2007 (10) TMI 450 - AT - Income Tax

Summary

Issues Involved:
1. Denial of claim for accumulation of income u/s 11(2) of the Income-tax Act, 1961.
2. Disallowance of 3% of total expenses.
3. Inclusion of entrance fees in the total income of the assessee.

Summary:

Issue 1: Denial of claim for accumulation of income u/s 11(2) of the Income-tax Act, 1961

The primary issue in the assessee's appeal was whether the Assessing Officer (AO) was justified in denying the claim for accumulation of income u/s 11(2) of the Income-tax Act, 1961. The AO denied the claim on the grounds that the statutory Form No. 10 and a copy of the resolution were not filed along with the return of income or during the assessment proceedings. The CIT(A) upheld the AO's decision, stating that Form No. 10 must be filed every year and that the form filed for the assessment year 1992-93 was defective. The Tribunal, however, held that Form No. 10 could be filed for subsequent years as well and that the assessee had complied with all conditions set out in section 11(2). Consequently, the Tribunal directed the AO to allow the accumulation u/s 11(2) of the Act, subject to verification of compliance with section 11(5).

Issue 2: Disallowance of 3% of total expenses

The AO disallowed 3% of the total expenses claimed by the assessee on the grounds that the entire expenditure could not be said to have been incurred wholly and exclusively for charitable objects. The CIT(A) confirmed this disallowance. The Tribunal found that this issue was covered by its earlier order for the assessment year 2000-01, where the matter was remitted to the AO for fresh adjudication. Following the same, the Tribunal set aside the CIT(A)'s order on this issue and remitted the matter to the AO for fresh adjudication.

Issue 3: Inclusion of entrance fees in the total income of the assessee

The AO included the entrance fees in the total income of the assessee, arguing that it could not be considered a voluntary contribution with a specific direction to form part of the corpus. The CIT(A) disagreed, following the Tribunal's decision for the assessment year 1992-93, and held that the entrance fees could not be treated as income of the assessee. The Tribunal upheld the CIT(A)'s decision, finding no merit in the revenue's appeal.

Conclusion:

The appeal of the assessee was allowed to the extent of the issues discussed, and the appeal of the revenue was dismissed.