2009 (8) TMI 571 - HC - Income Tax

Charitable Trust- The assessee a society registered under section 12A of the Act was engaged in the business of imparting professional training to probationers of the Central Accounts and Finance Services. The Assessing Officer rejected the claim of the assessee for exemption under section 11 on the ground that the assessee accumulated profits without providing any explanation. The Commissioner (Appeals) held that the utilization of accumulation was on the agenda of the governing body the purpose of expending for accumulation was for building fund and equipment fund and the period was less then 10 years. The Tribunal upheld the order of Commissioner (Appeals). Held that- dismiss the appeal that when the assessee had specified the purpose and there was no fault in utilization of the amount the assessee was entitled to accumulation of income.

Summary

Issues:
Interpretation of section 11(2) of the Income-tax Act, 1961 regarding accumulation for building and equipment fund under exemption claim.

Analysis:
1. The appellant, a society registered under section 12A of the Act, sought exemption under section 11 for accumulating profits for a building and equipment fund. The Assessing Officer disallowed the claim, alleging accumulation without explanation. However, the Commissioner of Income-tax (Appeals) accepted the plea, noting the governing body's agenda for accumulation utilization.

2. The Tribunal, citing the Delhi High Court judgment in Bharat Kalyan Pratisthan v. Director of Income-tax, upheld the view that the appellant could accumulate income for the institution's objects. Under section 11(2), conditions for accumulation include specifying the purpose, limiting accumulation period to ten years, and prescribed investment. The Commissioner found the purpose specified, i.e., building and equipment fund expenditure, within the ten-year period, with proper utilization, a stance upheld by the Tribunal.

3. The Revenue's counsel failed to establish how the proposed question constituted a substantial question of law given the appellant's specified purpose and proper utilization of the accumulated amount. The Court, therefore, dismissed the appeal, affirming the Tribunal's decision regarding the exemption claim under section 11 for the building and equipment fund accumulation.