TMI Blog2016 (12) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... n no.2 laid down by the Hon’ble Supreme Court in the case of ACIT Vs. ALN Rao Charitable Trust [1995 (10) TMI 2 - SUPREME Court], then it would be clear that the assessee will be entitled for exemption qua the income which has been applied for its objects, plus 15% of the total income. The ld.CIT(A) has failed to construe these two proposition while denying the exemption to the assessee. Therefore, I allow the appeal of the assessee and set aside the impugned order of the ld.CIT(A) and direct the AO to grant deduction of ₹ 1,75,804/- being 15% of ₹ 11,11,185/- i.e. income derived by the assessee form the trust-property. - Decided in favour of assessee - ITA.No.3015/Ahd/2013 - - - Dated:- 15-11-2016 - SHRI RAJPAL YADAV, JUDICI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is worth to note. It reads as under: 7.5 Now, coming to the issue of deduction u/s 11 (2) of the Act, the total income of the appellant is of ₹ 11,11,185/-, apart from this the appellant has received donations of ₹ 14,81,000/-. Therefore, the income of the appellant for the purpose of determining 85 % of income under clause 11 (2) should be ₹ 25,92,185, in view of Explanation below section 11(1)( d) of the Act, if the nature of donation is such that these are covered by section 12(1). 7.6 Under section 11 (2) of the Income Tax Act, the appellant is entitled to transfer the income which is not so applied, provided it is set apart/ accumulated and invested in specified modes and forms and the form no. 10 referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income, therefore, it will be entitled to deduction only to the extent of income applied, i.e. of ₹ 6, 50,000/-. The deduction of 15% of ₹ 11,11,1857- will not be allowed as deduction as held by the ITAT Delhi D Bench in its decision dated 21.10.2011 in the case of ACIT v/s Karnal Improvement Trust reported in 40 SOT 258. Therefore, ground no. 4 is allowed in favour of the appellant while, ground no. 2 is dismissed. 4. The ld.CIT(A)has relied upon the order of the ITAT in the case of ACIT Vs. Karnal Improvement Trust (supra). Let me take note of the discussion made by the Tribunal in that case: 8. From the provisions of section 11(1)(a) it is clear that in a case where the trust or institution applies 85 per ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 11(1)(a) [then to the extent of 25 per cent and which was reduced to 15 per cent, also by the Finance Act, 2002] is unfettered and not subject to any conditions and is an absolute exemption. It was further held that if the conditions contained in section 11(2) are read as applicable to the exemption of upto 15 per cent under section 11(1)(a) also, then what is absolute and unfettered exemption of accumulated income guaranteed by section 11(1)(a) would become a restricted exemption as laid down in section 11(2). Section 11(2) was held not to operate to whittle down or to cut across the exemption provision contained in section 11(1)(a). In this regard, it was further noticed that section 11(2) does not contain any non-obstant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that exemption to be allowed is conditional one subject to fulfillment of certain condition of application/accumulation of the income. Otherwise it would lead to an absurd situation where an assessee will get exemption of 15 per cent income in each year without carrying out charitable activities merely because of its status as a charitable institution and this cannot be a legislative intention for enacting section 11 of the Act. 5. Before adverting to the facts of the present case, I would like to make reference to the decision of the Hon ble Supreme Court in the case of ACIT Vs. ALN Rao Charitable Trust, 83 Taxman 252 (SC). This decision was referred by the ld.CIT(A) also and it has been considered by the Tribunal in Karnal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded from the extent net as per Section 11(2). (iv) The remaining balance of the accumulated income out of ₹ 55,000/-, that is, ₹ 35,000/- if not invested as per sub-section (2) of Section 11 will be added to he taxable income of the trust and will not get exempted from the extent net. (v) If of the other hand the entire remaining accumulated of ₹ 55,000/- is wholly invested as per Section 11(2) the said entire amount of ₹ 55,000/- will get exempted from the net. 6. If the finding of the ld.CIT(A) is being perused in the light of these two decisions, then it would reveal that the ld.CIT(A) has failed to construe this decision. In the case of Karnal Improvement Trust, the Tribunal has not emphased tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
