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2018 (2) TMI 161 - AT - Income TaxAccumulation of income for application for charitable purposes u/s. 11(1)(a) - to be allowed at 15% of gross receipts or net receipts i.e.; gross receipts less Revenue expenditure - Held that - Respectfully following the decision of the co-ordinate bench in the case of Mary Immaculate Society (2015 (6) TMI 1149 - ITAT BANGALORE), we hold and direct the AO that the accumulation u/s. 11(1)(a) of the Act is to be allowed at 15% of gross receipts, as claimed by the assessee. Consequently, grounds raised by the Revenue are dismissed. Claim for Depreciation - Held that - We uphold the order of the ld CIT(A) in directing the AO to allow the assessee s claim for depreciation. See Al-Ameen Charitable Fund Trust & Others (2016 (3) TMI 462 - KARNATAKA HIGH COURT). Carry forward of excess application of income for set off as application against income of subsequent years - Held that - Following the aforesaid decision of the co-ordinate bench in the case of Shraddha Trust 2017 (4) TMI 1289 - ITAT BANGALORE we uphold the order of the ld CIT(A) in directing the AO to allow the assessee s claim for carry forward of surplus application of income for set off as application against income of subsequent years
Issues Involved:
1. Net receipts vs. Gross receipts for computation of accumulation. 2. Disallowance of depreciation. 3. Carry forward of excess application of income for set off as application against income of subsequent years. Issue-wise Detailed Analysis: 1. Net receipts vs. Gross receipts for computation of accumulation: The primary issue here was whether the accumulation of income for application for charitable purposes under Section 11(1)(a) of the Income Tax Act should be calculated on gross receipts or net receipts. The assessee claimed accumulation at 15% of gross receipts, while the Assessing Officer (AO) contended it should be on net receipts (gross receipts less revenue expenditure). The CIT(A) sided with the assessee, allowing accumulation on gross receipts. The Tribunal upheld this decision, referencing the Special Bench decision in Bai Sonabai Hirji Agiary Trust v. ITO, which established that accumulation should be on gross receipts. The Tribunal emphasized that the statutory language of Section 11(1)(a) supports accumulation on gross receipts, and this interpretation aligns with the Supreme Court's decision in CIT vs. Programme for Community Organization. 2. Disallowance of depreciation: The AO disallowed the depreciation claimed on fixed assets, arguing it constituted a double deduction since the cost of acquiring the assets had already been treated as application of income. The CIT(A) allowed the depreciation claim, referencing several Tribunal decisions that supported the assessee's position. The Tribunal confirmed the CIT(A)'s decision, citing the Karnataka High Court's ruling in DIT(E) vs. Al-Ameen Charitable Fund Trust & Others, which distinguished from the Supreme Court's decision in Escorts Ltd. The Tribunal noted that the amendment introduced by the Finance Act, 2014, which disallowed such depreciation, was prospective and not applicable to the assessment year in question. 3. Carry forward of excess application of income for set off as application against income of subsequent years: The AO rejected the assessee's claim to carry forward surplus application of income, arguing there was no provision in Sections 11 and 13 of the Act permitting this. The CIT(A) allowed the claim, and the Tribunal upheld this decision. The Tribunal cited the decisions in Jyothi Charitable Trust and ITO (Exemption) vs. Shraddha Trust, which established that excess expenditure in earlier years could be carried forward and set off against income in subsequent years. The Tribunal reiterated that the application of income for charitable purposes could be adjusted in subsequent years, aligning with commercial principles and the benevolent nature of Section 11. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on all three issues. The judgment emphasized the interpretation of statutory provisions in favor of the assessee, consistent with established judicial precedents.
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