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TMI Blog2015 (12) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The Assessing Officer computed the accumulation at 15% of the net income of the Society 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. 4. On appeal, the assessee relied upon the decision of the Hon'ble Supreme Court in case of CIT vs Programme for Community Organization 248 ITR 1 to emphasize its stand that the accumulation of income provided for after application of income for charitable purposes u/s 11(1)(a), should be with reference to 'gross' and not 'net' income. 5. The ld. CIT(Appeals) was of the opinion that assessee's reading of the said judgment was incorrect since the decision deals with a case where only voluntary contributions were received and utilized for rendering charitable/religious activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally 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)." 8. The ld. CIT(Appeals) finally concluded as follows:- "3.7 I find from the AO's treatment that the different kinds of receipts available to the assessee through voluntary contributions, local donations, apart from income from Nirmala Hospitals and the Nursing College, has not been appreciated and the principle of 15% accumulation on net educational income has been applied without proper mind application. To the extent the appellant receives donations, the accumulation from such receipts are to be treated in terms of the Hon'ble Supreme Court's decision in case of Programme for Community Organization (supra). The receipts from the hospital and the nursing school, even if fixed at non commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase 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 accumulation will be allowed only to the extent of 15% of the income after revenue expenditure. In other words income to be set apart u/s.1 1(1)(a) of the Act has to be computed at 15% of the net income i.e., gross receipts minus revenue expenditure and not on the gross receipts as claimed by the Assessee. Since in the case of the Assessee, the gross receipts af ter revenue expenditure was nil, the AO denied the benefit of accumulation to the Assessee. 16. On appeal by the Assessee, the CIT(A) confirmed the order of the AO. Hence ground No-4 raised by the Assessee before the Tribunal. 17. The issue to be decided is therefore as to whether for the purpose of computing accumulation of income of 15% under section 11(1)(a) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 income is expected to have relation to the extent to which such income is appl ied to such purposes in India. It is thereafter the statutory provision proceeds further that such income is not to be understood to be in excess of 25 per cent of the income from such properties. In other words, the very language of the statutory provision under consideration sets apart 25 per cent of the income from the source of property with reference to the extent to which such income is appl ied f or such purposes, charitable or religious. In other words, for the purpose of s. 11(i)(a) of the Act, the income in terms of relevance would be the income of the trust from and out of which 25 per cent is set apart in accordance with the spirit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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