TMI Blog2019 (8) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... n for accumulation u/s 11(2) after every expiry of the period of accumulation without applying it for stated objectives. This would result in non-taxing of income perpetually and it would defy the intention of the legislature in introducing sec. 11(3). Assessee shall not be eligible to accumulate the income assessed as deemed income u/s 11(3). Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the action of the AO in assessing entire amount of ₹ 91.65 lakhs as income of the assessee without granting any benefit of accumulation. Accordingly we confirm the order passed by ld CIT(A) in both the appeals. - Decided against assessee. - ITA Nos.947 And 948/Bang/2017 - - - Dated:- 26-7-2019 - Shri B.R Baskaran, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Smt. Tanmayee Rajkumar, Advocate For the Respondent : Shri R.N Siddappaji, Addl. CIT (DR) ORDER PERB.R BASKARAN,ACCOUNTANT MEMBER Both the appeals filed by the assessee are directed against the order passed by the Ld CIT(A),Gulbharga and both relate to asst. year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1.4.2007 to 31.3.2012 for construction of Baldota Kala Academy . Accordingly, it was prayed that the unutilized accumulated funds may be considered as accumulated as per the above said Form No.10 u/s 11(2) of the Act and accordingly, not to be assessed as income of the assessee for asst. year 2008-09. However, the AO did not accept the request of the assessee for the reason that the assessee has made this application u/s 11(3A) of the Act only during the course of re-assessment proceedings, that too, after detection by the department about violation of provisions of sec.11(2) of the Act by not applying funds.Accordingly, the AO added the unutilized amount of ₹ 91.65 lakhs to the total income of the assessee. 6. It is pertinent to note that the assessee appears to have filed anapplicationin Form No.10 for asst. year 2008-09proposing to accumulatea sumof ₹ 180.00 lakhs in terms of sec.11(2) of the Act. However, the income of the assessee for the period relating to asst. year 2008-09 was 148.60 lakhs and hence deduction u/s 11(2) appears to have been restricted to the extent of ₹ 148.60 lakhs. We noticed that,in the reassessment proceedings, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the income so assessed forms part of current year s income and hence the AO should have allowed deduction u/s 11(2) of the Act by admitting fresh Form No.10 filed by the assessee before him seeking accumulation of ₹ 10 crores with the objective of construction of Baldota Kala Academy. The ld AR placed her reliance on the decision rendered by Hon ble Kolkatta High Court in the case of CIT Vs. Natwarlal Chowdhury Charity Trust (1990) 52 Taxmann330,wherein the deduction of 25% u/s 11(1)(a) was allowed against the income assessed u/s 11(3)(b) of the Act for failure of the assessee to invest or deposit the accumulated amount in accordance with sec. 11(5) of the Act. The ld AR submitted that, by applying the analogy of Hon ble Calcutta High Court,the assessee should have been allowed deduction u/s 11(2) of the Act. 9. On the contrary, the ld DR placed his reliance on the decision rendered by Mumbai Benchof ITAT inthe case of The Trustees, the B.N.Gamadia Parsi Hunnarshalal (2002) 77 TTJ 274, wherein the Tribunal has expressed the view that deduction u/s 11(1) and 11(2) is allowed in respect of income derived from property . However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligious purposes as per the provisions of sec. 11 to 13 of the Act. As per sec. 11(1) of the Act exemption is given to the extent the income is applied for charitable or religious purposes and further deduction is given for the income accumulated up to 15% of the income, meaning thereby, the charitable or religious trust is required to apply 85% of its income for the purposes mentioned in its objects. However, if the assessee is not able to apply 85% of the income for charitable or religious purposes, then another option is given under the provisions of sec. 11(2), whereby the assessee can apply to the assessing officer in prescribed form for accumulating income subject to the conditions prescribed in sec.11(2) of the Act. One of the conditions is that the accumulation can be done for a period not exceeding 5 years. If the assessee does not apply the amount so accumulated u/s 11(2) within the period originally mentioned before the AO at the time of accumulation of income, then the same is deemed to be income of the assessee u/s 11(3)(c) of the Act of the previous year immediately following the expiry of the period of accumulation originally intimated to the AO. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent of the income from such property. Sec. 11(1)(d) speaks of income in the form of voluntary contributions. Explanation (1) to section 11 reads as under: For the purposes of clause (a) and (b) (1) in computing the twenty-five per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income. Section 12 in turn says that any voluntary contributions received by a trust shall for the purposes of section 11 be deemed to be income derived from property. Again section 11(2) speaks of the 'income referred to in clause (a) or clause (b) of sub-section (1) r/w the Explanation to that subsection'. Thus, section 11( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aritable trust to accumulate a portion of income derived from property and not other incomes. However, by virtue of section 12, voluntary contributions are deemed to be income from property and, therefore, Explanation (1) was added to section 11(1) of the Act which specified that in computing twenty-five per cent of the income which may be accumulated, voluntary contributions should be taken into account as they are deemed to be part of the income. Thus, it can be seen that wherever the legislature intended to include deemed income as part of the income 'derived from property' it was spelt out clearly. However, section 11(3) of the Act uses the expression 'income of such person' in contradistinction to the words 'income derived from property' used in other sub-sections of section 11. Thus, it cannot be said that deemed income under section 11(3) of the Act should be taken as part the income derived from property for the purposes of allowing the benefit of accumulation. 9. The matter may also be looked from another angle. The assessee would be allowed to accumulate income if there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82] 135 TTR 485 (Mad.) and agreed with the view expressed by the Hon'ble Madras High Court: It may be noted that the Hon'ble Madras High Court observed that in the context of section 11(1)(a) of the Act income' means the income which is available in the hands of the assessee because accumulation of 25 per cent is possible only from the income available with the assessee and not the deemed income. It could thus be seen that deemed income under section 11(3) of the Act is different from the income contemplated under section 1 l(1)(a) and 11(2) of the Act and, therefore, the assessee is not entitled to claim the benefit of accumulation out of such deemed income. 11. In the case of CIT v. Natwarlal Chowdhury ( cited supra), the Hon'ble High Court, with due respect, has not analysed this section in the correct perspective. In our humble opinion the different expressions i.e., 'income derived from property' and 'income', used by the legislation under sections 11 and 12 of the Act missed the attention of their Lordships or the impact of the difference in the expressions were not brought to their Lordships notice. In fact, a different vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The Ld A.R placed her reliance on the decision rendered by Hon ble Calcutta High Court in the case of Natwarlal Chouwdhury Charitable Trust (supra). It can be noticed that the Mumbai bench of Tribunal has considered the above said decision rendered by Hon ble Calcutta High Court and has taken the view that the same cannot be followed for the reasons discussed in the order, particularly in view of the fact that the difference between the expressions income derived from property held under the trust and income were not brought to the notice of Lordships. Since the Mumbai bench of Tribunal has rendered its decision by critically analyzing the provisions of sec. 11(1) to 11(3) of the Act and has passed a reasoned order, we are inclined to follow the same. Accordingly we are of the view that the decision taken by the Mumbai Bench in the above said case can be applied to the case on hand. 17. The ld AR submitted that the Mumbai bench has considered the possibility of non-availability of funds, if the accumulated income is used for other purposes. Even, in the absence of availability of funds, the funds so diverted shall be assessed as deemed income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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