2012 (10) TMI 889 - AT - Income Tax

Denial of accumulation under section 11(2) of the Act assessee Society is running educational institute - alleged that assessee did not specify the purpose of accumulation in Form 10B - Held that - Assessee has accumulated income for the specific purpose and for which the funds have been used accordingly in subsequent years - assessee has applied the accumulation of funds as specified which were in accordance with the object of the trust disallowance set aside in favor of assessee

Summary

Issues:
- Appeal against deletion of addition on account of denial of accumulation claimed under section 11(2) of the IT Act, 1961.
- Interpretation of section 11(2) regarding the purpose of accumulation.
- Validity of specifying the purpose of accumulation in Form No.10B.

Analysis:

Issue 1: Appeal against deletion of addition on account of denial of accumulation claimed under section 11(2) of the IT Act, 1961:
The Revenue filed an appeal against the order of the Ld. CIT(A) deleting the addition of Rs. 29,33,910/- on the grounds of denial of accumulation claimed under section 11(2) of the IT Act, 1961. The Assessing Officer disallowed the claim as the assessee did not specify the purpose of accumulation in Form 10B. However, the CIT(A) allowed the claim stating that the appellant had specified the purposes of accumulation under section 11(2) of the Act. The CIT(A) held that the income of the trust can be accumulated for the purpose of the trust, and since the appellant had specifically specified the purposes of accumulation, the benefit could not be denied. The CIT(A) directed the Assessing Officer to allow the benefit of accumulation, and the Tribunal upheld this decision, confirming the allowance of Rs. 29,33,907/- under section 11(2) of the Act.

Issue 2: Interpretation of section 11(2) regarding the purpose of accumulation:
Section 11(2) requires the assessee to specify the purpose for which the income is being accumulated or set apart. In this case, the assessee had filed Form No.10B specifying purposes such as construction, repairs, purchase of equipment, and meeting expenses for the trust/institution. The Assessing Officer's objection was that the purpose of accumulation was not specified in Form No.10B. However, the Tribunal noted that the assessee had indeed specified the purpose for accumulation, and the funds were used for the stated purposes in subsequent years. The Tribunal distinguished previous judgments cited by the Assessing Officer, emphasizing that the specific purpose required by section 11(2) was not vague in this case. Therefore, the Tribunal upheld the CIT(A)'s decision to allow the accumulation of funds under section 11(2) as the specified purposes were in accordance with the law.

Issue 3: Validity of specifying the purpose of accumulation in Form No.10B:
The Tribunal confirmed that the assessee had complied with the requirement of specifying the purpose of accumulation in Form No.10B. Despite the Assessing Officer's objection, the Tribunal found that the purposes listed in Form No.10B were clear and in accordance with the law. The Tribunal rejected the Revenue's appeal, affirming the CIT(A)'s decision to allow the accumulation of Rs. 29,33,907/- under section 11(2) of the Act.

In conclusion, the Tribunal dismissed the Revenue's appeal and upheld the decision of the CIT(A) regarding the allowance of accumulation claimed under section 11(2) of the IT Act, 1961.