1983 (5) TMI 37 - AT - Income Tax

Summary

Issues:
1. Accumulation of income of a trust under section 11(2) of the IT Act, 1961.

Analysis:
The appeal pertains to the assessment year 1976-77, where the assessee, a public charitable trust, filed a revised return of income claiming to accumulate its surplus of Rs. 51,200 under section 11(2) of the IT Act, 1961. The Income Tax Officer (ITO) rejected the claim for accumulation, stating that the trust had not specified the objects for which the surplus was proposed to be utilized. The Appellate Assistant Commissioner (AAC) upheld the ITO's decision. The main contention was whether the trust had complied with the conditions for accumulation of income under section 11(2) of the Act.

The assessee argued that it had filed Form No. 10 in time, specifying the accumulation of Rs. 60,000 for the construction of a building for the trust. The assessee contended that there was no bar in submitting a revised Form No. 10 to clarify the purpose of accumulation. The departmental representative opposed the claim for accumulation of surplus.

Upon considering the submissions, the Tribunal analyzed sections 11(1)(a), 11(2), and 11(3) of the Act. Section 11(1)(a) exempts income derived from property held under trust for charitable purposes, allowing accumulation of income up to 25%. Section 11(2) provides conditions for accumulation of income not utilized for charitable purposes. Section 11(3) deems accumulated income as trust income if not utilized as per the specified purposes.

The Tribunal observed that the trust had fulfilled the conditions of section 11(2)(b) regarding investment of accumulated funds. It held that the trust's initial declaration of accumulation for the objects of the trust was acceptable. The Tribunal emphasized that the trust's revised Form No. 10 clarified the purpose of accumulation for the construction of a building for the trust. It concluded that the authorities were not justified in rejecting the accumulation claim, as the trust had complied with the provisions of the Act.

In light of the above analysis, the Tribunal allowed the appeal, holding that the trust's claim for accumulation of surplus income should be accepted, and the trust granted exemption for the said surplus.