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TMI Blog2021 (12) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A)-25, Kolkata dated 11.06.2019 for AY 2013-14 on the following grounds: Ground No (1): That the CIT(A) erred in upholding the decision of the AO to the effect that the amount of income allowed to be accumulated indefinitely u/s. 11 (1)(a) of the Income-tax Act 1961 - is to be calculated @ 15% of the figure arrived at by reducing certain Administration Establishment Expenses from the gross receipts, instead of calculating the same @ 15% of the figure of gross receipts itself - as contended by the appellant and which contention is also borne out by the scheme for determination of such income [to be accumulated indefinitely u/s. 11 (1)(a)] - as per the relevant tax- return (ITR-7) Ground No (2): That without prejudice to Ground No. (1) - the CIT(A) erred in upholding the decision of the AO whereby a certain part of income claimed by the appellant as 'applied' for charitable purposes was identified considered as Administration Establishment Expenses despite: (i) the absence of any specific 'in-principle' provisions in the Income-tax Act 1961 (as applicable to assesses to whom provisions of Section 11 to 13 apply) for such identification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what is available in the hands of the assessee, subject to adjustment of any expenses extraneous to the trust. Therefore administrative and establishment expenses are to be deducted from the gross receipt to determine the income available for application. Administrative establishment expenses are considered as a charge to the income of the organization and, therefore, only the income, after such expenses are taken out from gross receipt available for charitable purposes. Accumulation of 15% is to be calculated on this figure i.e. income available for application. 4.4 Administrative establishment expenses are neither directly nor proximately to charitable purpose nor are these expenditures directed to achieving the objectives of charity. It is the net income, after deducting these expenses, is available in the hands of the assessee trust for charitable activity. These expenses are directly related to earning income and are deductible from gross receipt as expenses under normal commercial principle. These are expenses attributable to earning income and not application of income u/s. 11. All applications are undoubtedly expenses but all expenses are not application of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, it is noted that this precise issue came up before the coordinate Bench of this Tribunal (Bangalore Bench) in ACIT (Exemption) Vs. Bhagwan Mahaveer Memorial Jain Educational Cultural Trust, ITA Nos. 1514 1515/Bang/2016 for AYs 2020-11 and 2011-12 and ITA No. 137/Bang/2017 for AY 2012-13 dated 21.08.2019, wherein it was held as under: 16. The third issue that arises for consideration in ITA No. 1515/Bang/2016 for AY 2011-12 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. 11(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 after revenue expenditure was nil, the AO denied the benefit of accumulation to the Assessee. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 11(1)(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 religious purposes, and the income is expected to have relation to the extent to which such income is applied 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. CIT (supra). No reason whatsoever has been given by the Revenue authorities for deducting ₹ 2,17,126 in this case for purposes of s. 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 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. 19. 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. The relevant ground of appeal of the revenue is accordingly dismissed. 5. Therefore, respectfully following the aforesaid Tribunal's decision in Bhagwan Mahaveer Memorial Jain Educational Cultural Trust (supra) we hold that the accumulation u/s. 11(1)(a) of the Act should be allowed as claimed by the assessee and the AO is directed to do so. This ground of appeal of assessee is allowed. 6. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 8th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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