2010 (6) TMI 594 - AT - Income Tax

Deduction for accumulation of income to the extent of 15 per cent - assessee had shown total receipt of ₹ 1,32,19,569 as per receipt and payment account, however, the Assessing Officer had calculated the exemption @15 per cent under section 11(1)(a) of the Act with reference to ₹ 68,32,435 - Apex Court in the case of Programme for Community Organisation 2000 (11) TMI 4 - SUPREME Court wherein it was held that - from the plain language of section 11(1)(a) of the Act, it was clear that a charitable or religious trust is entitled to accumulate 25 per cent of its income derived from property held under trust and in the said case, the donations received by the assessee were of ₹ 2,57,376 which constituted this property and was held to be entitled to accumulate 25 per cent there out and not merely 25 per cent of the balance of ₹ 87,0107 - Decided in favor of the assessee

Summary

Issues:
1. Notice under section 143(2) not served properly
2. Treatment of receipts by Mandi Parishad
3. Deduction for accumulation of income under section 11(1)(a)

Issue 1: Notice under section 143(2) not served properly
The appellant contended that the assessment order was invalid due to the absence of a mandatory notice under section 143(2). However, this ground was not pressed and dismissed. The appellant also argued that the CIT(A) erred in directing the Assessing Officer to make a reference to another officer without proper examination of accounts, which was deemed unnecessary.

Issue 2: Treatment of receipts by Mandi Parishad
The dispute centered around the treatment of receipts by Mandi Parishad, with the CIT(A) making observations regarding the accounting principles. The ITAT referred to a previous case involving a similar issue and concluded that the observations made by the CIT(A) were unwarranted as they were based on irrelevant material and lacked an opportunity for the concerned parties to present their case. The ITAT allowed the appellant's ground based on the previous judgment.

Issue 3: Deduction for accumulation of income under section 11(1)(a)
The dispute revolved around the calculation of the deduction for accumulation of income under section 11(1)(a) of the Act. The appellant argued that the deduction should be based on gross receipts, not net income. Citing Supreme Court judgments, the ITAT agreed with the appellant's interpretation, emphasizing that the deduction should be calculated based on the total receipts received by the assessee. Therefore, the ITAT allowed the appellant's appeal on this ground.

In a separate appeal, similar issues were raised, including the notice under section 143(2), treatment of receipts by Mandi Parishad, and the deduction for accumulation of income. The ITAT applied its findings from the first appeal to this case, allowing the appeals partly.

In conclusion, the ITAT addressed the issues comprehensively, ensuring that legal principles and precedents were considered in delivering the judgment.