TaxTMI 
TaxTMI 
2020 (3) TMI 1033
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.... revision of form No.10 when the calculations have been changed by the authorities below? c. Whether in the present facts and circumstances of the case the order of the Ld. ITAT is perverse?" [2] The relevant facts are that appellant is a Society working under the Government of Punjab, same being principal donor also. The Society is running the Museum by the name of Maharaja Ranjit Singh War Museum and was registered under section 12AA of the Act on 06.08.1998. The object of the Society is to create sense of patriotism and nationality among the citizens; to preserve and display war history of Punjab. For the assessment year 2014-15, the annual receipts of the Society were Rs. 67,65,299/- and assessee had accumulated sum of Rs. 1,08,63,246/-. During the relevant year, Rupees one crore was given to Punjab State War Heroes Memorial & Museum Society, Amritsar [for brevity 'PSWHMMS'] on directions of the Government of Punjab. The donee-Society was not registered under section 12AA at the relevant time though subsequently registered. The income tax return was selected for scrutiny, assessment was framed on 19.12.2016. Apart from other additions the amount transferred to PSWHMMS was ....
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.... specific direction that they shall form part of the corpus of the trust or institution. Explanation 1.-For the purposes of clauses (a) and (b),- (1) in computing the fifteen 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; (2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of eighty-five per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount- (i) for the reason that the whole or any part of the income has not been received during that year, or (ii) for any other reason, then- (a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which t....
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....he cost of the transferred asset; (b) where a capital asset, being property held under trust in part only for such purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the appropriate fraction of the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely:- (i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of the appropriate fraction of such capital gain; (ii) in any other case, so much of the appropriate fraction of the capital gain as is equal to the amount, if any, by which the appropriate fraction of the amount utilised for acquiring the new asset exceeds the appropriate fraction of the cost of the transferred asset. Explanation.-In this sub-section,- (i) "appropriate fraction" means the fraction which represents the extent to which the income derived from the capital asset transferred was immediately before such transfer applicable to charitable or religious purposes; (ii) "cost of the transferred asset" means the aggreg....
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....ncome for the previous year: Provided that in computing the period of five 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. Explanation.-Any amount credited or paid, out of income referred to in clause (a) or clause (b) of subsection (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. (Inserted by the Finance Act, 2002 w.e.f. 01.04.2003) (3) Any income referred to in sub-section (2) which- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart....
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....erred to in clause (d) of sub-section (3) in the year in which such trust or institution was dissolved. [5] The contention raised by learned counsel for the appellant is two-fold:- * Firstly, that from explanation of section 11(2) and clause (d) in sub-section (3) to Section 11, it is evident that appellant is entitled to pay or credit the accumulated amount to any Trust or institution not specified in the said provisions; * Secondly, that the aims and objects of the donee- Society and donor-Society were similar hence there is no violation of conditions prescribed under section 11 and amount cannot be treated as income of the appellant- Society during the relevant year, as same was applied through donee. [6] Before dealing with the issue we take over all view of provisions of section 11(1) to 11(3A) of the Act, relevant for the present appeal. Chapter III of the Act deals with the 'income which do not form part of the total income'. Section 11 is for 'Income from property held for charitable or religious purposes'. Sub-section (1) provides that subject to section 60 to 63 of the Act, incomes mentioned in sub clauses (a) to (d) received in previous year are not to be inclu....
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....de, in clauses (a) to (d), situations when the amount accumulated or set apart in sub-section (2) shall be deemed to be income of such person in the previous year in which it was to be applied or ceases to be accumulated or set apart. Clause (a) states when the accumulated amount is applied for other than for charitable and religious purposes; clause (b) deals when the amount no longer remain invested as per sub-section (5) of section 11; clause (c) contemplates if the amount is not utilized for the purpose, during the specified period; clause (d) was added by the Finance Act, 2003 w.e.f. 01.04.2003 and it provides that if the accumulated or set apart amount is credited or paid to a Trust or Institution registered under section 12AA of the Act or fund or institution or Trust referred to in clauses (iv), (v), (vi) and (via) of section 10(23C) of the Act. [9] Sub-section (3A) of section 11 starts with a non-obstante clause and authorized the assessing officer that for the reasons beyond the control, purpose for which the amount was accumulated can be changed but the change shall be in conformity with the objects of the Trust. Two provisos were added to sub-section (3A) by the Finan....
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....there could be accumulation or not. In such circumstances, there is a clear violation of the conditions referred in sub-section (2) and sub-section (3) of section 11. The amount has been spent for the purpose other than for what it was accumulated, it comes within the mischief of section 11(3)(c). [15] The second limb of the argument raised is that by adding explanation to sub- section (2) and adding clause (d) to sub-section (3) of section 11 it is rather clarified that the assessees like appellant can pay or credit the accumulated sum to an unregistered or funds or Trust or institution not specified therein. [16] The argument is not well founded. [17] The reasons and objects of amendments are reproduced below:- "Sub-clause (c) (ii) seeks to insert an Explanation below sub-section (2) of the said section so as to provide that any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution....
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....0] There is another aspect of the matter, it has not been even the case of the appellant that the donee is indulged in charitable or religious purpose what has been stated is that the aims and objects of the donor and donee are similar. [21] To fortify the second limb of the contention of learned counsel for the appellant places reliance on Circular No.8 of 2002. Relevant clauses 21.1 to 21.4 of the Circular reads as under:- "Restriction on the application of accumulated income of the charitable or religious trusts. 21.1 Through the Finance Act, 2002, an Explanation has been inserted below sub-section (2) of section 11 so as to provide that any amount paid or credited out of income from property held under trust referred to in clause (a) or clause (b) of sub section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub clause (iv) or sub clause (v) or sub clause (vi) or sub clause (via) of clause (23C) of section ....
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....in Commissioner of Income Tax Vs. Shri Ram Memorial Foundation reported as (2004) 269 ITR 0035. These decisions deal with the application of income under section 11(1)(a) and do not deal with the accumulated income under section 11(2). Moreover, the decisions are prior to amendment by the Finance Act, 2002 and would have no application in the present case. [24] Further reliance is placed on decisions of Madras High Court in Commissioner of Income Tax Vs. M.CT. Muthiah Chettiar Family Trust & Ors reported as (2000) 245 ITR 0400. This decision also deals with the provisions prior to amendment of 2002, same does not enhance the case of the appellant rather paragraph No.10 of the judgment states that the accumulation has to be for specific purpose and amount cannot be accumulated merely by stating that it is for the aims and objects of the Trust. Paragraph No.10 of the judgment is reproduced as under:- "10. The scheme of s.11 of the Act was examined by the apex Court in S.RM.M.CT.M. Tiruppani Trust vs. CIT (1998) 145 CTR (SC) 176 : (1998) 230 ITR 636 at p.640 (SC): TC S.23.2416 as under:- "Under s. 11(1)(a), income derived from property held under trust for charity, to the exte....