2006 (4) TMI 345 - AT - Income Tax

Summary

Issues:
Denial of exemption under section 11(2) of the Act for accumulated income for charitable purposes.

Analysis:
The judgment pertains to appeals against CIT(A)'s orders for assessment years 1993-94 and 1995-96 regarding the denial of exemption under section 11(2) of the Act for accumulated income for charitable purposes. The main contention was the failure to specify the purpose of accumulation as required by law.

The assessee, a charitable trust, sought accumulation of surplus funds under section 11(2) for making substantial donations to selected institutions. The Assessing Officer rejected the application, leading to an appeal. The appellant argued that the purpose was previously specified and that subsequent notices were extensions of the initial notice. However, the Revenue contended that each assessment year is distinct, requiring specific purposes for accumulation under section 11(2).

The tribunal examined the relevant legal provisions and judicial precedents. It highlighted that unapplied income of a particular year can only be accumulated, not a general amount over time. The purpose for accumulation must be specified annually in Form No. 10. The tribunal noted that the purpose mentioned must be concrete and specific, not merely listing the trust's objects.

The tribunal considered various case laws cited by both parties. It emphasized that accumulation must be for charitable purposes alone and should align with the trust's objects. The tribunal disagreed with the lower authorities' denial of exemption based on failure to state the specific purpose of accumulation. It clarified that while the purpose can be the same annually, it must be mentioned each year in Form No. 10.

Ultimately, the tribunal allowed the appeals for the assessment years 1993-94 and 1995-96, directing the Assessing Officer to compute the income accordingly. The judgment underscores the importance of specifying the purpose of accumulation annually for unutilized income, ensuring compliance with the law's requirements for tax exemption under section 11(2) of the Act.