9911796707
TMI Blog2025 (2) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue generated out of the manufacturing activities has to be treated as eligible income for the purpose of accumulation u/s 11(1) of the Act. It cannot be considered as gross income. Further, what is relevant is the income available for the purpose of applying the same for the purpose of charitable purpose. We intend to explain the above aspect by an example: Let's say the institution has earned Rs.1000 from the property in the trust and also undertakes certain additional services to generate income for the trust, wherein it generate gross sales of Rs.2000 and incurs expenditures of Rs.1500. Assessee has actually utilized the income of trust more than the 85% of the income earned by the assessee during the year. The stand of the lower authorities on this issue is not as per the various judicial precedents. Respectfully following the decision of the co-ordinate bench in the case of Mary Immaculate Society [2015 (6) TMI 1149 - ITAT BANGALORE] we hold and direct the AO that the accumulation u/s. 11(1)(a) of the Act is to be allowed at 15% of gross receipts, as claimed by the assessee. Ground no 2 and 3 raised by the assessee are allowed. Treatment of loans received under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 'accumulation' under section II, as the same was not based on methodology as laid down in Act; (4) the authorities below have erred in law and on facts in holding/upholding that (i) loans aggregating Rs. 22,00,00,000/ - as had been received by the appellant under ADIP Scheme, from Banks, were applied for Charitable Purposes and were taken as part of "Receipt" when the same had been raised; (ii) repayment of the same was taken as "Application" in subsequent years as and when they were repaid; and (iii) application of such repayment was valid in law as upheld by various judgments of Hon'ble Courts as well as per CBDT Circular No. 100 [F. No. 195/1/72-I.T. (A.I.) - Dated - 24.01.1973 issued by CBDT]. (5) the appellant's contention about the 'methodology', is fully covered by various judicial pronouncements, particularly in the cases of : (i) appellant's own case for earlier years; (ii) Addl. Commissioner of Income Tax and Another Vs. A.L.N Rao Charitable Trust reported in (1995) 216 ITR 697 (SC); (iii) Commissioner of Income Tax V s. Programme for Community Organization reported in (2001) 248 ITR 1 (SC); ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Operations 14 16270.26 16,507.62 (ii) Less : Discount 14 55.66 55.24 (iii) Revenue from Operations 16,214.60 16,452.38 (iv) Other income 15 1,070.79 772.22 Total Revenue 17,285.39 17.224.60 B Expenses (i) Cost of material consumed 16a 8372.30 8424.77 (ii) Changes to inventories of finished goods & work in progress 16b 1.19 (530.18) (iii) Employee benefits expenses 17 2934.66 3262.61 (iv) Depreciation 8 154.88 107.88 (v) Financing cost 58.00 0.00 (vi) Other expenses 18 2598.98 2812.10 Total Expenses 14120.01 14077.18 Income 3165.38 3147.42 7. He observed that the assessee itself has shown its income derived from the activities of manufactures and supplies of the artificial limbs at Rs. 31,65.38 lacs during this year. Further he observed that assessee has received some grants of Government of India which are not shown in its account. These grants are received by the assessee from the Government and the same are spent. As per Note-6 of the Notes forming part of the financial statements, it was stated that the assessee is working as nodal agency of Government of India under its ADIP (Assistance to disabled persons) Scheme a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income as per Income Expenditure account 31,65,38,000 Addition (i) Depreciation 1,54,88,000 (ii) Provision against bad and doubtful debt 6,26,000 Total income from artificial limb making activities 33,26,52,000 2 (i) ADIP Scheme Grants 50,22,10,000 (ii) ADIP interest transferred 1,28,66,998 Total income from ADIP 51,50,76,998 3 (i) ADIP-SSA Scheme Grants 20,50,00,000 Total income from ADIP-SSA 20,50,00,000 4 Grant for SIPDA Scheme 42,96,000-18,11,000 (Closing - opening balances) 24,85,000 5 Grant for ADIP Awareness Camp 5,00,000 - 92,000 4,08, Learned CIT Total income 105,56,21,998 15% for deduction 15,83,43,300 Balance income for application 89,72,78,698 10. The AO rejected the above method of computation computed by the assessee and he observed that the assessee has entered turnover and loans taken on account of ADIP and ADIP-SSA schemes for computation of deduction @ 15%. However, the same need to be separated while working the application of income. With the above observation, he reworked the calculation as under :- A Revenue Applications (i) ADIP Scheme 7,93,18,000 Opening balance 50,22,10,000 Grant received during the year 3,22,45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee submitted oral as well as filed detailed submissions before us. For the sake of clarity, the same is reproduced as under :- "The appellant namely Artificial Limbs Manufacturing Corporation of India, in short known as "ALIMCO" is a corporation fully owned by the Government of India, as its entire 'issued capital' is held by the President of India through Ministry of Social Justice & Empowerment, New Delhi. 2. It came into existence with the following as its main objects:- (1) To promote, encourage and develop the availability, use, supply and distribution at reasonable cost in the country of Artificial Limbs and accessories and constituents thereof to needy persons particularly disabled defence personnel, hospitals and such other welfare institution. (2) To establish facilities for the manufacture of Artificial Limbs and accessories and constituents thereof and all other things which can be or may conveniently be used for the manufacture of or in connection with such articles, things as aforesaid. (3) To carry on the business of manufacturers, buyers, sellers, importers, exporters, dealers in and of Artificial Limbs and accessories and constitue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or fitting of limbs to patients. 6.2 Through these production centres, ALIMCO has been producing standard size of products in the shape of components which are being fabricated by Prosthetist and Orthotist medical officer of the corporation on the basis of patient measurement taken for preparation of required limbs which are being fitted to patients like leg below knee, above knee or loss of both leg and polio effected children, old or young disable people. Similarly short of hand from elbow or short of hand from shoulders are also being fitted/supplied. Considering the requirement, hearing aids to patients are also providing after measurement with Audio Meter and various types of suitable products, on the basis of measurement and proper assessment by the medical officer. 6.3 Working of the Limbs Fitting Centres situated at various places are briefly stated as under:- The Limbs Fitting Centre contains the strength of following personnel employed by ALIMCO in each Limb Fitting Centre with its production centre and Regional Marketing Centre situated in different parts in the country for proper function of centre to serve disable people of the country. i) Medial Officer ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oad as does locomotor disease and disorders. Amputee rehabilitation is also a major part of the specialty. It is concerned with specialist management of disabled persons suffering from brain injuries (both traumatic and non-traumatic) including stroke, spinal cord Injury, chronic neurological disease, chronic locomotor disease and amputations (congenital and acquired). It is primarily aimed at people with complex needs with regard to physical disabilities. For example, the first step towards prosthesis rehabilitation would be to make a model of the area on which the prosthesis is to be fitted. Then a plaster cast or a digital image would be made which would then be modeled to produce a safe and comfortable fit. Then, this assembly of prosthesis is supervised by a team of expert technicians. During fitting, advice is offered on how to use the prosthesis and make adjustments to maximize its performance. THE AIM OF REHABILITATION IS TO ENABLE THE PATIENT TO LEAD A NORMAL LIFE AT WORK AND AT LEISURE. (a) PROTHESIS AIDS: These aids are provided to the patients who require an artificial limb. The best possible artificial replacement is provided to the patients who have lost or were b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ministry of social justice & empowerment, (Government of India), as compared to the prevalent market price, by way of "relief of poors" and "medical relief" which is covered by the definition of "charitable purposes" as given in section 2(15) of the Act. 8.1. Education: However, the overall objective of rehabilitation would have stood defeated without there being an adequate arrangement for fitting of these products to the patients to their complete satisfaction. To make such a system in place, it was needed to set up centres equipped with training facilities and technical knowhow. With this object, the concept of Limb Fitting Centers was mooted, and it was proposed to set up many such centres across the country in order to ensure adequate availability of this facility to the patients. It was decided that ALIMCO would be actively involved in setting up these Centres by providing them required funds, technical know-how on fitment procedures and also the tools and material required for the fabrication of Orthosis / Prosthesis. 8.2. The Orthotic/Prosthetic devices have to be fabricated from the modules and fitted on to the disabled persons. Such a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth and Family Welfare; State Handicapped Development Corporations; Local Bodies - Zila Parishad, Municipalities, District Autonomous Development Councils and Panchayats; Nehru Yuvak Kendras. In view of the above, ALIMCO is providing relief to the poor patients having the disability in various field as required free of cost on the basis their income group certificate as per ADIP Scheme. 10. Conclusion: From the discussions made in the foregoing paragraphs 6.1, 6.2, 6.3, 6.4, 7.1, 7.2, 8.1, 8.2 & 9 it is fully borne out and established that ALIMCO is an integrated medical institution, which has been established with the main object of providing "relief to the poor", "medical relief" which involve attention and rehabilitation to the patients who are physically disabled and also 'education'. Over the past several years of its existence, the appellant has been manufacturing and providing prosthotic and orthotic aids and appliances and their components and hearing aids at very reasonable price as compared to price prevailing in the market and for this purpose training centres (for giving necessary education) have been set up. From a brief resume o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A). The relevant finding of CIT(A) are in para 6.2 at page 16 of his order which reads as under: "6.2 Decision:- I have perused the penalty order and other relevant orders, grounds of appeal and submissions filed by the appellant. I find from the assessment order that the AO has computed the 15% amount eligible for deduction i.e. allowable accumulation at Rs. 15,83,43,300/- whereas the appellant has computed the same at Rs. 40,02,92,460/-. I find that the AO has computed the allowable accumulation amount on the profit and gains derived from the incidental business of the charitable trust whereas the appellant has computed the same on the gross receipts of the trust. I find that the approach adopted by the AO is as per the provisions of section 11(1)(a) of the IT Act and is found to be correct. In this regard I find that Hon'ble ITAT Ahmadabad in the very recent decision dated 13/02/2023 in the case of Shree Bhartimaiya Memorial Foundation Vs ACIT (ITA No. 369/Ahd/2020) for AY 2016-17 held that only profit and gains derived from the incidental business of charitable-trust would qualify as income for computing statutorily allowed accumulation of 15% in terms of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eout 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 derived from property held under trust. For the present purposes, the donations, the assessee received, in the sum of Rs. 2,57,376, would constitute its property and it is entitled to accumulate twenty-five per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered for determining twenty five per cent to be accumulated. Their Lordships, as noted earlier, affirmed the decision of Kerala High Court in CIT v. Programme For Community Organisation [1997] 228 ITR 620 wherein it is held as under: "At the outset, the statutory language of section 11(1)(a) of the Income- tax 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% of the income from such properties. In other words, the very language of the statutory provision under consideration sets apart 25% of the income from the source of property with reference to the extent to which such income is applied for such purposes, charitable or religious. In other words, for the purpose of the section 11(1)(a) of the Act, the income in terms of relevance would be the income of the trust from and out of which 25% is set apart in accordance with the spirit of the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered by the Hon'ble Kerala High Court in its decision referred to above. Accordingly the question referred to us is answered in the affirmative and in favour of the assessee." 12.9 Further, reliance is placed upon the decision dated 04.10.2017 of Hon'ble ITAT Bangalore in the case of DCIT vs. M/s B S & G Foundation [IT A No. 884/Bang/2016] wherein relying upon the decision dated 23.06.2015 of coordinate bench in the case of Mary Immaculate Society [ITA No. 240 & 241/Bangl2015] and the decision of the Special bench in Bai Sonabai Hirji Agiary Trust vs. ITO [2005] 93 ITD 70 (Mum)(SB) it was observed and held as under: "4.3.3 The issue to be decided by us is as to whether for the purpose of accumulation of income for application for charitable purposes u/s. 11(1)(a) of the Act is to be allowed at 15% of gross receipts or net receipts i.e.; gross receipts less Revenue expenditure. We find that the issue in question was considered and adjudicated by a co-ordinate bench of the Tribunal in the case of Mary Immaculate Society and in its order in ITA Nos. 240 & 2411Bang/2015 dated 23.06.2015 held that the assessee is to be allowed accumulation of income for applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Rs. 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. It other wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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." 16. 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." 4.3.4 Respectfully following the decision of the co-ordinate bench in the case of Mary Immaculate Society (supra), we hold and direct the AO that the accumulation u/s. 11(1)(a) of the Act is to be allowed at 15% of gross receipts, as claimed by the assessee. Consequently, grounds raised by the Revenue are dismissed." 12.10 Similar view has been taken by the Hon'ble ITAT Calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(1)(a) on gross income of the appellant, copy of which appears at page 71-80 of PB. 12.14 Accordingly, looked from whatever angle, the exemption @ 15% in the instant case deserves to be allowed on gross income of the appellant and your humble appellant prays for the same. 13.1 Further, without causing any prejudice to the submission made above, as regards (ii) of para 11 above, it is pointed out that the Assessing Officer in para 6.2 of the assessment order after reproducing the working of gross receipts, as per appellant, observed that Rs. 2200 lacs (22 crores) being loan amount of ADIP and ADIP-SSA schemes be reduced from the gross receipts. The relevant observation reads as under: "From the above it is clear that the assessee has also considered in its income the loan amounts of ADIP and ADIP-SSA schemes. From above it is seen that the assessee has received loan of Rs. 9 crores in ADIP Scheme and Rs. 13 crores in ADIP-SSA scheme. The assessee has received total of Rs. 22 crores as loan in these schemes. In Note 6.4 of Notes Forming part of financial statements, the assessee has written that "in accordance to the ADIP Scheme of Government of India, a loan for R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xation for the AY 2015-16 works out to Rs. Nil, made up as under: A Revenue Application As per Assessing Officer Corrected (i) ADIP Scheme Opening balance 7,93,18,000 7,93,18,000 Grant received during the year 50,22,10,000 50,22,10,000 Interest transferred Wrongly taken Nil 1,28,66,998 Total 58,15,28,000 59,43,94,998 Deduct : Closing Balance 3,22,45,000 3,22,45,000 Application 54,92,83,000 56,21,49,998 Application of loan 9,00,00,000 (ii) ADIP-SSA Scheme Opening Balance 24,70,000 24,70,000 Grant received during the year 20,50,00,000 20,50,00,000 Total 20,74,70,000 20,74,70,000 Deduct : Closing Balance 1,95,97,000 1,95,97,000 Application 18,78,73,000 18,78,73,000 Application of loan 13,00,00,000 B Capital Application (i) Addition in Fixed assets 1,93,98,269 1,93,98,269 (ii) Addition in SWIP 47,04,254 47,04,254 Total Application 76,12,58,523 99,41,25,521 Balance Income (for Application (As shown in table in para 6.3) 89,72,78,698 89,72,78,698 Balance Income for taxation 1360,20,175 (9,68,46,823) i.e. Nil 13.5 Accordingly, even on removing the infirmity in the working made by the Assessing Officer, there is no income li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order that the AO has computed the 15% amount eligible for deduction i.e. allowable accumulation at Rs. 24,67,64,1001- whereas the appellant has computed the same at Rs. 50,92,72,1101-. I find that the AO has computed the allowable accumulation amount on the profit and gains derived from the incidental business of the charitable trust whereas the appellant has computed the same on the gross receipts of the trust. I find that the approach adopted by the AO is as per the provisions of section 11(1)(a) of the IT Act and is found to be correct. In this regard I find that Hon'ble ITAT Ahmadabad in the very recent decision dated 13/02/2023 in the case of Shree Bhartimaiya Memorial Foundation Vs ACIT (ITA No. 369/Ahd/2020) for AY 2016-17 held that only profit and gains derived from the incidental business of charitable-trust would qualify as income for computing statutorily allowed accumulation of 15% in terms of section 11(1)(a) of the Income Tax Act. In view of the above the addition made by the AO is confirmed and the grounds of appeal raised by the appellant are dismissed." 15.4 In relation to aforesaid finding of CIT(A) and decision of Hon'ble ITAT, Ahmedabad (at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, it is pointed out that the Assessing Officer in para 7.2 at page 5-6 of the assessment order after reproducing the working of gross receipts, as per appellant, observed that Rs. 2163 lacs (21.63 crores) being loan amount of ADIP and ADIP-SSA schemes be reduced from the gross receipts. The relevant observation reads as under: "From the above it is clear that the assessee has also considered in its income the loaf). amounts of ADIP and ADIP-SSA schemes. From above it is seen that the assessee has received loan of Rs. 5.5 crores in ADIP Scheme and Rs. 16.13 crores in ADIP-SSA scheme. The assessee has received total Rs. 21.63 crores as loan in these schemes. In Note 6.4 of Notes Forming part of financial statements, the assessee has written that "in accordance to the ADIP Scheme of Government of India, a loan for Rs. 2163.16 lacs was taken by the corporation and receipt of such loan, which has been repaid from the ADIP funds released in the financial year 2016-17, has been considered as receipts against the receivable Grant-in-aid to be released by Ministry and has been disclosed as liability accordingly. ". Thus it is clear that the assessee has itself clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78,55,52,000 78,94,88,000 Application of loan 5,50,00,000 (ii) ADIP-SSA Scheme Opening Balance 1,95,97,000 1,95,97,000 Grant received during the year 20,45,00,000 20,45,00,000 Total 22,40,97,000 22,40,97,000 Deduct : Closing Balance 2,89,12,000 2,89,12,000 Application 19,51,85,000 19,51,85,000 Application of loan 16,12,13,000 B Capital Application (i) Addition in Fixed assets 66,97,000 66,97,000 (ii) Addition in CWIP 8,16,17,000 8,16,17,000 C Form No.10 Total Application 106,90,51,000 137,83,00,000 Balance Income (for Application (As shown in table in para 7.3) 139,83,29,900 139,83,29,900 Balance Income for taxation 13,60,20,175 2,00,29,900 17.5 Accordingly, on removing the infirmity in the working made by the Assessing Officer, the income liable for taxation during the year under appeal works out to Rs. 2,00,29,900." 15. Further, at the time of hearing, ld. AR of the assessee was asked to submit the pattern of receipts from revenue operation at the Bar. In response, ld. AR submitted as under:- Buyer Category Sales of 2014-15 %age share 2014-15 Sales of 2015-16 %age share 2015-16 National Institute 11.13 6.84% 5.93 3.13% AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% of the income of the trust or its total income determined for the purpose of Income Tax. The AO has considered the net income generated by the assessee ie., total revenue of the manufacturing activities less manufacturing expenditure and recomputed the eligible amount of 15% considering the Government Grants. It is relevant to notice that he has treated the manufacturing activities as incidental to main object of the entity. The question raised before us is whether the main revenue from activities of manufacturing carried on by the assessee has to be treated as eligible to be included for the purpose of determining the income of the entity or not. The revenue has relied on the various decisions in which the issue under consideration was considered by the various courts and held that the main revenue like donations, income from the assets held under the trust and any incidental activities carried on by the institution to generate additional revenue for the purpose of charitable purpose can be considered as gross income of the trust/institution. For the purpose of section 11(1) of the Act, the various courts have held that the direct revenue generated by the institution and net in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1500. The eligible income for the purpose of section 11(1) of the Act is: Income from the property Rs. 1000 Net income from the additional services: Gross sales Rs. 2000 Expenses Rs. 1500 Net income for the purpose of Charity Rs. 500 The eligible income u/s 11(1) Rs. 1500 20. The above issue is well settled on the basis of various decisions of Courts However, the above method of determining the eligible income which is available for the main activities of the institution whereas the situation changes when we determine the eligible income for the main activities has to determine the income available for the main activities, in the given case, the whole revenue available for the purpose of achieving the main purpose has to include the gross revenue along with the grants of GOI. Therefore, the eligible income has to be determined as under: Revenue from operation Rs. 17285.39 Lakhs (in place of net profit taken by AO) Grants from ADIP Scheme Rs. 5150.77 Lakhs Grants from ADIP- SSA Scheme Rs. 2050.00 Lakhs Grants from SIPDA Scheme Rs. 24.85 Lakhs Grants from ADIP Awareness Camp Rs. 4.08 Lakhs Total Income as per Section 11(1) Rs. 24515.09 Lakhs 15% allowable acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 240 & 241/Bang/2015 dated 23.06.2015 held that the assessee is to be allowed accumulation of income for application for charitable purposes u/s. 11(1)(a) of the Act at 15% of gross receipts following the decision of the ITAT Special Bench in the case of Bai Sonabai Hirji Agiary Trust v ITO, 93 ITD 0070 (SB). In its order (supra), the co-ordinate bench has held as under at paras 15 and 16 thereof:- "15. The issue to be decided is therefore as to whether for the purpose of computing accumulation of income of 15% under Sec.11(1)((a) of the Act, one has to take the gross receipts or gross receipts after expenditure for charitable purpose i.e., the net receipts. This is issue is no longer res integra and has been decided by the Special Bench Mumbai in the case of Bai Sonabai Hirji Agiary Trust Vs. ITO. 93 ITD 0070 (SB). The facts in the aforesaid case were that the assessee was a public charitable trust enjoying exemption under s. 11 of the IT Act. As per the requirement of s. 11(1) of the IT Act, as it prevailed at that point of time, the assessee had to apply 75 per cent of its income for the objects and purposes of the trust and the assessee was permitted to accumulate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h income is not to be understood to be in excess of 25 per cent of the income from such properties. It other words, the very language of the statutory provision under consideration sets apart 25 per cent of the income from the source of property with reference to the extent to which such income is applied for such purposes, charitable or religious, In other words, for the purpose of s. 11(1)(a) of the Act, the income in terms of relevance would be the income of the trust from and out of which 25 per cent is set apart in accordance with the spirit of the statutory provision." This means that, when it is established that trust is entitled to full benefit of exemption under s. 11(1), the said trust is to get the benefit of twenty-five per cent and this twenty-five per cent has to be understood as income of the trust under the relevant head of s. 11(1). In other words, income that is not to be included for the purpose of computing the total income would be the amount expended for purposes of trust in India. Their Lordships in the above case have emphasized on the clear and unambiguous language of s. 11(1)(a) and decided the matter on the basis of the same. It has been held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the Revenue are dismissed." 21. Respectfully following the above decisions and the cases relied by the revenue authorities including Ld DR are distinguishable to the facts on record as discussed in the above paragraphs. Hence, the ground no 2 and 3 raised by the assessee are allowed. 22. Coming to the ground no 4, we observed that the assessee has included the loan granted thru ADIP funds and ADIP-SSP schemes cannot be included for the purpose of income u/s 11(1) of the Act. This loan may be utilized by the assessee for the charitable purpose and it can be considered as application of income during the year of utilization and the assessee has to claim them as excess utilization and can adjust the same in the year of generation of income. It cannot be claimed as application of income for the purpose of section 11(1) of the Act for the year under consideration. In the result, we are inclined to accept the findings of Ld CIT(A) and AO. Accordingly, the ground no 4 raised by the assessee is dismissed. 21. In the result, the appeal filed by the assessee is partly allowed. 22. The facts in the AY 2016-17 are exactly similar and the decision rendered in the AY 2015-16 are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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