2016 (1) TMI 123 - AT - Income Tax

Accumulation of income u/s 11(1)(a) - Held that - A perusal of the computation of total income done by the AO vide para 8 of the asst. order shows that there was net surplus of ₹ 51,52,825/- before the income being applied for charitable purpose. After applying the said income to the capital expenditure of ₹ 100,04,167 lakhs there remains no income. Therefore, the question of accumulated income for the future years does not arise. The issue in appeal is purely academic in nature does not require any adjudication. Hence, the appeal filed by the assessee society is dismissed. - Decided against assessee.

Summary

Issues:
1. Appeal against order of Commissioner of Income-tax (Appeals) for assessment year 2011-12.
2. Computation of accumulation of income u/s 11(1)(a) of the Act.
3. Treatment of different kinds of receipts and application of 15% accumulation on net educational income.
4. Applicability of accumulation based on gross receipts or net receipts.
5. Dismissal of appeal by the Appellate Tribunal.

Issue 1: Appeal Against Order of Commissioner of Income-tax (Appeals) for Assessment Year 2011-12:
The appeal was filed by the assessee against the order of the Commissioner of Income-tax (Appeals) for the assessment year 2011-12, challenging the computation of total income done by the Assessing Officer.

Issue 2: Computation of Accumulation of Income u/s 11(1)(a) of the Act:
The Assessing Officer observed that only 15% of the net surplus is allowed to be accumulated under section 11(1)(a) of the Income-tax Act based on the provided computation of total income.

Issue 3: Treatment of Different Kinds of Receipts and Application of 15% Accumulation on Net Educational Income:
The Commissioner of Income-tax (Appeals) highlighted that the principle of 15% accumulation on net educational income was applied without proper consideration of different receipts, such as donations, gifts, grants, and income from hospital and educational institutions. The AO was directed to separate receipts and consider accumulation based on gross receipts and net receipts accordingly.

Issue 4: Applicability of Accumulation Based on Gross Receipts or Net Receipts:
The Appellate Tribunal considered the arguments presented by the assessee's counsel, referring to previous decisions, emphasizing that for recognizing 15% income to be accumulated, only gross receipts should be considered. However, the Tribunal dismissed the appeal based on the computation of total income, stating that after applying income to capital expenditure, there was no remaining income for accumulation, rendering the issue academic and not requiring further adjudication.

Issue 5: Dismissal of Appeal by the Appellate Tribunal:
The Appellate Tribunal ultimately dismissed the appeal of the assessee society, concluding that the question of accumulated income for future years did not arise due to the absence of remaining income after applying it to capital expenditure. The decision was pronounced on November 13, 2015.

This detailed analysis covers the appeal against the order of the Commissioner of Income-tax (Appeals), the computation of accumulation of income u/s 11(1)(a) of the Act, the treatment of different receipts, the applicability of accumulation based on gross or net receipts, and the dismissal of the appeal by the Appellate Tribunal, providing a comprehensive overview of the legal judgment.