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TMI Blog2023 (2) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... ised by the assessee read as under: "1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred in enhancing addition to Rs.53,19,254/-as against Rs.33,40,284/- u/s 11(1)(a) of the Act made by Assessing Officer on account of excess relief. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred in calculating deduction u/s 11(1) of the Act based on net income of pharmacy store instead of gross receipts. 3. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred in confirming addition of Rs.33,40,280/- res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) in this regard at para 4.3 to 4.4 of the order is as under: "4.4 The appellant during the course of appellate proceedings has said that as per section 11(1)(a), it is the gross receipts which is to be added and therefore, the calculation of accumulated income shall be calculated on the entire amount of such gross profits. It has also relied on two judgments in the case of Society of the Servant of the Holy Spirit v/s. DCIT (Exemption), Circle 17(2), Bangalore (ITA No. 975/Bang/2015), but the facts of the said case are different as the question that was raised before the Hon'ble ITAT was also different so it cannot be relied upon. It is stated that the scheme of exemption from taxation in case of an entity engaged in charitable pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.4.1 Obviously it is only the profits, that is generated from the incidental business that can be applied for charitable activity not the gross receipts/turnover of such business, as no business can be run without certain expenditure. Therefore, the principle that only surplus income of pharmacy, is to be transferred to the main account of the charitable trust for calculation of accumulated income u/s.11(1)(a) of the Act as decided by the AO is correct and her action is upheld." 5. A perusal of the above reveals that the ld.CIT(A) held the accumulation allowable on the net profits of the business noting that exemption provisions u/s 11 relating to businesses incidental to charity, i.e section 11(4A), referred to incomes of such busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (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 is not in excess of fifteen per cent of the income from such property; As is evident from the above, income from properties held for charitable purposes are exempt from tax to the extent utilized for the said purposes. Also 15% of such income is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross receipts of the business on which the quantum of accumulation is to be determined is based on case laws which have been rightly distinguished by the ld.CIT(A). The decision of the Hon'ble Apex Court in the case of Programme for Community Organization (supra) , relied upon by the Ld.Counsel for the assessee was followed by the ITAT, Bangalore Bench in the case of Society of the Servant of the Holy Spirit (supra). The Ld.CIT(A) has rightly distinguished the same pointing out that the said case dealt with a totally different issue and was rendered entirely on different set of facts. In the said case, the issue was not as to what would comprise income of an incidental business carried out by a charitable entity, but on the contrary, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumulated in terms of section 11(1)(a) of the Act. The said decision was rendered in totally different context and is of no assistance to the assessee where the issue is the scope of the term income of an business incidental to charity for determining the statutory allowed deduction at the rate of 15% thereof. 12. In view of the above, we uphold order of the ld.CIT(A) holding that it is the only profits and gains derived from the incidental business of the assessee charitable-trust i.e. its pharmacy business, which would qualify as income for the purpose of computing the statutorily allowed accumulation at the rate of 15% in terms of section 11(1)(a) of the Act. 13. In view of the above, all the grounds of the assessee are dismissed; cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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