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TMI Blog2022 (1) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeal has been filed by the Revenue against the order passed by the Commissioner of Income Tax (Appeals)-4, Ahmedabad, (in short referred to as CIT(A)), dated 25-02-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the Act ) pertaining to Assessment Year (A.Y) 2008-09. 2. The solitary ground raised by the Revenue reads as under: The Ld. CIT(A) has erred in law and on facts in holding that the assessee is eligible for deemed utilization of the income received as per provisions of section 11(1)(a) of the IT Act, on the Gross Income, without appreciating the findings of the AO. 3. It was pointed out that the solitary issue in the present appeal is whether, in the case of a charitable trust, the amount treated as exempt u/s 11(1)(a) of the Act ,on account of setting aside/accumulation of income to a specified percentage,15% in the present case,is to be calculated on the gross/net income of the trust/society. The assessee in the present case is a charitable trust carrying on charitable activities of education and medical relief and registered u/s. 12A of the Act vide order of the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate proceedings the appellant made various submissions which are placed on record and are part of the proceedings. The AR also argued, that in a recent judgment, Hon'ble ITAT, Bangalore in order No. ITA No. 975/Bang/2015 Asst year 2011-12 in the case of M/s. Society of the Servants of the Holy Spirit Vs. Deputy Commissioner of Income Tax (Exemptions) dated 27.11.2015 has held that the claim for accumulation under section 11(1)(a) of the Act , could not have been restricted and was eligible for accumulation of 15% of gross receipt from all streams of Its income . Also references in that order has been made of the Hon'ble Apex Court. Addl CIT V.A.L.N. Rao Charitable Trust (216 ITR 697) wherein it is held Sec. 11, sub-s. (1)(a) operates on its own. By its operation two types of income earned by the trust during the previous year from its properties are given exemption from income-tax, (i) that part of the income of previous year which is actually spent for charitable or religious purposes in that year: and (ii) out of the unspent accumulated income of the previous year 25% of such total property income or ₹ 10,000 whichever is higher can be permitted to be accumu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Aggrieved by the same, the revenue has come up in appeal before us. 6. Before us the Ld. D.R. supported the order of the AO relying on the decision of the Hon ble Apex Court in the case of Escorts Ltd. ( 199 ITR 043.The Ld. Counsel for the assessee on the other hand stated that the issue is no longer res integra having been decided by the Hon ble Apex Court in favour of the assessee in the case of CIT vs. Programme for Community Organization reported in 248 ITR 1 (SC). He further pointed out that the said decision was followed by the ITAT Kolkata Bench in the case of Kanehialall Lohia Trust vs. ITO (Exemption) Ward-1(4), Kolkata reported in [2020] 120 taxmann.com 208. He also drew out attention to the decision of the ITAT Pune Bench in the case of Maharshi Karve Stree Shikshan Samstha Karvenagar vs. ITO, Ward11(1), (Pune) reported in [2019] 101 taxmann.com 175,in this regard .Copies of all the above orders were placed before us. 7. We have heard both the parties and have also gone through the orders of the authorities below and the decisions relied upon by both the counsels. 7.1 The issue before us relates to section 11(1)(a) of the Act which is reproduced her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard at para 2-3 of the order is as under: 2.The question that really requires consideration is whether, for the purpose of s. 11(1)(a) of the IT Act, 1961, the amount for the grant of exemption of twenty-five per cent should be the income of the trust or it should be its total income as determined for the purposes of assessment to income-tax. This question has to be answered in the light of these facts : The assessee-trust received donations in the aggregate sum of ₹ 2,57,376. It applied thereout for its charitable purposes the aggregate sum of ₹ 1,70,369 leaving a balance of ₹ 87,010. The question is whether the assessee is entitled to accumulate twenty-five per cent of ₹ 2,57,376 as it contends, or twenty-five per cent of ₹ 87,010, as the Revenue appeared to contend. Sec. 11(1)(a) reads thus : 11. (1)(a) Income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12A of the Income-tax Act, 1961 (hereinafter referred to as the Act ). It is noted that the issue that arises for consideration is as to whether 15% accumulation for application in future has to be calculated on gross receipt or net receipt 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) of the Income-tax Act, 1961 (hereinafter referred to as 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. The Ld. CIT(A) upheld the view of the AO. I find that the issue is no longer res integra as held by the Special Bench of the Mumbai in the case of Bai Sonabai Hirji Agency Trust Vs. ITO 93 ITD 0070 (SB). I note that this precise issue came up before this Tribunal of Bangalore Bench in ACIT (Exemption) Vs. Bhagwan Mahaveer Memorial Jain Educational Cultural Trust, ITA Nos. 1514 1515/Bang/2016 for AYs 2020-11 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educted from the gross income and 25 per cent of only the remaining amount should be allowed to be accumulated or set apart. The Special Bench of the ITAT on the issue held as follows: 9. Coming to the merits of the issue, we are of the view that the same is clearly covered by the decision of the Hon'ble Supreme Court in the case of CIT vs. Programme for Community Organization (supra). In the decision, their Lordships, after taking note of provisions of s. 11(1)(a), have held as under: Having regard to the plain language of the above 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 ₹ 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 ₹ 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 allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication thereof and take into account 25 per cent of such income. Their Lordships have pointed that the same has to be taken on commercial basis and not total income as computed under the IT Act. Their Lordships in the decided case rejected the contention of the Revenue that the sum of ₹ 1,70,369 which was spent and applied by the assessee for charitable purposes was required to be excluded for purpose of taking amount to be accumulated. Having regard to the clear pronouncement of their Lordships of the Supreme Court, it is difficult to accept that outgoings which are in the 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 ₹ 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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