Case Law Details
Shree Bhartimaiya Memorial Foundation Vs ACIT (ITAT Ahmedabad )
ITAT Ahmedabad 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.
Facts- The assessee is a registered charitable trust, both under the Income Tax Act and with the Charity Commissioner, providing services to the public at large. During the impugned year it had shown gross receipts of Rs.23,90,62,222/- including receipt of Rs.7,40,55,485/- from its pharmacy business. Finding the pharmacy business to be incidental to the charitable activities of the assessee-trust, the AO held that in terms of the provisions of section 11(1)(a) of the Act it was only profits and gains of the pharmacy business which were to be considered for the purpose of computing the amount to be allowed to set apart, at the rate of 15% of the income. The assessee had computed the same on the gross-receipts of the pharmacy business. Accordingly, the excess accumulation claimed by the assessee to the tune of Rs.33,40,283/- was denied by the AO. The same was upheld by the ld.CIT(A).
Conclusion- The section 11(4A) of the Income Tax Act clearly states profits and gains of businesses incidental to the main objects of the charitable entities and qualifying for exemption being, to be incomes of such trusts eligible for exemption.
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.
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