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TMI Blog2020 (6) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) is no longer res integra. For that we rely on the decision of Green Wood High Trust Vs. ACIT(Exemption) [ 2018 (1) TMI 1105 - ITAT BANGALORE] - direct the AO to allow the accumulation income u/s. 11(1)(a) of the Act at 15% of the gross receipt as claimed by the assessee and consequently ground raised by the assessee is allowed. Excess application of income - HELD THAT:- Hon ble Supreme Court in CIT-Exemptions Vs. Subros Educational Society [ 2018 (4) TMI 1622 - SC ORDER ] wherein it was held that eligible trust which are enjoying the registration u/s. 12AA of the Act are entitled to carry forward and set off of the excess application of income - direct that the excess expenditure incurred by the assessee trust in earlier assessment year should be allowed to be set off against the income of this year and so I allow the claim of the assessee as application of income. Not allowing tax deducted at source - HELD THAT:- As decided in JAYASHREE CHARITY TRUST [ 1984 (12) TMI 30 - CALCUTTA HIGH COURT ] there is no reason to deny the benefit of exemption granted by section 11 to that portion of income which had been taken away by deduction of tax at source on the ground that amount had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shment expenses from gross income for calculating the allowable 15% accumulation of income u/s 11(1)(a) of Income tax Act, 1961 resulting in addition of₹ 203400/. Alternative to ground no. 2 : For that on the facts and circumstances of the case and in law, the Id. CIT(A)' erred in sustaining the ld. A/O's action of estimating the establishment expenses in the sum of ₹ 1356000/while deducting it from gross income for calculating the allowable 15% accumulation of income u/s 11(1)(a) of Income tax Act, 1961. 3. Against lowering down of amount of application of income u/s 11(1)(a) For that on facts and circumstances of the case and in law; the ld. CIT(A) erred in not disturbing ld. A/O's action of lowering down the amount of application of income for charitable purposes u/s 11(1)(a) by: a) not allowing excess application of income for charitable purposes made in earlier year amounting Rs.I003387/as application of income. b) not allowing tax deducted at source amounting ₹ 4,98,795/as application of income. 4. Against not allowing establishment expenses as application of income u/s 11(1)(a) : For that on the facts and circumstances of the case and in law, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), who called for remand report, which has been reproduced by him at pages 21-22 of the impugned order. Considering the same the ld. CIT(A) gave partial relief to the assessee by restricting the addition by to ₹ 2,95,000/-. Aggrieved, the assessee is before us. 4. After hearing both parties, it is noted that appellant is a charitable trust registered u/s. 12A of the Act. The Appellant Trust income for year under this appeal, and the effect of AO s action is given in the form of chart at a glance, which is as under:- 5. I note that the ld. CIT(A) has called for the remand report, wherein the AO after enquiry from M/s. Uma Road Carriers P.Ltd and M/s. Jayshree Chemicals Ltd had concluded by stating it can be concluded from the above discussions that out of the claim of total corpus donation of ₹ 7,95,000/the donations received from Uma Road Carriers Pvt. Ltd and Jayshree Chemicals Ltd. totalling of ₹ 5 lakhs can be considered as Corpus Donation received by the assessee during the FY 201112. Taking note of the remand report the ld. CIT(A) has given partial relief to the assessee and treated the amount of ₹ 2,95,000/- as general Donation. We note that AO du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the AO. Aggrieved, the assessee is before us. I note that aforesaid facts are not disputed. I find that the issue under consideration in respect of accumulation of income allowed u/s. 11(1)(a) is no longer res integra. For that we rely on the decision of the co-ordinate bench decision of this Tribunal [Bangalore] in the case of Green Wood High Trust Vs. ACIT(Exemption) (2018) 62 ITR (Trib) (2018) 264 ITAT, Bangalore, wherein it was held as under: 3.4.3 The issue to be decided by us is as to whether for the purpose of accumulation of income for application for charitable purposes under section 11 (1)(a) of the Act is to be allowed at 15 per cent. of the gross receipts or the net receipts i.e. ; gross receipts less revenue expenditure. We find that the issue in question was considered and adjudicated by a coordinate bench of the Tribunal in the case of Mary Immaculate Society an in its order in I. T. A. Nos. 240 and 241/Bang/2015 dated June 23, 2015 held that the assessee is to be allowed accumulation of income for application for charitable purposes under section 11 (1)(a) of the Act at 15 per cent. of the gross receipts following the decision of the Incometax Appellate Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes, the donations the assessee received, in the sum of ₹ 2,57,346 would constitute its property and it is entitled to accumulate twentyfive per cent. thereout. It is unclear on what basis the Revenue contended that it was entitled to accumulate only twenty five per cent. of ₹ 87,010. For the aforesaid reasons, the civil appeal is dismissed. It is clear from the above that deduction of twentyfive per cent. was held to be allowable not on total income as computed under the Incometax 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 CIT v. Programme for Community Organisation [1997] 228 ITR 620 (Ker) ; [1997] 141 CTR 502 (Ker) wherein it is held as under (page 623 of 228 ITR) : At the outset, the statutory language of section 11 (1)(a) of the Incometax Act, 1961, relates to the income derived by the trust from property. The trust is required to be wholly for charitable or religious purposes, and the income is expected to have relation to the extent to which such income is applied to such purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable to the assessee before it was applied is directed to be taken and the same in the present case is ₹ 3,42,174. Twentyfive 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 Mhow v. CIT [1987] 163 ITR 832 (MP). No reason whatsoever has been given by the Revenue authorities for deducting ₹ 2,17,126 in this case for purposes of section 11(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 the Central Board of Direct Taxes 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.' 16. The aforesaid decision clearly supports the plea of the assessee. Following the same, we hold that the accumulation under section 11 (1)(a) of the Act should be allowed as claimed by the assessee. 3.4.4 Respectfully following the decision of the coordinate Bench in the case of Mary Immaculate Society (supra), we hold and direct the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue had observed, that as the income of the trust was to be computed on commercial principles, thus adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years, against the income earned by the trust in the subsequent year, was to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year. We find that the Hon'ble High Court had in unequivocal terms observed, that the adjustment of the expenses incurred by the trust in the earlier years, against the surplus of the subsequent year, will have to be excluded from the income of the trust under Sec. l1(l)(a) of the Act. Still further, a similar view had been taken by the Hon 'ble Supreme Court in the case of CIT(Exemption) Vs. Subros Educational Society (2018) 166 TDR (SC) 257. The' Hon'ble Apex Court, while affirming the judgment of the Hon'ble High Court of Delhi, had in the aforementioned case dismissed the appeal of the revenue and had declined to dislodge the observations .of the High Court, that the excess expenditure incurred by the charitable trust/ charitable institution in an earlier assessment year w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l) held that salaries and miscellaneous expenses, which are incurred for carrying out the objects and purposes of the trust must be considered as application for charitable purposes. I note that the assessee had claimed total expenses of ₹ 11,27,264/- (establishment expenses), however, AO estimated the expenses at ₹ 13,56,000/- which is per-se arbitrary and erroneous and ld. CIT(A) erred in confirming it. So relying on the ratio laid by the Hon ble Calcutta High Court in Birla Janhit Trust (supra), I direct the AO to allow the establishment expenses claimed by the assessee to the tune of ₹ 11,27,264/- as application of income u/s. 11(1)(a) of the Act. 15. Before parting, it is noted that the order is being pronounced after ninety (90) days of hearing. However, taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, I rely upon the decision of the Co-ordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited in ITA No. 6264/Mum/2018 6103/Mum/2018, Assessment Year 201314, order dt. 14th May, 2020. In light of the above discussion, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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