TMI Blog2018 (1) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bench in the case of Bai Sonabai Hirji Agiary Trust v ITO (2004 (9) TMI 300 - ITAT BOMBAY-E). - Decided in favour of assessee - ITA No.800/Bang/2017 - - - Dated:- 19-1-2018 - Shri Jason P Boaz, Accountant Member And Shri Laliet Kumar, Judicial Member For the Appellant : Shri B.R Sudheendra, C.A For the Respondent : Ms. Neera Malhotra, CIT ORDER PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : This appeal by the assessee is directed against the order of the CIT(A)-14, LTU, Bangalore dated 29.12.2016 for Assessment Year 2012-13. 2. Briefly stated, the facts of the case relevant for disposal of this appeal are as under:- 2.1 The assessee is a trust, registered u/s. 12A of the Income Tax Act, 1961 (in short the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer has erred in denying 15% of gross income for accumulation u/s 1 1(1)(a) and the learned CIT(A)-14 (LTU) has erred in confirming the action of the assessing officer. 2.2 The learned CIT(A)-14 (LTU), Bangalore has erred in concluding that income for the purposes of section 11(1 )(a) is to be arrived at after deducting expenditure from receipts (or net surplus). The impugned conclusion of the learned CIT(A) and the basis / rationale in support of the same is contrary to law and liable to be quashed. 2.3 On facts and circumstances of the case and law applicable, accumulation u/s 11(l)(a) at 15% should be allowed in respect of gross income of the appellant trust. 3.1 Prayer:- In view of the above and other grounds to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r ( AO ) however, was of the view that accumulation will be allowed only to the extent of 15% of the net receipts i.e.; gross receipts less revenue expenditure and not on the gross receipts as claimed by the assessee. On appeal, the ld. CIT(A) upheld the AO s view that the assessee is to be allowed accumulation of income for application for charitable purposes only to the extent of 15% of net receipts u/s. 11(1)(a) of the Act and not 15% of gross receipts as claimed by the assessee. 3.4.3 The issue to be decided by us is as to whether for the purpose of accumulation of income for application for charitable purposes u/s. 11(1)(a) of the Act is to be allowed at 15% of gross receipts or net receipts i.e.; gross receipts less Revenue expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 per cent, the important question which arose was as to whether for this purpose, the gross income earned by the assessee is relevant or the income as computed in accordance with the provisions of IT Act. In other words, whether outgoings from out of gross income which are in the nature of application of income, should be first deducted from the gross income and 25 per cent of only the remaining amount should be allowed to be accumulated or set apart. The Special Bench of the ITAT on the issue held as follows:- 9. Coming to the merits of the issue, we are of the view that the same is clearly covered by the decision of the Hon ble Supreme Court in the case of CIT vs. Programme for Community Organization (supra). In the decision, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on proceeds further that such income is not to be understood to be in excess of 25 per cent of the income from such properties. It other words, the very language of the statutory provision under consideration sets apart 25 per cent of the income from the source of property with reference to the extent to which such income is applied for such purposes, charitable or religious, In other words, for the purpose of s. 11(1)(a) of the Act, the income in terms of relevance would be the income of the trust from and out of which 25 per cent is set apart in accordance with the spirit of the statutory provision. This means that, when it is established that trust is entitled to full benefit of exemption under s. 11(1), the said trust is to get th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the nature of application of income are to be excluded. The income available to the assessee before it was applied is directed to be taken and the same in the present case is ₹ 3,42,174. Twenty five per cent of the above income is to be allowed as a deduction. Similar view has also been taken by the Hon ble Madhya Pradesh High Court in Parsi Zorastrian Anjuman Trust vs. CIT (supra). No reason whatsoever has been given by the Revenue authorities for deducting ₹ 2,17,126 in this case for purposes of s. 11(1)(a). The decision cited on behalf of the Revenue did not take into account the decision of the Supreme Court referred to above. The circular of CBDT has also been considered by the Hon ble Kerala High Court in its decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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