9911796707
TMI Blog2012 (12) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... aid out of the current year’s income but from the accumulation of income Held that:- It has been held in case of Bagri Foundation (2010 (7) TMI 85 - DELHI HIGH COURT ) that “Explanation” appended after section 11(2) is nothing but an additional condition attached to accumulation in excess of 15 per cent permitted u/s 11(2). It cannot be held as a condition on accumulation up to 15 per cent as provided for in section 11(1)(a) also. There is no rational classification for imposing the restriction as contained in the “Explanation” to the accumulation of up to 15 per cent also when there is no such restriction to donating the entire income of a year to another charitable trust. Hence, CIT(A) in view of aforesaid decision, has rightly deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f are that the assessee is running a hospital for philanthropic purposes under the name of Deepak Memorial Hospital and Medical Research Centre. From the Income Expenditure Account the Assessing Officer noted that a sum of Rs.2,50,00,000/- was debited on account of donations paid to Deepak Memorial Trust . The AO further noted that as against income of Rs.6,41,62,126/-, the assessee had incurred expenditure of Rs.7,79,99,725/-. Thus the excess expenditure over the income was to the extent of Rs.1,38,37,599/- (Rs.7,79,99,725 6,41,62,126). The Assessing Officer asked the assessee to explain as to how payment of donation of rs.2,50,00,000/- could be considered as application of income in view of Explanation to sec. 11(2) of the Act on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income was applied for the object of trust, the excess application of Rs.1,38,37,599/- would not be allowed to be carried forward. 3. The AO considered the submissions made by the assessee. The AO however, rejected the contention of the assessee and taxed the surplus income of Rs.1,38,37,599/-. While doing so it was held by him that Explanation to sec. 11(2) would be applicable to both the incomes i.e. 85% or 15% of the income. The AO also rejected the contention of the assessee that the assessee had accumulated funds to the tune of Rs.2,99,06,670/- as on 31st March, 2002 out of which the donation was given. This explanation was treated by the AO as absurd. 4. Before the CIT(A) it was submitted by the assessee that the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmitted u/s 11(2) of the Act. Therefore, provisions of Explanation cannot be extended to accumulation of income upto 15% as provided u/s 11(1)(a) of the Act. The learned CIT(A) relying on the decision of Hon ble Delhi High Court in the case of Bagri Foundation (supra) held that the issue is squarely covered by the decision of the jurisdictional High Court. The learned CIT(A) therefore, allowed the appeal in favour of the assessee. 5. Before us the learned Sr. DR supported the order of the AO while the learned AR of the assessee strongly supported the order of the CIT(A). He also placed reliance on the decision of Hon ble Delhi High Court in the case of Director of Income-tax (Exemption) vs. Bagri Foundation (2010) 192 Taxman 309 (Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. In the case of assessee the income for the year is Rs.6,28,64,300/- and the assessee has applied Rs.7,567,01,899/- for objects of the trust. There is no dispute that the assessee had not accumulated any income u/s 11(2) of the Act. The surplus generated is out of 25%/15% of income which was not applied in earlier years. The assessee had paid donation of Rs.2,50,00,000/- during the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the `Explanation , if a trust donates its entire income for a year to another charitable trust, it would still be entitled to exemption under section 11(1)(a). It defies logic as to why such donations cannot be permitted out of 15 per cent accumulation permitted under section 11(1) (a) itself. There is, however, rationale for imposing the restriction as contained in the Explanation (supra) to accumulations in excess of 15 per cent. Such accumulations, but for the conditions imposed in section1 1(2) and in the Explanation aforesaid, would have been eligible to be taxed. One of the conditions in section 11(2)(a) is that the purpose for which accumulation in excess of 15 per cent is being made is to be notified; another condition ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
