1982 (1) TMI 107 - AT - Income Tax

Summary

Issues:
- Appeal by department against assessee-trust for assessment year 1973-74 regarding accumulation of income under section 11 of the Income-tax Act, 1961.
- Dispute over whether permission to accumulate income can be granted to assessee-trust based on accumulation allowed to author-trusts.
- Department's objection to AAC's decision granting exemption to assessee-trust.

Analysis:
1. The appeal before the Appellate Tribunal concerned the department's challenge against the assessee-trust, a charitable trust, for the assessment year 1973-74 regarding the accumulation of income under section 11 of the Income-tax Act, 1961. The trust had applied for accumulation of income for the relevant assessment year and subsequent years, meeting all necessary conditions, including investing in approved securities. The Income Tax Officer (ITO) sought to tax the trust's total income, arguing that permission for accumulation cannot be granted due to accumulation allowed to author-trusts. The AAC, in the appeal, ruled in favor of the assessee, stating that it was entitled to exemption under section 11 independently of the author-trusts' actions.

2. The Tribunal, upon hearing both parties, found no merit in the department's objection. It noted that the author-trusts' accumulation issue had been addressed in separate appeals where it was held that making over accumulated income to the assessee-trust constituted application to charity. For the assessment year in question, the assessee sought to accumulate its income, and the Tribunal upheld the AAC's decision that the assessee, as an independent trust fulfilling accumulation requirements, cannot be denied exemption based on author-trusts' accumulation history. The Tribunal rejected the department's claim that the assessee should lose its exemption due to the author-trusts' actions, citing a lack of legal provision to support such a stance.

3. Ultimately, the Tribunal dismissed the department's appeal, affirming the AAC's decision in favor of the assessee-trust. The judgment emphasized the independence of the assessee as a trust entitled to exemption under section 11, irrespective of the accumulation permissions granted to the author-trusts. The decision underscored that the assessee's compliance with accumulation conditions and eligibility for exemption were sufficient grounds to uphold its right to accumulate income for the relevant year, despite the department's objections based on the author-trusts' circumstances.