TMI Blog2016 (1) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Section 11(2) of the Act is for giving relief to unapplied income which is short of 85% with a condition of keeping such surplus in the specified mode as per section 11(5) of the Act. This is to be done after giving notice to the AO by the assessee in Form No.10 of the Income Tax Rules. In the instant case, if the 15% of the gross total income is set apart u/s 11(1)(a) of the Act, it comes to Rs. 2,03,50,121/- (15% of Rs. 13,56,67,475/-). After incurring of capital expenditure, the surplus was only Rs. 92,71,940/-. Therefore, there is no need to file Form 10 before the AO nor for any investment as mentioned u/s 11(5) of the Act, since the entire excess would be within 15% of the income accumulated as per Sec. 11(1)(a) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Expenditure Account. Circular No.5-P(LXX - 6) of 1968 issued on 19.06.1968 categorically stated that the income mentioned in section 11(1)(a) is not the total amount of income computed in the manner laid down in this Act . Also the Supreme Court of India in Addl. CIT Vs. ALN Rao Charitable Trust (1995) 216 ITR 697 discussed the matter elaborately and ordered that the accumulation is on gross income and not on net income. 3 The brief facts of the case are as follows: The assessee is a religious Trust. It is established for religious retreat functions. The assessee Trust was registered u/s 12AA of the Act and as such assessee s income was entitled to exemption u/s 11 of the I T Act, 1961. The audited account of the assessee Trust f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the net income and not on the gross income, the assessee filed rectification u/s 154 of the Act , before the AO which is pending disposal. 7 In the meanwhile, the CIT(E) passed an order u/s 263 of the Act. According to CIT, there was a surplus to the extent of Rs. 25,70,582/- ( Rs. 3,79,74,363 Rs 3,54,03,781) and the assessee Trust having not filed the Form 10 before the AO nor having invested the above sum of Rs. 25,70,582/- in the mode specified in section11(5) of the I T Act, the same was not entitled to exemption. The relevant findings of the CIT(A) in passing 263 order read as under: 5. I have gone through the submissions made by the assessee during the course of hearing of the 263 proceedings and also the facts pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of 15% u/s 11(1)(a) of the Act is to be calculated on the gross income and not on the surplus/net income as per income and expenditure statement. In support of the above contention, the assessee relied on the CBDT circular no.5-P(LXX-6 of 1968 dated 19.6.1968 and the following judicial pronouncements: i) CIT vs Programme for Community Organization (1997) 228 ITR 620 (Ker) ii) CIT vs Programme for Community Organization((2001) 166 CIT 401 (SC) iii) S. RM M CT.M Tiruppani Trust vs CIT (1998) 145 CTR 176(SC) iv) ACIT Another vs ALN Rao Charitable Trust (1995) 216 ITR 697(SC) 9 The ld DR present was duly heard. 10 We have heard the rival submissions and perused the material on record. The solitary issue that arises for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assign to the word income used in section 11(1)(a), the same meaning as has been specifically assigned to the expression total income vide section2(45). ii) CIT vs Programme for Community Organization 228 ITR 620 (Ker) The Hon ble High Court decided the issue in favour of the assessee following the CBDT circular dated 19.6.1968. The Hon ble High Court held (at page 625): taking into consideration all the facts and the circumstances, the situation needs no disturbances of any kind. For the above reasons, we answer question no.1 to the effect that the assessee is entitled to exemption of 25% on Rs. 2,57,376/- and not on Rs. 87,010/- (here Rs. 2,57,376 is the gross income and Rs. 87,010/- is the surplus after applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot applied but some income is accumulated by such a trust, then also u/s 11(1)(a) such accumulated income to the extent of 25% of the total income (or Rs. 10,000/-, whichever is higher) would be exempted from income tax. Section 11(2) in turn provides that the restriction which is specified in cl(a) of sub section(1) as regards accumulation shall not apply if the assessee gives notice as prescribed u/s11(2)(a) and invest the amount accumulated in Govt securities as per section11(2) (b). The restriction specified in cl.(a) of sub section(1) is clearly the restriction of 25% of the accumulated income (or Rs 10,000/-, whichever is higher) being exempt. If more than 25% (or Rs.10,000), is tobe exempted then the assessee has to comply with the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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