2004 (6) TMI 584 - AT - Income Tax

Summary

Issues:
Denial of accumulation of income under section 11(2) by the Assessing Officer upheld by CIT(A) for assessment year 1996-97.

Analysis:
The appeal was filed by the assessee against the order of CIT(A) upholding the denial of accumulation of income under section 11(2) by the Assessing Officer for the assessment year 1996-97. The assessee, a charitable trust entitled to exemption under section 11(2), filed its return of income declaring "NIL" income and requested accumulation of a sum of Rs. 11,47,134. The Assessing Officer proposed disallowing the accumulation under section 11(2) due to vague purposes mentioned in Form No. 10. The assessee specified purposes for accumulation in a subsequent letter, but the Assessing Officer and CIT(A) rejected the request.

The ITAT Delhi held that the assessee was entitled to the benefit of accumulation under section 11(2). While the specific purpose for accumulation was not indicated in Form No. 10, the subsequent letter from the assessee detailing specific purposes met the requirement. The ITAT referred to the decision in CIT v. Nagpur Hotel Owners Association, emphasizing that the purpose of accumulation can be intimated before the completion of assessment proceedings. The Delhi High Court's decision in CIT v. Hotel Restaurant Association was also cited, stating that specification of certain purposes was necessary for accumulation under section 11(2), which was fulfilled by the assessee in this case.

Regarding the requirement of a resolution of the Board of Trustees specifying the purposes for accumulation, the ITAT noted that no such specific requirement is mandated under section 11(2). The ITAT emphasized the bona fide nature of the trust's activities and the acceptance of its charitable and religious purposes by revenue authorities. The ITAT adopted a liberal and purposive approach in interpreting section 11(2) to allow the benefit of accumulation to the assessee trust. Consequently, the ITAT reversed the findings of CIT(A) and allowed the appeal of the assessee for accumulation of income under section 11(2) for the assessment year 1996-97.