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TMI Blog2022 (12) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular no. 5-P(LXX-6) of 1968 and as laid down by the Apex Court in 248 ITR 1 (SC) and not as surplus left after expenditure as wrongly contended by the lower authorities. 3. On the facts and circumstances of the case, the learned CIT(A) has erred in law and on facts in not allowing the carry forward of net deficit amounting to Rs. 17,71,228/- arbitrarily and without any justification. 4. The appellant craves, leave, to add, alter, amend, and/or forego any of the grounds of appeal at the time of hearing." 2. At the time of hearing, no one attended the proceedings on behalf of the assessee. However, vide letter dated 30.11.2022 by the Ld. Authorized Representative of the assessee (AR), a written submission has been filed and it is requested that the matter may be decided on the basis of written submissions. Therefore, the appeal is taken up for hearing in the absence of the assessee and is being disposed off on the basis of written submissions and material available on record. FACTS OF THE CASE 3. Facts giving rise to the present appeal are that the assessee filed return of income declaring income at NIL on 13.10.2016 for the year under consideration. The case was selecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s left after application of income for charitable purposes and not 15% of income derived from property held under trust. The Ld. AO while passing order u/s 143(3) did not accept the contention of the appellant trust and accumulation/set apart u/s 11(1)(a) allowed to the tune of net surplus i.e. Rs. 20,34,215/- after application of income as per provisions of section 11 & 12 of the Act. The Ld. AO made reference to circular no.335 dt. 13.04.1982 which states that exemption u/s 11(1)(a) will be available only if at least (75 per cent) now 85 % of the income is applied for charitable or religious purposes in India during the year and remaining amount is invested in the forms or modes specified under section 13(5) Thus, both the requirements will have to be fulfilled before the trust can claim and avail of the exemption under section u/s 11(1)(a) Section 13(5) was deleted by finance Act, 1983 w.e.f. 01.04.1983. However, there is no such condition in section 11 (1)(a) as enumerated by Ld. AO. Provisions of section 11 (1)(a) are reproduced herein below. Section 11(1)(a) "Income derived from property held under trust wholly for charitable or religious purposes, to the exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(a) i.e. 15% of income is unfettered and not subject to any conditions. Your honour is requested to consider the submissions and allow appropriate relief as may be deemed fit as per law." 7. On the other hand, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. He contended that law is clear that there is no ambiguity under law. The assessee has not complied with the provision of section 11(1)(a) of the Act. Therefore, Ld. Sr. DR contended that the present appeal lacks merit and deserved to be dismissed. 8. I have heard Ld. Sr. DR and perused the written submissions and material available on record. Ld.CIT(A) has decided the issue by observing as under:- 4. Determination 4.1 "Grounds of appeal nos. 1 and 4 are general in nature and do not require separate adjudication. 4.2 Ground of appeal no. 2 challenges the restricting of accumulation of income under section 11(1)(a) to the surplus and not allowing accumulation to the extent of 15%. 4.2.1 The Assessing Officer noted that the assessee had applied more than 85% of income and had claimed accumulation of an amount which is more than the surplus available to the assessee. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me 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 Rs. 2,57,376. It applied thereout for its charitable purposes the aggregate sum of Rs. 1,70,369 leaving a balance of Rs. 87,010. The question is whether the assessee is entitled to accumulate twenty-five per cent of Rs. 2,57,376, as it contends, or twenty-five per cent of Rs. 87,010, as the revenue appeared to Contend. Section 11(1) (a) reads thus : "11. Income from property held for charitable or religious purposes.-(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 is not in excess of twenty-five per cent of the income from such property;" 4. 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 derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Now it is to be decided whether the findings of the authorities below are justified in holding that the AO is justified in restricting the amount to be accumulated under section 11(1)(a) of the Act to the extent of the surplus available after application of income. In the case in hand, undisputed facts are that during the year under consideration the assessee had applied income more than 85% of its total income however, it claimed accumulation of income u/s 11(1)(a) of the Act to the extent of 15% of total income that came to a sum of Rs. 38,05,443/- however, the AO restricted the accumulation to the extent of surplus available of Rs. 20,34,215/-. A bare reading of the section 11(1)(a) of the Act goes to prove that any income accumulated or set apart should not exceed 15% of total income. In the present case, the assessee had applied more than 85% of the income that does not mean that in excess of 85% of income, the assessee has accumulated or set apart for charitable purpose. Reliance is placed upon the judgment of Hon'ble Madras High Court rendered in the case of CIT vs Matriseva Trust 242 ITR 20 (Mad.) wherein Hon'ble High Court has followed the judgment of Hon'ble Rajasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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