TMI Blog2008 (4) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded as application of income of the trust for charitable and religious purposes in subsequent years in which the adjustments have been made having regard to the benevolent provisions contained in s. 11 of the Act. The accumulation of 25 per cent of the total income is permissible when the assessee failed to apply the total income of the trust in a particular year. If the assessee applies the entire income of the trust he is entitled to claim 100 per cent exemption and there is no question of further accumulation of 25 per cent of the total income of the assessee. If the assessee incurs more expenditure than the total income of the trust the expenditure over and above to the income can be carried forward and is allowed to be set off against the income in succeeding year. In this case, he is entitled to claim the carry forward of the excess expenditure but he will not be allowed to accumulate 25 per cent of the total income first and then claim the excess expenditure for its carry forward, to subsequent years. We accordingly set aside the order of the CIT(A) and restore the matter to the file of the AO with a direction to allow the carry forward of the excess expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purposes of the trust the assessee would be entitled to 100 per cent deduction and if the assessee has applied more than the surplus amount the deficit would be carried forward to the succeeding year and the assessee would get the benefit of set off in succeeding year against the income of the trust. In support of this proposition. the learned counsel for the assessee has placed reliance upon the judgment of the apex Court in the case of CIT vs. Programme For Community Organization and the Board's circulars. He has also placed reliance upon the following judgments in support of his contentions: (1) CIT vs. Munisuvrat Jain 1994 Tax LR 1084; (2) CIT vs. Institute of Banking Personnel Selection (2003) 185 CTR (Bom) 492 : (2003) 264 ITR 110 (Bom); (3) CIT vs. Bhoruka Public Welfare Trust (1999) 157 CTR (Cal) 40 : (1999) 240 ITR 513 (Cal); (4) CIT vs. Birla Janahit Trust (1995) 124 CTR (Cal) 340 : (1994) 208 ITR 372 (Cal); (5) CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992) 105 CTR (Guj) 303 : (1992) 198 ITR 598 (Guj); (6) CIT vs. Society of The Sisters of St. Anne (1984) 39 CTR (Kar) 9 : (1984) 146 ITR 28 (Kar); (7) CIT vs. St. George Forana Church ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular limit for its application to the purposes of the trust. 6. The learned Departmental Representative further invited our attention to the judgment referred to by the assessee with the submissions that those judgments are rendered under different circumstances and have not dealt with the controversial issues raised in the present appeal. As such, the ratio laid down in those judgments cannot be applied to the present case. 7. Having heard the rival submissions and from careful perusal of the record, we find that s. 11 relates to the computation of income from property held for charitable or religious purposes. In order to support a claim for exemption of income under the provisions of this section, the following conditions must be satisfied: (1) The income must be derived from property; (2) Such a property should be held under trust or other legal obligations; (3) Such trust or legal obligations should be wholly for religious or charitable purposes; (4) Such income is applied or accumulated for the application to such religious or charitable purposes in India. 8. Unless the above conditions are fulfilled, the assessee cannot successfully claim exemption under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sake of reference extract the provisions of s. 11 (1)(a) of the Act as under: "11. Income from property held for charitable or religious purposes: (1)(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 9-pplication 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." 9. We have carefully examined the judgments referred to by the parties and we find that the judgments referred to before us were rendered on different issues and as such the ratio laid down therein cannot be applied to the present case. In the case of CIT vs. Programme For Community Organisation the issue in dispute was with respect to the percentage of accumulation of income; whether it should be 25 per cent of the total income or 25 per cent of the balance amount/remainder after application of the income for charitable purposes of the trust. The facts of that case are that the assessee trust received donations in the aggregate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO did not allow carry forward of the excess of expenditure to be set off against the surplus of the subsequent years on the ground that in the case of a charitable trust, their income was assessable under self-contained code mentioned in ss. 11 to 13 of the Act and that the income of the charitable trust was not assessable under the head "Profits and gains of business" under s. 28 of the Act under which the provision for carry forward of losses was relevant. Their Lordships did not agree with the Revenue's contentions and have held that the income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in s. 11 of the Act and that such adjustment will have to be excluded from the income of the trust under s. 11(1)(a) of the Act. 12. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thereafter carry forward of the excess expenditure incurred for charitable purposes to succeeding year for its set off against the income of the trust. This proposition of the assessee cannot be accepted as the exemption is to be allowed on application of the income of the assessee and not for its accumulation. The accumulation of 25 per cent of the total income is permissible when the assessee failed to apply the total income of the trust in a particular year. If the assessee applies the entire income of the trust he is entitled to claim 100 per cent exemption and there is no question of further accumulation of 25 per cent of the total income of the assessee. If the assessee incurs more expenditure than the total income of the trust the expenditure over and above to the income can be carried forward and is allowed to be set off against the income in succeeding year. In the instant case, the assessee has incurred expenditure or applied for charitable religious purposes Rs. 58,09,87,048 against the total income of Rs. 35,60,82,101. In this case, he is entitled to claim the carry forward of the excess expenditure but he will not be allowed to accumulate 25 per cent of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
