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TMI Blog2019 (4) TMI 762X X X X Extracts X X X X X X X X Extracts X X X X ..... earned A.O. as well as Learned CIT(A) have erred in not following the principles settled by Hon'ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd. 368 ITR 531 (Bom) (Page 544) which is binding on Department in Mumbai as law of the land wherein it is held that income chargeable to tax has to be computed u/s.l4 of the Act and therefore income from property has to be computed allowing deduction u/s.24(a) of the Act in the case of all assesses including charitable trusts. 3. The Learned A.O. as well as Learned CIT(A) have erred in not following judgement of Hon'ble Bombay High Court in the case of Director of Income-tax (Exemption) vs. Jasubhai Foundation (2015) 374 ITR 315 wherein it is held that income which is not to be included in Total Income as per the provisions of Act cannot be included in Taxable Income of the Trust entitled to exemption of certain income u7s,10 and u/s.ll of the Act and therefore 30% of income excluded from Income from Property u/s.24(a) of the Act cannot be charged to tax in the case of charitable trust for computing taxable income of CHARITABLE TRUST. 4. The Learned CIT(A) has erred in not allowing the ground raised before hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of ITAT, Mumbai Bench in assessee's own case for earlier year in ITA Nos. 6970 & 199/Mum/2011 it shall our standard deduction claimed u/s 24(a) of the Act and recomputed income available for application u/s 11 of the I.T. Act, 1961. Finally, the AO as determined total income of the assessee at Rs. 63,81,840/- after considering accumulation of income u/s 11(2) of the I.T. Act for Rs. 2.10 crore as per Form 10 filed by the assessee along with the return of income. 3. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). The assessee has contested disallowance of deduction u/s 24(a) of the I.T. Act on the ground that income of a trust claiming exemption u/s 11 shall be computed in accordance with provisions of the Act, as applicable to other assessees. Therefore, there is no error in the computation of income arrived at by the assessee in respect of rental income after claiming standard deduction u/s 24(a) of the Act. The assessee further contended that while determining the income, the AO has not allowed actual repairs and maintenance expenses incurred by the assessee in respect of property from which rental income has been derived. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , income from property has to be computed allowing deduction u/s 24(a) of the Act, in the case of all assessee's including charitable trust. The Ld.AR further submitted that the Hon'ble Bombay High Court in the case of DIT (Exemption) vs Jasabai Foundation 374 ITR 315 (Bom) held that income which is not included in total income as per the provisions of the Act, cannot be included in taxable income of the trust entitled to exemption of certain income u/s 10 and section 11 of the Act and, therefore, 30% of income excluded from income from property u/s 24(a) of the Act, cannot be charged to tax in the case of charitable trust for computing taxable income. 5. The Ld.DR, on the other hand, submitted that the issue is covered against the assessee by the decision of ITAT for earlier years, where the Tribunal, after considering relevant facts held that standard deduction on rental income @30% u/s 24(a) of the I.T. Act, 1961 cannot be allowed while computing income of a trust / institution claiming exemption u/s 11 of the Income-tax Act, 1961. 6. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. We find that the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rified by the hon'ble apex court in the case of CIT vs. Harprasad & Co. (P.) Ltd. [1975] 99 ITR 118 (SC)t explaining that an income to come within its purview must satisfy the definition of total income u/s. 2(15) (of the Income-tax Act, 1922, which is para material with section 2(45) of the Act), prescribing two conditions. Firstly, it must comprise the total amount of income, profits and gains referred to in section4(l) and, two, must be computed in the manner laid down under the Act. The capital gain being not chargeable u/s.128 of the 1922 Act during the relevant period, the same would not enter the computation mechanism of the total income. This is as the capital gain or loss (which is only negative income) did not form part of the total income of the assessee which could be brought to charge, so that it was not required to be computed. Reference in this context may also be made to the following observation by the tribunal in the case of Pravin Shah Trust vs. Dy. CIT(in ITA No. 4782/Mum/2010 dated 05. 07. 2013): 3.3.... That is, an income exempt u/c. HI of 'the Act, not forming of the total income, would not enter the computation process determine the quantum of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly provide for the computation of income of a business t/i(/forming part of the property held under trust by charitable trust/institution in accordance with the provisions of the Act, even as pointed out by the hon'ble court in Rao Bahadur Calavala Cunnan Chetty Charities (supra). The Special Bench of the tribunal in Scientific Atlanta India Technology (P.) Ltd. vs. ACIT [2010] 2 ITR 66 (Trib) (Chennai) (SB) held that the profits of a unit eligible for deduction u/s.10A of the Act, i.e., to the extent not covered by the deduction there-under, would stand to be taxed directly and not enter the computation mechanism inasmuch as the same do not form part of the gross total income, as section 10A falls under Chapter HI of the Act, so that the provisions of Chapter Vl-A and, consequently, s. 80AD would not be applicable thereto. Before parting with the matter, we may also add that the assessee has been allowed ad the expenditure on repairs and maintenance as debited in its accounts, i.e., on actual basis (Rs. 11.97 lacs/PB 1 pg. 39), even as directed by the Id. CIT(A), and which fact was also clarified by us during hearing. Accordingly, the assessee fs ground/s for the claim of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 11, it has claimed standard deduction @30% of gross rental income u/s 24(a) of Income-tax Act, 1961. The AO has disallowed standard deduction claimed u/s 24(a) of the Act. However, expenditure incurred as per the books of account of the assessee has not been allowed while determining income available for application. It is the settled position of law that once income of a trust / institution is computed under the provisions of section 11 of the Act, whatever income derived from the property held under trust is to be taken into account and against which actual expenditure incurred for the objects of the trust has to be considered as application of income. Therefore, while arriving at income u/s 11, the AO needs to allow deduction towards actual repairs and maintenance expenses incurred for Rs. 13,00,635. Therefore, we direct the AO to allow deduction towards actual repairs and maintenance expenditure incurred for Rs. 13,00,635 before arriving at income available for accumulation u/s 11(2) / taxable income of the trust / institution. 9. The next issue that came up for our consideration from ground 4 of the appeal is computation of income of a trust in respect of income deriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per form 10 filed by the assessee for Rs. 2.10 crores. The assessee now claims for accumulation of income u/s 11(2) of the Act for Rs. 2,73,81,840 as against earlier accumulated income of Rs,.2.10 crores. The assessee has filed necessary revised form 10 alongwith copy of resolution passed by the Board of Trustees on 16-08-2018. According to the assessee, the trust has accumulated an additional amount of Rs. 63,81,840 for acquisition of land, building, and structure for educational activities and the same to be utilised in the next five financial years commencing from 01-04-2019. In this regard, the Ld.AR for the assessee relied upon the decision of Hon'ble Gujarat High Court in the case of CIT vs Mayur Foundation (2005) 274 ITR 562 (Guj). 12. We have heard both the sides, perused the material available on record and gone through the orders of authorities below. It is an admitted fact that the assessee has filed form No.10 alongwith return of income filed for the year and accumulated a sum of Rs. 210 lakhs for the objects of the Trust to be utilised in next five financial years. It is also an admitted fact that the AO has allowed accumulation of income u/s 11(2) as per the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have intended to give the benefit of accumulation to trust where the AO has computed taxable income of the trust in accordance with the provisions of the Act. Therefore, if we analyse the legislative intend behind enactment of provisions of section 11(2), it is very clear that the trust / institutions are allowed to accumulate income for specified purposes which needs to be specified in the resolution passed by the trust. Unless, the trust specifies the purpose for which the income is accumulated, then the benefit cannot be allowed. In this case, the assessee has tried to use the benefit of accumulation after exhausting all possible options available to it to contest the issue of deduction u/s 24(a). Further, no doubt, the Hon'ble Gujarat High Court has considered revised form 10 filed by the assessee accumulating additional income after a gap of six years, but on perusal of the ratio rendered by the Hon'ble Gujarat High Court, we find that in that case, there was no dispute with regard to availability of funds for accumulation u/s 11(2) and investment of such funds in the investments specified u/s 11(5) of the Income-tax Act, because, the disputed issue in that case is taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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