Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (11) TMI 1313 - KARNATAKA HIGH COURT

2016 (11) TMI 1313 - KARNATAKA HIGH COURT - TMI - Eligibility to claim accumulation under section 11(2) - Revenue contended that unless there is a specific purpose mentioned in Form No.10, the language ‘for general purpose’ would not permit the assessee to claim the benefit under Section 11(2) - revised Form No.10 filled - continuous proceeding - Held that:- In the present case Form No.10 was already filed and the Revised Form No.10 filed for sub-head of the purposes falling under the main h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e under Section 11(2) of the Act. - In view of the aforesaid, we find that the Tribunal was right in allowing the claim of the assessee under Section 11(2) of the Act. Hence, the question is answered in the affirmative in favour of the assessee - ITA No. 300/2015 C/W ITA No. 7/2016 - Dated:- 2-11-2016 - Jayant Patel And Aravind Kumar, JJ. For the Petitioner : Sri E I Sanmathi, Advocate For the Respondent : Sri A Shankar, Advocate ORDER In both the appeals, the only question which arise for c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

should be spelt out in clear terms in the statutory Form No.10 filed along with the return of income and the assessee is required to invest or deposit such accumulated income in the forms or modes specified in section 11(5)? 2. It may be recorded that when ITA No.300/2015 came to be considered for admission on 12.02.2016, the appeal was admitted only on the aforesaid question. However, so far as ITA No.7/2016 is concerned, the said appeal is so far not admitted. Hence, even if it is to be consi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. 4. Under the above circumstances, we find that even otherwise also, as question No.1 is already covered by the above referred decision of this Court dated 22.02.2016 in ITA No.1/2013 and allied matters, such question would no more arise for consideration in the present appeal. So far as question Nos.2 and 3 are concerned, though formulated by the Revenue would stand covered in the above referred question formulated, resultantly both the appeals are to be considered only on the above referred q .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

als) during the course of hearing of the appeal, accepted the revised form No.10 wherein the purpose mentioned was (a) towards development of infrastructure for furtherance of education and (b) towards meeting of operating and administrating expenses for providing education facilities . The CIT (Appeals) found that since there were two divergent views of the High Court of Kerala and Madras, whereas the High Court of Delhi had taken the view that particular purpose is not required to be mentioned .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

xed assets are concerned, the issue had come up before this Tribunal in assessee s own case in ITA No. 600 & 601/Bang/2012, where it was held as under; 7. Having heard both the parties and having considered the rival contentions, we find that the basic issue is whether the decision of the Hon ble Supreme Court in the case of M/s Escorts Ltd., is applicable to the facts of the case before us. We find that a similar issues have arisen before this Tribunal in the case of Karnataka Reddy Jansang .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

We have heard the rival submissions and carefully perused the materials on record. The income of the trust is required to be computed under section 11 on commercial principles, without reference to the heads of the income specified under section 14 of the Act. In other words, it is to be computed as per the book income and not total income as defined in section 2(45) of the Act. This proposition is laid down by various judgments of Hon ble High Courts, namely, (i) CIT v Trustee of H.E.H. Nizam s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rrived at (after deducting the depreciation) is to be applied for charitable purpose. Capital expense is application of the income so determined. The application of the income so determined cannot be stated to be a deduction to arrive at the income. The depreciation is to be deducted to determine the income under section 11 of the Act and it is not an application of income. Therefore, there is no double deduction as claimed by the DIT(E) in his order. 9.1 The controversy, according to us, is squ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the Hon ble Bombay High Court:- The assessee was a trust registered under the Bombay Public Trust Act and section 12A of the I T Act. The object of the assessee was charitable in nature. The income of the assessee was exempt u/s 11 of the I T Act. The assessee had claimed depreciation which was rejected by the Assessing Officer on the ground that capital expenditure incurred during the accounting year was allowed as a deduction from the income of the assessee. Further, the assessee had claime .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ct of capital cost of furniture and fixtures and if the depreciation was allowed, as claimed by the assessee, it would result in double deduction. The assessee carried the matter in appeal and the appellate authority decided the matter in favour of assessee. The decision of the appellate authority was confirmed by the Tribunal. 9.3 On reference, the Bombay High Court held that the Tribunal was right in law in directing the Assessing Officer to allow depreciation on the assets, the cost of which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Hon ble Madhya Pradesh High Court in the case of CIT v Raipur Pallottine Society 180 ITR 579 and by the Hon ble Madras High Court in the case of Gonvindu Naicker Estate v Assistant Director of Income Tax and Another 248 ITR 368. Further, in the case of CIT v Sheth Manilal Ranchhoddas Vishram Bhavan Trust 198 IITR 598, it was held by the Hon ble Gujarat High Court that depreciation should be allowed while computing the income under section 11(i)(a) of the Act. 9.5 The judgment of the Hon ble Apex .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on of such income. The aforesaid judgment of the Hon ble Apex Court in the case of Escorts Limited (supra) cannot be applied to determine taxable income for a trust, as the provisions to determine taxable income of the trust are totally different and normal provisions for computing income under the five heads cannot be applied. Though the Cochin Bench of the Tribunal is rendered on identical issue, we would prefer to follow the judgments of various High Courts, (cited supra) in preference to the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ectfully following the said decisions the assessee s appeals are allowed and the orders u/s 263 of the DIT(Exemp.) are vacated. 7. As for the second issue, it is necessary to reproduce section 11(2) of the Act and Rule 17 which are on accumulation; Where(eighty five) percent of the Income referred to in clause(a) or clause(b) of sub- section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

which the income is to be accumulated or set apart, which shall in no case exceed ten years. b) The money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section(5) . Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded; Provided further that in respec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y of the time allowed under sub-section (1) of section 139, for furnishing the return of income . The requirement in the Act are (i) specification by notice in writing to the AO(ii) such specification should be in prescribed manner and (iii) and such specification should give the purpose of accumulation. The time limit has been mentioned in the Rules alone. The delegated power of rule making given in section 11(2) is only for prescribing the manner of filing the application. The power does not i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mulation was not a requirement that can be read into section 11(2). Revenue has not been able to bring before us any decision of Hon ble jurisdictional High Court on this issue, and therefore, assessee has to be given the benefit of the decision in its favour, in preference to the decisions going against it. 6. The Tribunal ultimately did not interfere with the order of the CIT (Appeals). Under the circumstances, the present appeal before this Court. 7. Whereas in ITA No.7/2016, the facts are th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

icer and allowed the appeal in part on other aspect which is not touching to the question involved. The Income Tax Appellate Tribunal in further appeal has more or less recorded the same reasoning and it relied upon its earlier decision in case of DDIT(E) Vs. Gokula Education Foundation in ITA No.1091/Bang/2014 dated 30.12.2014 (which is subject matter of ITA No.300/2015 being simultaneously heard and considered) and the Tribunal thereafter found that the issue could be said as covered by its ea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

for the respondent-assessee in both the appeals. 10. The learned Counsel for the appellants- Revenue mainly contended that unless there is a specific purpose mentioned in Form No.10, the language for general purpose would not permit the assessee to claim the benefit under Section 11(2) of the Income Tax Act. He further submitted that in ITA No.300/2015 too vague and too general purpose was mentioned, but the CIT (Appeals) during the course of hearing accepted the revised Form No.10 which was no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the Delhi High Court in the case of Daulat Ram Education Society (supra), no specific purpose is required to be mentioned so long as the purpose/s are within the objects of the Trust. He also contended that even otherwise also, the appeal before the CIT (Appeals) is a continuous proceeding and therefore, it cannot be said that CIT (Appeals) could not permit revised Form No.10 during the course of hearing of the appeal. He submitted that the view taken in both the appeals by the Tribunal is co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lated or set apart. Since there is no controversy for the period for which the amount is set apart, we find it appropriate not to make any further observations in this regard. The only question therefore may arise is as to whether the specification of the purpose in the present case could be said as sufficient compliance for claiming the benefit under Section 11(2) (a) of the Act or not . 14. As we have recorded earlier in ITA No.300/2015 initially there was a broad purpose as towards objects of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e purposes specified in Form No.10 are not falling as the object of the Trust. But the only case of the Revenue is that the purpose should be specifically mentioned, though it may be one of the objects of the Trust and it may be more than one of the objects of the Trust. 15. It is true that in case of Daulat Ram Education Society (supra), Delhi High Court observed that so long as one or more purposes are specified by the assessee find place in the objects for which the Society has been incorpora .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a High Court in case of Director of Income Tax (Exemption) Vs. Trustees of Singhania Charitable Trust reported at (1993) 199 ITR 0819 contended that as per the view taken by Calcutta High Court unless a specific purpose is mentioned, the benefit under Section 11(2) of the Act, would not be available. 17. At this stage we may refer to the decision of this Court in case of Director of Income-tax, Exemptions, Bangalore Vs. Envisions reported at (2015) 232 Taxman 164/58, wherein the decision of Calc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

view, be sufficient to deny the benefit u/s 11(2) of the Act to the Assessee. As long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form 10 are for achieving the objects of the trust, merely because of non-furnishing of the details, as how the said amount is proposed to be spent in future, the assessee cannot be denied the exemption as is admissible under sub-section (2) of Section 11 of the I.T.Act, 1961. The aforesaid shows that as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ducation Society (supra). In any case, the aforesaid view taken by this Court in case of Envisions (supra) is binding on us and hence we do not find that the decision of the Calcutta High Court in case of Trustees of Singhania Charitable Trust (supra), upon which reliance has been placed by the learned Counsel for the Revenue would be of any help to the Revenue. 19. The learned Counsel for the appellants- Revenue did contend that if the revised Form No.10 was found to be not acceptable, then in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

under Section 11(2) of the Act. 20. Whereas, learned counsel appearing for the assessee contended that the appeal is a continuous proceeding and hence, if the Commissioner (Appeals) has permitted the assessee to file Revised Form No.10, such could not be said as prohibited by law. He also submitted that the aforesaid decision of the Apex Court in the case of Nagpur Hotel Owners Association (supra) came to be considered by a Division Bench of the High Court of Gujarat in the case of Commissioner .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version