2018 (1) TMI 1105 - AT - Income Tax

Accumulation of income for application to the extent of 15% of net receipts u/s. 11(1)(a) - allowance at 15% of gross receipts or net receipts i.e.; gross receipts less Revenue expenditure - Held that - We find that the issue in question was considered and adjudicated by a co-ordinate bench of the Tribunal in the case of Mary Immaculate Society 2015 (6) TMI 1149 - ITAT BANGALORE held that the assessee is to be allowed accumulation of income for application for charitable purposes u/s. 11(1)(a) of the Act at 15% of gross receipts following the decision of the ITAT Special Bench in the case of Bai Sonabai Hirji Agiary Trust v ITO (2004 (9) TMI 300 - ITAT BOMBAY-E). - Decided in favour of assessee

Summary

Issues:
1. Disallowance of depreciation
2. Accumulation u/s 11(1)(a) of the Act on gross instead of net receipts

Issue 1: Disallowance of Depreciation
The assessee, a trust registered u/s. 12A of the Income Tax Act, filed its return of income for Assessment Year 2012-13, claiming exception u/s 11 of the Act. The assessment completed u/s. 143(3) of the Act disallowed depreciation claimed by the assessee. The CIT(A) allowed the appeal of the assessee on the issue of depreciation, overturning the AO's decision.

Issue 2: Accumulation u/s 11(1)(a) of the Act on Gross instead of Net Receipts
The main issue revolved around whether accumulation of income for charitable purposes u/s. 11(1)(a) of the Act should be allowed at 15% of gross receipts or net receipts. The AO restricted accumulation to 15% of net receipts, while the assessee claimed it should be based on gross receipts. The Tribunal referred to a previous decision in the case of Mary Immaculate Society, where it was held that accumulation u/s. 11(1)(a) should be allowed at 15% of gross receipts. Relying on this precedent, the Tribunal directed the AO to allow accumulation at 15% of gross receipts as claimed by the assessee, thereby allowing the appeal.

In conclusion, the Tribunal allowed the assessee's appeal for Assessment Year 2012-13, overturning the disallowance of depreciation and directing the accumulation u/s. 11(1)(a) of the Act to be based on gross receipts at 15%.