2015 (8) TMI 276 - HC - Income Tax

Benefit of accumulation U/s. 11(2) denied - Held that - Judgment in the case of the trustees of Singhania Charitable Trust 1991 (7) TMI 16 - CALCUTTA High Court relied upon by revenue has no manner of application to the facts and circumstances of this case because in this case admittedly there are also 28 objects, out of which only one object was indicated in the option under sub-section (2) of section 11 for which the accumulation was sought to be made. Therefore, the requirement of law was sufficiently met. he requirement of sub-section (2) of section 11 had duly been complied with by the assessee. Therefore, the exemption should have been allowed. - Decided in favour of assessee.

Summary

Issues Involved:
Challenge to judgment and order dated May 26, 2004, passed by the Income Tax Appellate Tribunal for the assessment year 1996-97 regarding the refusal of accumulation under section 11(2) of the Income Tax Act by the assessing officer based on the vagueness of the purpose of accumulation and the specific objects of the trust.

Analysis:

Issue 1: Refusal of Accumulation under Section 11(2)
The assessing officer refused the accumulation of 85% under section 11(2) of the Income Tax Act for the trust, stating that the trust did not show interest in the actual application of income for charitable purposes despite having registration under section 12A. The assessing officer found that only a small amount was applied for charity out of the total receipt, and the purpose of accumulation mentioned in Form 10 was vague and not specific. The assessing officer emphasized the need for a clear identification of the purpose for accumulation to enjoy exemption under section 11. The CIT(Appeal) and the Tribunal affirmed this decision, leading to the appeal by the assessee.

Issue 2: Interpretation of Specific Purpose of Accumulation
The revenue relied on the judgment in the case of Trustees of Singhania Charitable Trust, emphasizing the requirement of a concrete and itemized purpose for accumulation under section 11(2). The judgment highlighted the need for a specific purpose that is instrumental or ancillary to the trust's objects, without any vagueness. However, the appellant argued that the Singhania Charitable Trust case did not apply to their situation as they had clearly specified one out of 28 charitable objects for accumulation. They also cited the judgment in the case of Daulat Ram Education Trust, which emphasized that specifying more than one purpose does not automatically disqualify the trust from exemption under section 11.

Final Decision:
The Court found the decision to refuse accumulation under section 11(2) as perverse. It was concluded that the trust had complied with the requirements of the law by specifying a particular charitable object for accumulation, and thus, the exemption should have been allowed. The questions raised regarding the justification of the Tribunal's decision were answered in the affirmative, leading to the allowance of the appeal by the Court.