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TMI Blog2015 (12) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. 4. The Assessing Officer computed the accumulation at 15% of the net income of the assessee trust holding that the gross receipts of an educational institution will not be available fully for application to charitable purposes in India since the expenditure for running the educational activities, which are necessary for earning such income, would have to be factored in. The assessee's claim of accumulation at 15% of gross receipt was not allowed since the AO was of the view that this method is applicable only to a Trust which is running purely on donations and where no amount has been spent for getting such donations. 5. Aggrieved, the assessee filed appeal before the CIT(Appeals) and submitted that the AO had not appreciated that the word "income" in section 11, which refers to gross income/receipt and not the commercial meaning of 'income' i.e. net of expenses used for earning the receipts. It was submitted that the AO's revised calculation has led to the accumulation u/s. 11(1)(a) being computed at 37,45,409 as against Rs. 41,41,899 claimed by the assessee at 15% of the gross receipts of Rs. 2,76,12,662. 6. The assessee relied upon the decision of the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be noted, in this connection, that the amounts so added back will become chargeable to tax u/s 11(3) to the extent that they represent outgoings for purposes other than those of the trust. The amounts spent or applied for the purposes of the trust from out of the income, computed in the aforesaid manner, should be not less than 75 percent of the latter, if the trust is to get the full benefit of the exemption u/s 11(1)." (emphasis added) 3.3 The appropriations or applications referred supra actually mean the debit entries appearing below the line i.e. the Income and Expenditure Appropriation account rather than above the line i.e Income and Expenditure Account. The circular, therefore, does not indicate that even revenue expenditure has to be added back in the case of charitable or religious trusts which are running hospitals, educational institutions or any other activities for which they charge a service fee, in order to arrive at "income" within the meaning of section 11(1)(a)." 10. The ld. CIT(Appeals) finally concluded as follows:- "3.7 I find from the appellant's Income and Expenditure Account that different kinds of receipts are available to it which include sources ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e after reckoning 15% of the accumulation in terms of section 11(1)(a)d of the Act on the net surplus after deducting revenue expenditure incurred by the assessee, instead of computing the same at 15% of the gross income from property held under trust, as done by the assessee under the facts and in the circumstances of the assessee's case. 4. For the above and other grounds that may be urged at the time of hearing of the assessee, your assessee humbly prays that the appeal may be allowed and justice rendered and the assessee may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs". 12. We find that the issue is covered by the Co-ordinate Bench decision in the case of Jyothy Charitable Trust in ITA No.662/Bang/2015. The relevant extract is reproduced below; "15. The third issue that arises for consideration in this appeal is as to whether 15% accumulation for application in future has to be calculated on gross receipts or net receipts after deduction of revenue expenditure. The Assessee claimed accumulation of income for application for charitable purpose at 15% of the gross receipts. The AO was of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision, it is clear that a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust. For the present purposes, the donations the assessee received, in the sum of Rs. 2,57,376, would constitute its property and it is entitled to accumulate twenty-five per cent thereout. It is unclear on what basis the Revenue contended that it was entitled to accumulate only twenty five per cent of Rs. 87,010. For the aforesaid reasons, the civi l appeal is dismissed." It is clear from the above that deduction of twenty-five per cent was held to be allowable not on total income as computed under the IT Act. Any amount or expenditure, which was application of income, is not to be considered for determining twenty five per cent to be accumulated. Their Lordships, as noted earlier, affirmed the decision of Kerala High Court in (1997) 141 CTR (Ker) 502 : (1997) 228 ITR 620 (Ker) (supra) wherein it is held as under: "At the outset, the statutory language of s. u(i)(a) of the IT Act, 1961, relates to the income derived by the trust from property. The trust is required to be wholly for charitable or rel igious purposes, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of application of income are to be excluded. The income available to the assessee before it was applied is directed to be taken and the same in the present case is Rs. 3,42,174. Twenty five per cent of the above income is to be allowed as a deduction. Similar view has also been taken by the Hon'ble Madhya Pradesh High Court in Parsi Zorastrian Anjuman Trust vs. CIT (supra). No reason whatsoever has been given by the Revenue authorities for deducting Rs. 2,17,126 in this case for purposes of s. I 1(1)(a). The decision cited on behalf of the Revenue did not take into account the decision of the Supreme Court referred to above. The circular of CBDT has also been considered by the Hon'ble Kerala High Court in its decision referred to above. Accordingly, the question referred to is answered in the affirmative and in favour of the assessee." 18. The aforesaid decision clearly supports the plea of the Assessee. Following the same, we hold that the accumulation u/s 11(1)(a) of the Act should be allowed as claimed by the Assessee. Ground No.4 raised by the Assessee is accordingly allowed. Following the decision of the co-ordinate bench of the Tribunal, we set aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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