TMI Blog2020 (12) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... umulation is allowable irrespective of whether 15% of income have been applied or not - See Gnyan Dham Vapi Charitable Trust [ 2020 (10) TMI 238 - ITAT AHMEDABAD]. - I.T.A No.3023/AHD/2015 - - - Dated:- 9-11-2020 - SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI ARJUN LAL SAINI, ACCOUNTANT MEMBER For the Assessee : Shri M.K.Patel AR For the Revenue : Shri B.K.Panda Sr.DR ORDER PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)-3 [Ld.CIT(A)], Surat dated 10.08.2015, which in turn arise out from the assessment order passed under section 143(3) of the Income-tax Act, 1961 dated 21.03.2014 for the Assessment Year (AY) 2011-12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called by the Tribunal in M.A.No.237/Mum/2012 order dated 08.03.2013. 4. On the other hand, the Learned Departmental Representative (DR) for the Revenue on Ground No.1 fairly agreed that this ground of appeal is covered. However, on Ground No.2, the Ld. DR submits that accumulation of 15% of income to be allowed subject to the income being available after application be more than 15% or equal. No working of deficit is allowable when not even entire income has been applied. The Ld. DR for the revenue also relied upon the decision of Dawat Institute of Dawoodi Bohra Community (supra). 5. We have considered the submission of both the parties and have gone through order of Lower Authorities. We have noted that on the Ground No.1 in assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses on the object of the assessee. On perusal of computation of income, the AO was of the view that method adopted for computing the deficit is not in accordance with the provisions of the Act. The AO issued show cause notice as to why the claim of 11(1)(a) should not be disallowed. The assessee filed its reply. The Ld.AO has not referred the contents of reply filed by the assessee. The Ld.AO concluded that he had perused the submission of the assessee, it is not acceptable to him. The AO was of the view that computation of deficit which can be carry forward for adjustment against the income of next year is not in accordance with the provision of Law. The assessee has shown total income of the assessee at ₹ 7.57 crore and applied amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act at the rate of 15% of the gross income. We are of the view that exemption available under section 11(1)(a) i.e. 15% of income is invested and not subject to any condition. According to us, there is no bar in law and there is no specific provision in the act which says that such deduction of 15% for accumulation will not be allowed in case of deficit but such 15% accumulation is allowable irrespective of whether 15% of income have been applied or not. Similar is the position in the case of ACIT vs. A.L.N. Rao Charitable Trust (1995) 216 ITR 697 (SC) here the meaning of applied in this context means that the income is actually applied for the charitable or religious purposes of the trust but the word applied need not necessarily im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section ll(1)(a) and Section 11(1)(b) of the Act. 8.1 Under s . 1 1 of the Act, income derived from property held under trust wholly for charitable or relates purposes shall not be included in the total income subject to certain conditions. On a combined reading of Section 11(1)(a) and Section 11(2) of the Act, it emerges that the trust is allowed to accumulate 15% of its income without any time limit and balance 85% can be set apart for specified period to five years. In the instant case, the assessee in the assessment year in question as well as in some other assessment years have made spendings in excess of its receipts resulting in certain deficit. Owing to excess spending over receipts, a peculiar situation has arisen in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in certain 'deficits'. The CIT(A) has applied the governing principles of Section 11 (1 )(a) of the Act to a totally converse situation of excess spending rather than accumulation and has brought down the entitlement of deficits carry forward. 8.3 Ostensibly, the assessee has not availed the entitlement of accumulation of 15% of income in the instant case. Needless to say, the statutory postulations towards accumulation of 15% of income for indefinite period is an entitlement or a right of absolute nature vested upon the assessee but, however, cannot be regarded as an obligation envisaged in law. The law applicable to accumulation of income cannot be extended to application thereof. Where an assessee trust has made excess appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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