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2019 (1) TMI 1340 - AT - Income TaxEntitlement towards general accumulations to the extent of 15% contemplated u/s 11(1)(a) - amount applied for the object of Trust already surpassed income derived from property held under trust - Held that - The identical issue cropped up in assessee s own case in AY 2010-11 as well, wherein no error was found in the action of the CIT(A) for granting accumulation or set apart of income already applied in this year to the extent of 15% of the receipt and consequently, the deficit was suitably enhanced. CIT(A) was justified in admitting the claim of the assessee for accumulation of income. The CIT(A) has rightly viewed that exemption under s.11(1)(a) of the Act i.e. 15% of the income is unfettered and not subject to any conditions. Hence, we do not see any perceptible reason for our indulgence with the order of the CIT(A). We thus decline to interfere. - Decided against revenue.
Issues Involved:
1. Whether the Commissioner of Income Tax (Appeals) erred in allowing the assessee’s claim of 15% accumulation of income under Section 11(1)(a) of the Income Tax Act. 2. Whether the exemption available under Section 11(1)(a) is unfettered and to be given even when no income is available. 3. Whether the assessee is entitled to carry forward the excess expenses for set off in the subsequent year. Issue-Wise Detailed Analysis: 1. Allowance of 15% Accumulation of Income under Section 11(1)(a): The Revenue contended that the Commissioner of Income Tax (Appeals) erred in law and on facts by allowing the assessee’s claim of 15% accumulation of income under Section 11(1)(a) of the Income Tax Act, despite there being no income left after allowing various expenses incurred for the object of the Trust. The Tribunal noted that the identical issue had been adjudicated in favor of the assessee in the assessee’s own case for the assessment year 2010-11. The Tribunal observed that the Assessing Officer (AO) had denied the entitlement towards general accumulations of 15% as the amount applied for the object of the Trust surpassed the income derived from the property held under the trust. The CIT(A) found merit in the case of the assessee and held that the assessee had correctly applied the provisions of Section 11(1)(a) and that the AO was not justified in denying 15% of income out of the receipts during the year for accumulation. 2. Exemption under Section 11(1)(a): The Tribunal upheld the CIT(A)’s view that the exemption under Section 11(1)(a) of the Act, i.e., 15% of the income, is unfettered and not subject to any conditions. The Tribunal referred to the Supreme Court's decision in CIT Vs. Programme for Community Organisation, which clarified that a charitable or religious trust is entitled to accumulate 25% of the income derived from property held under trust. The Tribunal found no error in the CIT(A)’s order and noted that the CIT(A) was justified in admitting the claim of the assessee for the accumulation of income. 3. Carry Forward of Excess Expenses: The Tribunal addressed the issue of whether the assessee is entitled to carry forward the excess expenses for set off in the subsequent year. The CIT(A) directed the AO to allow the benefit of the deficit of earlier years against the future incomes, relying on the jurisdictional Gujarat High Court's decision in CIT vs. Shri Plot Shwetambar Murtipujak Jain Mandal. The High Court had held that income derived from trust property has to be determined on commercial principles, and if expenses for charitable and religious purposes incurred in an earlier year are adjusted against the income of a subsequent year, it should be regarded as the application of income for charitable purposes in the subsequent year. The Tribunal agreed with the CIT(A) and upheld the decision to allow the carry forward of the deficit for set off in subsequent years. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)’s decision to allow the assessee’s claim of 15% accumulation of income under Section 11(1)(a), recognizing the exemption as unfettered, and permitting the carry forward of excess expenses for set off in subsequent years. The Tribunal found no reason to interfere with the CIT(A)’s order, which was consistent with the legal precedents and the assessee’s own case in previous assessment years.
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