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TMI Blog2016 (1) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... uing order refusing to accept the contentions of the appellant in the section 263 proceedings, to grant 15% accumulation on the gross income. 3 The learned Commissioner ought to have directed the assessing officer to rectify the assessment as per section 154 application filed by the Assessee. 4 The learned Commissioner erred in pointing out that the Appellant had failed to exercise their option for accumulation vi] s 11 (2) as the benefits under this sub section can be availed after exhausting the benefits available under sub section (1). 5 The learned Commissioner ought to have found that accumulation or setting apart of surplus as per section 11(1)(a) shall be on the gross income and not on net surplus as shown in the Income and Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be utilized Rs. 3,79,74,363/- Utilization as capital expenditure Rs. 3,54,03,781/- Total Income Rs. 'Nil' 6 The AO gave accumulation u/s 11(1)(a) of the act on 15% of the surplus/ net income (Rs.4,46,75,721) as shown in the income and expenditure account. Since the accumulation/set apart as per section 11 (1)(a) of the act was given only on the net income and not on the gross income, the assessee filed rectification u/s 154 of the Act , before the AO which is pending disposal. 7 In the meanwhile, the CIT(E) passed an order u/s 263 of the Act. According to CIT, there was a surplus to the extent of Rs. 25,70,582/- ( Rs. 3,79,74,363 - Rs 3,54,03,781) and the assessee Trust having not filed the Form 10 before the AO nor havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he I T Act, 1961, the assessment order dated 6.3.2013 is set aside with a direction to the AO to redo the same afresh after considering all issues raised hereinabove and after affording an opportunity of being heard to the assessee." 8 The assessee being aggrieved is in appeal before us. The ld counsel for the assessee submitted that the accumulation of 15% u/s 11(1)(a) of the Act is to be calculated on the gross income and not on the surplus/net income as per income and expenditure statement. In support of the above contention, the assessee relied on the CBDT circular no.5-P(LXX-6 of 1968 dated 19.6.1968 and the following judicial pronouncements: i) CIT vs Programme for Community Organization (1997) 228 ITR 620 (Ker) ii) CIT vs Progra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 968 The circular clearly stated that "the reference in clause (a) of Section 11(1) is invariably to 'income' and not to 'total income'. The expression 'total income' has been specifically defined in section 2(45) as 'the total amount of income computed in the manner laid down in this Act." It would accordingly, be incorrect to assign to the word 'income' used in section 11(1)(a), the same meaning as has been specifically assigned to the expression 'total income' vide section2(45)." ii) CIT vs Programme for Community Organization 228 ITR 620 (Ker) The Hon'ble High Court decided the issue in favour of the assessee following the CBDT circular dated 19.6.1968. The Hon'ble High Court held (at page 625): "taking into consideration all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of certain income from its total income of the previoys year. The income so exempt is the income which is applied by the charitable or religious trust to its charitable or religious purposes in India. If the entire income is so applied, the entire income would be exempted. If the entire income is not applied but some income is accumulated by such a trust, then also u/s 11(1)(a) such accumulated income to the extent of 25% of the total income (or Rs. 10,000/-, whichever is higher) would be exempted from income tax. Section 11(2) in turn provides that the restriction which is specified in cl(a) of sub section(1) as regards accumulation shall not apply if the assessee gives notice as prescribed u/s11(2)(a) and invest the amount accu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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