2015 (6) TMI 38 - HC - Income Tax

Benefit u/s 11(2) denied - Entitlement to accumulation of income of 85% of the donations - Held that - In the present case, we find that the revenue does not dispute the fact that all the three purposes specified by the Assessee in Form 10 are for achieving the objects of the trust, and that the purposes as well as objects, are both charitable. Merely because more than one purpose has been specified and details about the plan of such expenditure has not been given, the same would not, in our view, be sufficient to deny the benefit u/s 11(2) of the Act to the Assessee. As long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form 10 are for achieving the objects of the trust, merely because of non-furnishing of the details, as how the said amount is proposed to be spent in future, the assessee cannot be denied the exemption as is admissible under sub-section 2 of Section 11 of the I.T.Act, 1961. - Decided in favour of assesse.

Summary

Issues:
Appeal by Revenue against Tribunal's order granting benefit of Section 11(2) of the Income Tax Act to the assessee.

Analysis:
1. Issue: Interpretation of Section 11(2) of the Income Tax Act.
- The appeal questioned whether the assessee was entitled to accumulate income of 85% of donations received without specifying the object of accumulation.
- The Assessing Officer disallowed the accumulation, citing the purpose stated as vague.
- The Commissioner of Income Tax allowed the appeal, stating that the purposes mentioned were covered by the trust's objects.
- The Tribunal dismissed the revenue's appeal, leading to the current appeal.

2. Facts and Background:
- The case involved a charitable trust declaring nil income for Assessment Year 2005-06.
- The trust collected donations and claimed accumulation under Section 11(2) for various charitable purposes.
- The Assessing Officer disallowed the accumulation, relying on a Calcutta High Court decision.
- The Commissioner and Tribunal ruled in favor of the assessee, leading to the current appeal by the Revenue.

3. Legal Precedents:
- The Calcutta High Court and Delhi High Court judgments were referenced regarding accumulation of income for charitable purposes.
- The Delhi High Court emphasized the need for specific purposes aligned with the trust's objects for accumulation under Section 11(2).

4. Judgment and Conclusion:
- The High Court found that all three purposes specified by the assessee aligned with the trust's charitable objects.
- Emphasized that as long as the purposes are charitable and aimed at achieving the trust's objects, the lack of detailed expenditure plans does not warrant denial of Section 11(2) benefits.
- Dismissed the appeal, ruling in favor of the assessee and against the revenue.

This judgment clarifies the interpretation of Section 11(2) of the Income Tax Act, emphasizing that accumulation of income for charitable purposes is permissible as long as the purposes align with the trust's objects. Lack of detailed expenditure plans does not invalidate the claim for benefits under Section 11(2). The judgment reinforces the principle that as long as the charitable nature of the trust and alignment of purposes with trust objects are established, the benefit should not be denied solely on grounds of lack of detailed expenditure plans.