2015 (11) TMI 1857 - AT - Income Tax

Exemption u/s 11 - accumulation of income u/s.11(1)(a) was computed at 15% of the net income from property held under trust and not from the gross income from property held under trust - HELD THAT - We find that the issue raised before us is squarely covered by the judgment of Hon ble Apex High Court in the case of Addl.CIT v. A. L. N. Rao Charitable Trust 1995 (10) TMI 2 - SUPREME COURT Same view has been taken by us in the case of DCIT v. M/s. Rashtrothana Parishat 2016 (1) TMI 444 - ITAT BANGALORE Accordingly we are of the opinion that assessee s claim for accumulation under section 11(1)(a)of the Act could not have been restricted and was eligible for accumulation of 15% of gross receipt from all streams of its income. Appeal of assessee allowed.

Summary

Issues:
Calculation of accumulation of income u/s.11(1)(a) of the Income-tax Act, 1961 based on net income from property held under trust rather than gross income.

Analysis:
The appeal pertains to the computation of accumulation of income u/s.11(1)(a) of the Income-tax Act, 1961, where the assessee contested that it should be based on gross income from property held under trust, not net income. The assessee, engaged in charitable activities, declared nil income for the relevant assessment year after claiming exemptions u/ss.11 & 12 of the Act. The Assessing Officer (AO) limited the accumulation to 15% of the net surplus, contrary to the assessee's claim based on gross receipts. The CIT (A) partially allowed the appeal, emphasizing that accumulation should be calculated with reference to gross income, distinguishing between donation and income from charitable activities for the application of 15% accumulation under section 11(1)(a) of the Act.

The appellant challenged the CIT (A) order, arguing that accumulation should be based on gross income irrespective of the source, not restricted to the net amount. The Tribunal examined the issue, citing precedents like Addl.CIT v. A. L. N. Rao Charitable Trust and DCIT v. M/s. Rashtrothana Parishat. Referring to the judgment in A. L. N. Rao Charitable Trust, the Tribunal elucidated the provisions of section 11(1)(a) and 11(2) of the Act, emphasizing that accumulation for exemption purposes should be calculated based on gross income. The Tribunal concluded that the assessee's claim for accumulation under section 11(1)(a) could not have been restricted and was eligible for accumulation of 15% of gross receipts from all income streams, thereby allowing the appeal.

In light of the detailed analysis and legal interpretation provided by the Tribunal, the appeal filed by the assessee was allowed, and the order was pronounced on November 27, 2015.