari. The assessee-trust submitted that the word Future Project in the Resolution is necessarily and mandatorily to be linked with the future project of the assessee-trust , as also to the main objects of the assessee-trust. The assessee-trust has relied on the decision of Mitsui & Company Environment Trust, (2008)303 ITR 111 (Delhi HC) .....

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e and general in nature. The prescribed Form No. 10 was not filed with the return of income and was filed belatedly during the course of assessment proceedings u/s 143(3) of the Act read with Section 143(2) of the Act . The Resolution for further accumulation of funds u/s 11 of the Act for this purpose is passed on 24th September, 2010 i.e. the after the end of the financial year and is general and vague which does not specify the specific purposes for which accumulation of funds u/s 11 of the A .....

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tion. The assessee-trust submitted on this issue as under:- The assessee trust while withdrawing the appeal has also filed an affidavit dated 12.01.2010 to that effect with the Addl. Commissioner, Konkan Division. The copy of the said Affidavit filed by the assessee before the Addl. CIT of Konkan Division, withdrawing the case is placed at Pages 63 to 70 of the compilation and it is pertinent to note that such type of receipt, abinitio, is a non taxable capital receipt under Income-tax Act, 1961 .....

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eived on account of sale/surrender of entitlements/rights of the assessee-trust. The learned CIT(A) held that such receipts relates to a capital asset because u/s 11,12 & 13 of the Act, there is no such distinction for computation of income of the trust rather the capital receipt/corpus receipts are separately dealt under the provisions of section 11 & 12 of the Act itself, which also confirms that the capital receipts are also part of the income of the trust in the similar manner as are .....

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982)135 ITR 485(Madras HC) and in the case of CIT v. Progamme for Community Organisation (1997) 228 ITR (Ker.) and held that the deductions under other machinery provisions under separate head of income are not available u/s 11, 12 and 13 of the Act and accordingly the appeal of the assessee-trust was dismissed by the learned CIT(A) vide orders dated 07-01- 2015. 7. Aggrieved by the orders dated 07-01-2015 of the learned CIT(A) the assessee-trust is in appeal before the Tribunal. 8. The ld. Coun .....

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h Additional Commissioner , Konkan Division and stay of the Collectors order was granted. The stay was granted by the Additional Commissioner , Konkan Division to the Collectors order which adversely affected the development of the residential area by Om Vishal Nagar Co-operative Housing Society Ltd. . The copy of the Collector order and stay granted by Additional Commissioner, Konkan Division are placed in paper book page 50-62, along with English translation which is placed in the file. Later .....

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using Society Ltd. and the assessee-trust decided to accumulate the money for future project in compliance with the provisions of Section 11(2) of the Act. A Resolution was passed on 24th September, 2010 (copy placed at paper book page No. 72) wherein it was decided to accumulate money for future projects. It was the say of the learned counsel for the assessee-trust that form 10 was not filed with the Return of income filed u/s 139(4A) of the Act before the expiry of the time limit prescribed u/ .....

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d owned by the assessee-trust for Hospital and Medical Educational Institution vide notification dated 08- 12-2008 by de-reserving the said land from No Development Zone . It is the say of the learned counsel for the assessee-trust that the A.O. has disallowed accumulation of fund by the assessee-trust u/s 11(2) of the Act on three grounds viz. delay in filing Form 10, Resolution was passed after end of the assessment year and the resolution is general and vague which does not specify the specif .....

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right to sue is not a capital asset and cannot be transferred as contemplated under Transfer of Property Act,1882. There was no property or right in the property which was transferred by the assessee-trust and merely on withdrawal of appeal/litigation , the amount of ₹ 2 crores was paid by Om Vishal Cooperative Housing Limited as the stay granted by the Additional Commissioner , Konkan Division on the orders of the Collector was adversely affecting the residential project being developed b .....

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0 was filed with the A.O. before completion of the assessment and hence it should be admitted. The ld. Counsel further relied upon the decision in the case of CIT v. Hotel and Restaurant Association, [2003] 261 ITR 190 (Del) to contend that the accumulation is for the purposes of trust and there is no need to specify the purposes of the accumulation which can be for the objects of the assessee-trust. It was also the contention of the assessee-trust s counsel that if two views are possible, then .....

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red the judgment of Hon ble Calcutta High Court in the case of DIT(E) v. Trustees of Singhania Charitable Trust(supra) . The assessee-trust also relied upon the decision in the case of Bhartiya Kalyan Pratisthan v. DIT(E), (2007)299 ITR 406 (Del) , also decision in the case of M.P. Gandhi Trust v. ADIT(E),(2006) 8 SOT 808 (Mum. Trib), also decision in the case of Shree Seetharaman Anjaneya Veda Kendra v. ADIT(E), (2002)83 ITD 235 (Cochin),also decision in the case of CIT v. Nagpur Hotel Owners A .....

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ities below and submitted that the assessee-trust has not filed Form 10 along with the return of income,the purposes of accumulation is vague and general and the resolution for accumulation of funds is passed after the closure of the financial year. 10. We have heard the rival contentions and also perused the material placed on record including the case laws relied upon by both the parties We have observed that the assessee-trust is registered as a charitable trust with DIT (E), Mumbai u/s 12A o .....

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he said Resolution, it was shown that the accumulation of funds is sought to be made for future projects and no specific and concrete projects are contemplated for utilization of these accumulated funds. The contention of the assessee-trust is that it has ear-marked and accumulated funds for the purposes of setting up hospital project comprising of herbal environment and it will be equipped with hospital , diagnostic and research laboratories, wellness centre, educational training facilities as .....

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cal assistance is one of the objects of the assessee-trust specified in the Trust Deed which is placed in paper book page 106-114.It is also observed that Urban Development Department , Mumbai has under the Maharashtra Regional and Town Planning Act,1966 has accorded approval for earmarking the land owned by the assessee-trust for Hospital and Medical Educational Institution vide notification dated 08-12-2008 by de-reserving the said land from No Development Zone . In view of the decision of Hon .....

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to support its contentions that the accumulation of the funds u/s 11(2) of the Act can be made for achieving the objects of the trust and even there can be plurality of objects to be achieved are also allowed and there is no need to mention specific purposes. The assessee-trust contention is that the future project referred to in the Resolution is for the hospital project being set-up by the assessee-trust on 10 acres of plot at Jogeshwari for which progress has been achieved by the assessee-tr .....

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e limit stipulated under Rule 17 of Income Tax Rules, 1962 which was submitted during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act , however, before the completion of the assessment u/s 143(3) of the Act, although form no 10 could not be filed by the assesseetrust along with return of income filed u/s 139 (4A) of the Income Tax Act,1961 before the expiry of the time as allowed u/s 139(1) of the Act as prescribed under Rule 17 of Income Tax Rules,1962. The a .....

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ad (2012) 25 taxmann.com 469(Guj.) 5. Haryana Labour Welfare Board v. CIT (P&H), (2013) 219 Taxman 158(P&H HC) 6. CIT v. Mayur Foundation, (2005) 274 ITR 562 (Guj.) In our considered view and in the light of the above cited judicial precedents which could not be controverted by the learned DR and more so in the decision of the DIT v. Mitsui & Co. Environmental, (2008) 303 ITR111(Delhi HC) whereby the Hon ble Delhi High Court duly considered the judgment of Hon ble Calcutta High Court .....

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ight of the hospital project which was underway and was being set up by the assessee-trust on the touchstone of preponderance of probabilities, that the non-submission of Form 10 along with return of income as required under Rule 17 of Income Tax Ruls,1962 is duly addressed by the assessee-trust by filing the form no 10 before the conclusion of the assessment proceedings u/s 143(3) read with Section 143(2) of the Act and merely because the Resolution is passed after the end of the previous year .....

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ties and human conduct and also it is well settled proposition of law that when technicalities are pitted against the substantial justice, the course which advances substantial justice is to be preferred .We are also conscious of the fact that exemption provisions are to be strictly construed to establish the entitlement of the tax-payer for the grant of exemption but once the tax-payer establishes its eligibility to falls within the exemption provision then it is to be liberally construed to gr .....

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