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Commissioner of Income Tax (Exemptions) , Deputy Director of Income Tax (Exe) Versus M/s. Gokula Education Foundation And The Assistant Director of Income Tax (Exemptions) Versus M/s Vidyaniketan

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 head of the objects of the Trust, was accepted by t .....

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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 consideration vide order dated 12.02.2016 in ITA No .....

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ry 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 considered, the said appeal would require to be conside .....

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ven 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 question. 5. We may record that in ITA No.300/2015, .....

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ccepted 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. He found that in absence of any decision of the .....

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fore 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 Jansangha as well as in the case of Shri Adichunchanagiri .....

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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 Supplemental Religious Endowment Trust 127 ITR 37 .....

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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 squarely covered by the judgment of the Hon ble Bomba .....

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s 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 claimed depreciation on furniture and fixtures to the tu .....

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f 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 had been fully allowed as application of income un .....

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IT 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 Court relied on by The Director of Income-tax (Ex .....

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on 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 order of the Cochin Bench Tribunal. Therefore, we .....

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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 the previous year but is accumulated or set apart .....

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, 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 respect of any income accumulated or set apart on or aft .....

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tion 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 include fixation of time limits. Delegated legislat .....

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to 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 that the assessee-Trust set apart the amount of S .....

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t 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 earlier decision, wherein the reliance was placed up .....

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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 not permissible. 11. He submitted that if the revise .....

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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 correct and the appeals of the Revenue may be dismis .....

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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 the Trust . Thereafter, it is in the revised Form .....

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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 incorporated and so long as the said purpose/s are charitab .....

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emption) 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 Calcutta High Court was also relied upon by the Revenu .....

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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 per the view taken by this Court as long as the ob .....

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id 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 ITA No.300/2015 the purpose is too general and too .....

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ned 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 of Income Tax -versus- Mayur Foundation reported .....

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