2020 (3) TMI 794 - HC - Income Tax

Exemption u/s 11 - non acceptance of the plea for accumulation of income as per Section 11(2) of the Act read with Form No.10 - HELD THAT - Matter would deserve a remand to the learned Income Tax Appellate Tribunal. As a matter of fact, the Assessee could have approached the learned Tribunal by way of a Miscellaneous Application if a document like Form No.10 along with the Resolution filed before the learned Tribunal contained all the details and evidence of such accumulation set apart by the Assessee Trust for the purpose of construction of building etc., in terms of the provisions of Section 11 permitted by law. We find from paragraph 6 of the learned Tribunal's order that, though the learned Tribunal has referred to the said Resolution dated 01.09.2008 passed by the Assessee Trust, without finding it to be defective, they have not given any benefit of the same to the Assessee Trust. Whether the said surplus fund has been really spent by the Assessee Trust for such construction or not for charitable purposes of the Trust contained in its Trust Deed or not might be a subsequent fact, which may be relevant for the Tribunal to consider, coupled with the fact that the Assessee Trust has been assessed as such in 'Exempted Category' for the subsequent Assessment Years as stated by the learned counsel for the Assessee. Tribunal should re-examine the Form No.10 furnished by the Assessee along with the Resolution and additional evidence, which may be produced by the Assessee Trust before the learned Tribunal. Therefore, we dispose of the present appeals without answering the questions of law as such and request the learned Tribunal to reconsider the said Form No.10 dated 01.09.2008 and the Resolution along with the evidence of the surplus amount having been spent by the Assessee Trust for the purposes of the Trust.

Issues:
1. Appeal against denial of tax exemption under Section 11 of the Income Tax Act, 1961.
2. Rejection of plea for accumulation of income.
3. Compliance with requirements of Section 11(2) of the Act.
4. Consideration of resolution for accumulation of surplus funds.
5. Need for remand to the Income Tax Appellate Tribunal.

Analysis:

Issue 1: Appeal against denial of tax exemption under Section 11 of the Income Tax Act, 1961
The Assessee, C.N.N.Educational Trust, appealed against the denial of tax exemption under Section 11 of the Income Tax Act, 1961. The Tribunal denied the exemption due to non-compliance with the provisions of Section 11, specifically related to the accumulation of income and setting apart for charitable purposes. The Tribunal emphasized the necessity of specifying the purpose and period for accumulation, as mandated by the Act. Citing relevant case laws, the Tribunal upheld the requirement for specificity in the notice for accumulation of income. The failure to comply with the provisions of Section 11(5) further supported the Tribunal's decision to dismiss the appeal.

Issue 2: Rejection of plea for accumulation of income
The Tribunal rejected the Assessee's plea for accumulation of income under Section 11(2) of the Act due to deficiencies in the submitted Form-10 and resolution. The Tribunal noted that the resolution did not contain essential information such as the name of the assessee and the period for accumulation. This lack of compliance with statutory requirements under Section 11(2) led to the dismissal of the appeal.

Issue 3: Compliance with requirements of Section 11(2) of the Act
The Tribunal stressed the importance of complying with the provisions of Section 11(2) regarding the specification of the purpose and period for accumulation of income. Citing precedents, the Tribunal highlighted the need for concrete and specific purposes for accumulation, beyond mere repetition of the trust's objects. The failure to adhere to these requirements contributed to the rejection of the Assessee's claim for tax exemption.

Issue 4: Consideration of resolution for accumulation of surplus funds
The Assessee contended that the accumulation of surplus funds was intended for the construction of a building and purchase of assets for the Trust's usage. However, the Tribunal found the resolution lacking in details regarding the future use of the accumulated funds. Despite the Assessee's arguments, the Tribunal upheld its decision based on the insufficiency of information provided in the resolution.

Issue 5: Need for remand to the Income Tax Appellate Tribunal
The High Court concluded that the matter warranted a remand to the Income Tax Appellate Tribunal for re-examination. The Court highlighted the importance of providing all necessary details and evidence related to the accumulation of funds for charitable purposes. The Court directed the Tribunal to reconsider the Form No.10 and the resolution along with any additional evidence that the Assessee Trust might produce. The Court disposed of the appeals without addressing the questions of law directly, emphasizing the Tribunal's need to reassess the evidence presented by the Assessee.

This comprehensive analysis of the judgment highlights the key issues raised, the Tribunal's findings, and the High Court's directions for further proceedings.

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