Case Law Details

Case Name : Seth Walchand Hirachand Memorial Trust Vs. ITO (ITAT Mumbai)
Appeal Number : I.T.A..No. 4852/Mum/2016
Date of Judgement/Order : 29.03.2017
Related Assessment Year : 2010-11
Courts : All ITAT (4201) ITAT Mumbai (1406)

ITAT Tribunal held that it is clear from section 11(1)(a) that income derived from property held under trust wholly for charitable purposes or religious purposes shall not be included in the total income to the extent of 15% is unqualified. It was held that exemption available u/s.11(1)(a) i.e. 15% of income is unfettered and not subject to any conditions and thus allowed this issue in favour of the assessee and deleted the addition confirmed by the CIT(A).

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Under this issue the assesse has chalenged the confirmation of the order of the Assessing Officer by the CIT(A) in which the CIT(A) has confirmed the order of the Assessing Officer for not allowing the accumulation of the 15% and the income was allowed u/s.11(1)(a) of the Act. The learned representative of the assessee has argued that this issue has been covered by the order passed by the Hon’ble Income Tax Appellate Tribunal, Mumbai bench in case of ADIT(E) 1(2) Vs. Sayaji Ubakhin Memorial Trust (ITA No.5646/Mum/2011) dated 17.05.2013. However, on the other hand the learned representative of the department has strongly relied upon the order passed by the CIT(A) in question. Before going further, it is necessary to advert the finding of the ADIT(E) 1(2) Vs. Sayaji Ubakhin Memorial Trust (ITA No.5646/Mum/2011) dated 17.05.2013 on record:-

“5. With regard to Ground No. 2 of appeal, the Assessing Officer observed that if the trust has not left with surplus and there is deficit, then there can be no accumulation made. AO has stated that accumulation or setting apart of 15% of income has been allowed by virtue of provision of section 11(1)(a) of the Act when assessee is not able to spend the entire amount and when the entire amount has been spent, there is no surplus left that can be accumulated. Aggrieved, assessee filed appeal before ld. CIT(A).

On behalf of assessee, it was submitted that as per section 1 1(1)(a), the expenditure incurred by a trust or institute on the objects of the trust by way of application of income derived from the property held for religious or charitable purposes is deductible from the income. It was submitted that there is no bar in law and there are no specific provisions in the Act which says that such deduction of 15% for accumulation will not be allowed in case of deficit. Such 15% accumulation is allowable irrespective of whether 85% of the income have been applied to charitable purposes or not. Ld. CIT(A) after considering the submission of the assessee stated that AO is not justified in denying the claim of the assessee for the accumulation of income and, accordingly, allowed the claim of the assessee. Being aggrieved, department is in appeal before the Tribunal.

We observe that ld CIT(A) has allowed the claim of the assessee, inter alia, observing as under:

“6.3 I have considered the A.O.’s order as well as the appellant’s A/R submission. I have also carefully observed the findings of the Hon’ble Supreme Court in the case of programme for community organisation reported in 248 ITR I, wherein the Hon’ble Supreme Court, while delivering the said judgement has stated that “Having regard to the plain language of the above provisions, it is clear that a charitable or religious trust is entitled to accumulate twenty five percent. Thus, taking note of all these facts, I find merits int eh arguments of the appellant. Besides this, I also get strong opined from the recent judgement of Hon’ble Bombay High Court in the case of CIT Vs. Trustees of Bhat Family Research Foundation, wherein the Hon’ble Bombay High Court states that Пt is clear from clause (a) of sub-section (1) of section 11 that income derived from proper held under trust wholly for charitable purposes or religious purposes shall not be included in the total income to the extent to which it is applied for such purposes in India and, where it is accumulated for such application to the extent whichever is higher. The exemption of accumulated income to the extent of 25% or Rs.10,000/-, whoever is higher, is unqualified and unconditional..” Further to that, I also place reliance to the judgment of Hon’ble Supreme court in the case of Addl. CIT Vs. A.I.N. Rao Charitable Trust (1995) 129 CTR 205, wherein it is held that exemption available u/s.11(1)(a) i.e. 15% of income is unfettered and not subject to any conditions.

6.4. Considering all the above factual position as well as the case laws referred as above, I consider it proper and appropriate to hold that the A.O. was not justified in denying the claim of the appellant for accumulation of income. Accordingly this ground of appeal is allowed.

We observe that ld CIT(A) has relied on the decision of Hon’ble Supreme Court in the case of A.I.N. Rao Charitable Trust(supra), wherein, it is held that exemption available u/s.11(1)(a) i.e. 15% of income is unfettered and not subject to any conditions. In the case before us, assessee has claimed 15% accumulation u/s. 11(1)(a) of the Act. Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and reject ground of appeal taken by department.”

On appraisal of the above mentioned order it is not in dispute that the matter of controversy has been decided in favour of the assessee by the Hon’ble Income Tax Appellate Tribunal by following the decision of the Hon’ble Supreme Court decision in case of CIT A.I.N. Rao Charitable Trust (1995) 129 CTR 205. In view of the order passed by the co-ordinate bench we allowed this issue in favour of the assessee and delete the addition confirmed by the CIT(A) in question. Accordingly, this issue is decided in favour of the assessee against the revenue.

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Category : Income Tax (24800)
Type : Judiciary (9780)
Tags : ITAT Judgments (4381) section 11 (89)

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