2015 (12) TMI 350 - AT - Income Tax

Disallowance of amount claimed as accumulation and amount claimed as set apart for the assessment years 2008-09 and 2009-10 respectively u/s.11(2) - Held that - In the present case, though the assessee filed Form-10 during the time of assessment, setting apart amount, the period etc. are not shown and the columns in the form to be filled are left blank. The contention of the ld. AR is that though there were discrepancies in Form-10, it should be considered rectified in view of resolution passed. The resolution passed does not show the name of the assessee as well as the period. Thus, the resolution is also defective and it is not having all the information required. There is no dispute that it is mandate of sec.11 of the Act to specify the purpose and period for which accumulation is sought for and he assessee has not complied with the provisions of sec.11(5) of the Act. Considering the totality of facts and circumstances of the case, in our opinion, the orders of the lower authorities are justified in dismissing the appeal of the assessee. - Decided against assessee

Summary

Issues Involved:
Disallowed amount claimed as accumulation and set apart under section 11(2) of the Income Tax Act for assessment years 2008-09 and 2009-10.

Analysis:

1. Disallowed Accumulated Amounts:
- The appeals by the assessee were against orders disallowing amounts claimed as accumulation and set apart under section 11(2) of the Income Tax Act for the assessment years 2008-09 and 2009-10.
- The AO disallowed the claimed amounts as the trust did not fulfill conditions under section 11(1)(a) and 11(b) of the Act. The AO found that the trust had not applied the income for charitable purposes as required by law.
- The AO also noted non-compliance with the requirement to specify the purpose and period for accumulation as per Form 10 and section 11(2) of the Act.
- The Commissioner of Income-tax(Appeals) upheld the AO's decision, leading the assessee to appeal to the ITAT Chennai.

2. Judicial Precedents and Arguments:
- The assessee relied on judgments from the Delhi High Court and the Supreme Court to support the filing of Form 10 during reassessment proceedings.
- The ITAT Chennai agreed that the assessing authority needed information under Form 10 at the time of assessment completion to grant exclusions under section 11.
- However, in this case, although Form 10 was filed during assessment, crucial details like the purpose and period were missing, rendering the form incomplete and ineffective.
- The ITAT Chennai emphasized the necessity of complying with section 11(2) requirements, as highlighted in various judicial decisions, including the need for specifying the purpose of accumulation.

3. Compliance and Justification:
- The ITAT Chennai highlighted the mandatory nature of specifying the purpose and period for accumulation under section 11 of the Act.
- Previous court decisions supported the requirement for trusts to clearly state the purpose for which income is being accumulated.
- Additionally, the assessee failed to comply with the investment conditions specified in section 11(5) of the Act, further justifying the disallowance of the claimed amounts.
- Considering the facts and circumstances, the ITAT Chennai upheld the lower authorities' decisions to dismiss the appeals for the assessment years 2008-09 and 2009-10.

In conclusion, the ITAT Chennai dismissed the appeals of the assessee due to non-compliance with the statutory requirements under section 11(2) of the Income Tax Act, emphasizing the necessity of specifying the purpose and period for income accumulation as mandated by law.