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TMI Blog2004 (9) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Trust and the assessee is permitted to accumulate or set apart up to 25% of its income, which is subject to fulfilment of other conditions. While calculating the aforesaid 25%, the important question which arises is 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% of only the remaining amount should be allowed to be accumulated or set apart. During the previous year relevant to the assessment year under appeal, the assessee worked out 25% of the income in the following manner: Gross income Rs. 3,52,962 Less: Administrative expenses, etc. Rs. 47,984 Depreciation (as allowable) Rs. 24,646 Rs. 72,630 Rs. 2,80,332 Less: 25% of 2,80,332 Rs. 70,083 The Assessing Officer, however, determined the 25% only at Rs. 36,061, which is worked out in the following manner: Gross income as per assessee's computation Rs. 3,42,174 Less: Income from property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income of Rs. 17,414 could not be deducted therefrom. 5. The ld. counsel for the assessee also invited our attention to the Supreme Court decision in the case of CIT v. Programme for Community Organisation [2001] 248 ITR 1, confirming the Kerala High Court decision in the case of CIT v. Programme for Community Organisation [1997] 228 ITR 620. The ld. counsel invited out attention to the following observation of the Hon'ble Supreme Court at page 2 of the Report: "The question that really requires consideration is whether, for the purposes of section 11(1)(a) of the Income-tax Act, 1961, the amount for the grant of exemption of 25% should be the income of the trust or it should be its total income as determined for the purposes of assessment to income-tax. This question has to be answered in the light of these facts. The assessee-trust received donations in the aggregate sum of Rs. 2,57,376. It applied there out for its charitable purposes the aggregate sum of Rs. 1,70,369 leaving a balance of Rs. 87,010. The question is whether the assessee is entitled to accumulate 25% of Rs. 2,57,376 as it contends, or 25% of Rs. 87,010 as the Revenue appeared to contend. Section 11(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITAT, Mumbai 'A' Bench decision in the case of Gem & Jewellery Export Promotion Council v. Sixth ITO [1999] 68 ITD 95. 7. The ld. counsel for the assessee, in his rejoinder, submitted that even though any written ground on this issue was not raised by the assessee, during the course of hearing before the Regular Bench, relevant oral grounds were raised, which were admitted by the Tribunal, which is proved from the fact that the Tribunal referred the matter to the Special Bench. It is contended that it is a purely legal issue and therefore the oral ground was rightly admitted by the Tribunal and referred to the Special Bench. 8. We have given a careful consideration to the rival submissions made before us vis-a-vis the facts of the case and have gone through the various judgments with which we have been assisted by both the sides. First of all, we deal with the technical objection raised by the ld. CIT DR. As already mentioned above, this issue came up for consideration before the Regular Bench and the Bench made a detailed reference to the Hon'ble President, ITAT for constituting a Special Bench for deciding this issue. In our view, the very fact that the Regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory provision under consideration sets apart 25% 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 the section 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% is set apart in accordance with the spirit of the statutory provision." 11. This means that when it is established that trust is entitled to lull benefit of exemption under section 11(1), the said trust is to get the benefit of twenty five per cent and this twenty five per cent has to be understood as income of the trust under the relevant head of section 11(1). In other words, income that is not to be included for the purpose of computing the total income would be the amount expended for purposes of trust in India. Their Lordships in the above case have emphasized on the clear and unambiguous language of section 11(1)(a) and decided the matter on the basis of the same. It has been held that as per the statutory language of the above section the income which is to be taken for purpose of accumulation is the income derived by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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