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2016 (11) TMI 656 - ITAT MUMBAI

2016 (11) TMI 656 - ITAT MUMBAI - TMI - Disallowance of exemption claimed u/s 11(2) - Held that:- As already noted, in Form no.10, as well as resolution of the trust, the assessee has specifically mentioned the purpose of utilization of fund in construction / re–development of buildings / properties of the trust. Thus, the purpose of utilization is in consonance with the objects of the trust. That being the case, assessee’s claim cannot be disallowed. - We also find merit in the submission .....

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e aforesaid reasons, we do not agree with the conclusion of the Departmental Authorities. Accordingly, we set aside the impugned order of the learned Commissioner (Appeals) and allow assessee’s claim of exemption under section 11(2). - ITA no.5494/Mum./2015 - Dated:- 16-9-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER For The Assessee : Shri V.G. Ginde For The Revenue : Shri B.S. Bist ORDER PER SAKTIJIT DEY, J.M. Instant appeal by the assessee is directed agai .....

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of income on 9th August 2011, declaring total income of ₹ 78,210. During the assessment proceedings, the Assessing Officer on verifying the financial statement of the assessee, along with the return of income noticed that the assessee has claimed accumulation of fund at ₹ 95 under section 11(2) of the Act. The Assessing Officer, therefore, issued a show cause notice to the assessee to explain why exemption claimed under section 11 of the Act on the accumulated fund amounting to ͅ .....

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ich the accumulated fund was set apart. The assessee submitted, accumulated fund was set apart for carrying out the object of the trust which is for utilisation in the up-coming projects. The Assessing Officer, after considering the submissions of the assessee, however, observed that the purpose of accumulation shown by the assessee is general in nature and it does not specified the specific object or purpose for which accumulated fund is to be utilised. He observed, assessee was not able to sub .....

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claim, however, the learned Commissioner (Appeals) endorsing the view of the Assessing Officer held that as the assessee has not specified in Form no.10, any concrete project or purpose for which the accumulated fund was set apart no exemption can be allowed to the assessee. 5. Learned Authorised Representative submitted, one of the main object of the trust is to construct Mahajan Wadi, Hostels, Shelters, etc., for the members and needy students of Daiwadnya Samaj. He submitted, the surplus fund .....

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dated 27th June 2011. Further elaborating, learned Authorised Representative submitted, the trust has constructed a building to be utilised as hostel for outstation students. The building being a very old one is in a dilapidated condition. Therefore, a project was undertaken for re-development of the hostel building as well as other existing properties of the trust. Thus, the learned Authorised Representative submitted, the allegation of the Departmental Authorities that the purpose of accumulat .....

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art within a period of five years. Therefore, until the expiry of five years, the Assessing Officer cannot disallow the assessee s claim of exemption as per statutory provisions contained under section 11(3). The Assessing Officer can only look into the aspect of utilisation of the accumulated funds for the specified purpose after the expiry of five years and if he finds that it was not utilised for the specified purpose then only he can disallow assessee s claim. Thus, he submitted, the Assessi .....

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mental, [2008] 167 taxmann.com 43 (Del.); and vi) Bharat Kalyan Pratishthan v/s DIT(E), [2007] 299 ITR 406 (Del.). 6. Learned Departmental Representative relying upon the observations of the Assessing Officer and the learned Commissioner (Appeals) submitted, as the assessee has not specifically mentioned the purpose of accumulation with any concrete plan and documentary evidence assessee s claim was rightly disallowed. 7. We have considered the submissions of the parties and perused the material .....

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ccumulated or set apart is not in excess of 15% of the income from such property. Sub-section (2) of section 11 provides that where 85% of the income referred to under sub-section (1) of section 11, is not applied to charitable or religious purpose during the previous year but is accumulated or set apart either in whole or in part for application to such purpose in India, the income so accumulated or set apart shall not be included in the total income of the previous year in which such income wa .....

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rovisions if we examine the facts of the present case, it is to be noticed that the assessee has accumulated funds of ₹ 95 lakh which has been set apart for utilisation in the objects of the trust in subsequent years. In compliance to the provisions of section 11(2)(a), assessee along with return of income has filed a declaration in form no.10. On a perusal of the said declaration dated 27th June 2011, a copy of which is at Page-27 of the paper book it is noticed that the purpose for which .....

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f ₹ 95,00,000/- being 56 per cent of the income of the trust, as is available at the end of the previous year ended 31/0312011 be accumulated or set apart and transferred to "Building and Amenities Reserve 2011 ", till the previous year(s) ending 31/03/2016 in order to enable the trust, to accumulate sufficient funds for the purpose of spending on development of existing properties of the trust or purchase or construction of new buildings for carrying out the activities of the Tr .....

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ges. Thus, the purpose for which the accumulated fund is set apart as mentioned in Form no.10 as well as resolution of the trust if read in conjunction with the objects set out in the trust deed clearly demonstrate that the purpose of utilisation of accumulated fund is for achieving the objects of the trust. It has been submitted before us by the learned Authorised Representative that the building used as hostel for outstation student is in a dilapidated condition, therefore, a project is under .....

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nstruction of new building for carrying out the activities of the trust. The aforesaid purpose set out in Form no.10 is clearly in consonance with the object of the trust. That being the factual position, the allegation of the Department that the purpose of accumulation of fund is general in nature is without any basis, hence, cannot be accepted. In case of DIT(E) v/s Envisions (supra), the Hon'ble Karnataka High Court after considering disallowance of exemption on similar nature of allegati .....

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