Income Accumulation for future utilization on one of trust’s object stated in memorandum is not accumulation towards general purpose

 Facts of the case:

• Assessee trust registered u/s 12AA incorporated for the promotion of Fashion Design Industries. For AY 2007-08 it filed its return of income on 31.10.2007 disclosing nil income. Assessee in its return of income showed income from property held under trust amounting to Rs. 22,11,76,304/- and reduced therefrom amount spent during the previous year of Rs. 18,02,20,722/- leaving surplus (unutilized income) of Rs. 4,09,55,582/-.
• Assessee claimed deduction in respect of such surplus under explanation 2B of Section 11(1)(B) that the said amount had been accumulated and set apart for promotion of fashion industry in India. Form No. 10 was also submitted to AO during the course of assessment proceedings with a certified copy of resolution to accumulate the unutilized income dated 25.10.2007.
• AO doubted the documentation filed by the assessee and denied the benefit of accumulation.
• In appeal before CIT (A) , no relief was granted to assessee as CIT (A) was of the view that assessee has failed to specify any definite or determinable purposes for the accumulation as accumulation for general or indefinite purpose is not envisaged u/s 11(2) of the Act.

 Contention of the Assessee:

• In form no. 10 the assessee has submitted the object for accumulation is to promote fashion design in India. In Memorandum of Association it is one of the specific object of the trust and therefore the finding of the CIT (A) that it is not specific object is not correct.
• Further, learned counsel for the assessee relied on the decision of Hon’ble Gujarat High Court in case of Mayur Foundation 274 ITR 562 and also on the decision of Nagpur Hotel Owners association of Hon’ble Supreme Court reported 247 ITR 201 , in both these decisions courts have held that if form no. 10 is submitted before the completion of the assessment proceedings the assessee should be given the benefit of accumulation.

Contention of the Revenue:

• Revenue supported the order of CIT (A) and AO, and also emphasized that promotion of fashion industry is not specific object as the trust itself exists with the aim of promoting Indian fashion worldwide, there need to be some other purpose which facilitates the fulfillment of the general purpose for which trust is in existence.

Issue before ITAT Delhi:

Whether the accumulation of income for promotion of fashion industry was towards a specific purpose?

Held by ITAT Delhi:

• The trust had as much has 12 main objects and 15 ancillary objects in its memorandum of association. The object of promotion of fashion industry is one of the main object of the trust stated at serial no 2 of the main objects. Therefore it cannot be said that in form no 10 as well as in resolution no specific object is mentioned by the assessee.
• Further, the AO had objected about the timing of submission of Form 10 by the assessee and argued that Form 10 was not submitted with return of income but in the course of assessment proceedings. ITAT in order to address this issue placed reliance on the decision of Hon’ble Gujarat high court in case of CIT vs. Mayur Foundation 274 ITR 562 wherein the court held that submission of Form 10 at any time before the completion of assessment proceedings is valid compliance of law.

• In the light of the above observations the doubts raised by AO are not valid. Assessee had made substantial procedural compliance for getting exemption in respect of accumulation of income.
• In result the appeal of assessee was allowed.