IN THE ITAT AGRA BENCH
Additional Commissioner of Income-tax
IT APPEAL NO. 122 (AGRa) OF 2011
[ASSESSMENT YEAR 2007-08]
APRIL 27, 2012
A.L. Gehlot, Accountant Member
This is an appeal filed by the Revenue against the order dated 23.02.2011 passed by the Ld. CIT(A), Ghaziabad for the Assessment Year 2006-07 on the following grounds :-
“1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 29,33,910/- on account of denial of accumulation claimed u/s 11(2) of the IT Act, 1961 treating the general purposes as specific ones.
2. The Ld. CIT(A) has erred in law and on facts by not appreciating the facts that purpose for accumulating the income is not covered according to section 11(2) of the I.T. Act.
3. Appellant craves leave to amend, alter, add, or modify any ground or grounds of appeal either before or at the time of hearing of case.”
2. The brief facts of the case are that the assessee Society is running educational institute in the name of Jamia Urdu, Medical Road, Aligarh. From a perusal of audit report in Form No.10B under section 12A(b) of the Income Tax AC, 1961 (‘the Ac’ hereinafter) and Form No.10 read with rule 17, the Assessing Officer noticed that the assessee has accumulated Rs. 29,33,907/- out of net surplus of Rs. 60,63,306/- under section 11(2) of the Act. The Assessing Officer disallowed the claim of the assessee on the ground that the assessee did not specify the purpose of accumulation in Form 10B. Therefore, the assessee is not entitled for the benefit of accumulation under section 11(2) of the Act. The Assessing Officer treated Rs. 29,33,906/- as income of the assessee. The CIT(A) allowed the claim of the assessee as under :-
“I have considered the facts of the appellant’s case and arguments of the ld. A.R. and have perused the evidences on records, written and oral arguments. In my considered opinion plain reading of section 11(2) of the Act and Form No.10 clearly shows that the appellant is not required under the provisions to specify any purpose other than which falls in the objects of the trust or the purpose of which the accumulation is to be made. The only requirement under the provisions is that the income of the trust can be accumulated for the purpose of trust. So far as the appellant’s case under the appeal is concerned, I hold that since the appellant has very specifically specified the purposes of accumulation of Rs. 29,33,907/- u/s 11(2) of the Act therefore neither the authoritative decisions cited by the learned Assessing Officer in his assessment order namely Director of Income-tax (Exemption) v. Trustees of Singhania Charitable Trust (Supra) and CIT v. M.Ct. Muthaih Family Trust (Supra) nor the various observations made by the Assessing Officer while denying such accumulation to the appellant are applicable, otherwise also in my considered opinion in the light of authoritative decisions relied upon by the appellant the accumulation of Rs. 29,33,907 claimed by the appellant u/s 11(2) of the Act, cannot be denied.
Keeping in view the totality of facts, arguments of learned A.R., evidences on records and the various authoritative decisions cited by the learned A.R. on the issue under appeal cumulatively I hold that the appellant is entitled for the benefit of accumulation of Rs. 29,33,907/- u/s 11(2) of the Act and accordingly I direct the A.O. to allow the benefit of accumulation of Rs. 29,33,907/- u/s 11(2) to the appellant and recompute the appellant’s income accordingly.”
3. We have heard the ld. Representatives of the parties. The assessee society claimed accumulation of income by filing Form No.10B for some specified purpose which has been reproduced by the Assessing Officer in his order at page no.3 which reads as under :-
(a) Towards Construction, repairs, renovation, extension of the property owned by it. In fact the assessee educational institution will incur about Rs. 30 lacs towards extensive repairs and renovation of the excising building. Further it will incur about Rs. 35 lacs towards construction of 10 rooms in accordance with new plan. It will construct a new building for MBA, B.Ed and BCA classes in which it will incur about Rs. 1.2 crores.
(b) Towards purchase of equipments, machinery, plants etc. and/or other resources for the use and purpose of trust/institution. The assessee educational institution has already incurred about Rs. 6.25 lacs towards purchase of computers, about Rs. 3.40 lacs onwards purchase for furniture, about Rs. 11.40 lacs towards purchase of cars, about Rs. 1.15 lacs towards purchase of electrical gadgets, A.C., Telephone/Mobile sets. It will further incur about Rs. 3 lacs towards purchase of noiseless generator, about Rs. 5 lacs towards purchase of computer and laptops, printer etc. about Rs. 1 lac towards EPBX of 100 lines systems, about Rs. 1 lac towards motorized automatic grass cutting machine etc.
(c) To meet expenses laid down/incurred for the attainment of the objectives of the trust/institution. Viz/namely assessee educational institution will develop software’s and website in which about 2 lacs will be incurred.”
4. Section 11(1) provides subject to the provisions of section 60 to 63, the income which is 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 no in excess of 15% of the income from such property, shall not be included in the total income of the previous year of the person in respect of the income. Sub-section (a) within (2) of section 11 provides that for the purpose of accumulation of such person is specified by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accounted or set apart which shall in no case exceed 10 years. On perusal of the above relevant provisions of the Ac, we find that for the purpose of accumulation of income the assessee is required to specify by notice in writing to the Assessing Officer, the purpose for which the income being accumulated. In the case under consideration, as noted above, that the assessee has specified he purpose for which the income has been accumulated. The assessee has filed the relevant prescribed Form No.10B which is not in dispute. The sole objection of the Assessing Officer is that the assessee did not specify the purpose of accumulation in Form No.10B. He relied upon a judgement of Calcutta High Court in the case of Director of Income-tax (Exemption) v. Trustees of Singhania Charitable Trust, 199 ITR 819 (Cal) and the judgement of Madras High Court in the case of CIT v. M.Ct. Muthiah Family Trust, 245 ITR 400 (Madras). The Assessing Officer has wrongly applied the judgment of Calcutta High Court in the case of Director of Income-tax (Exemption) v. Trustees of Singhania Charitable Trust as the facts of the case under consideration and the facts of that case are distinguishable. In the case of Director of Income-tax (Exemption) v. Trustees of Singhania Charitable Trust, the assessee trust for the purpose of accumulation of income listed all the charitable objects for which the assessee trust was created. Under that circumstances the Court held that the specific purpose as required by section 11(2) admits of no amount of vagueness about such purpose. In the case under consideration, it has been noticed that the assessee has accumulated income for the specific purpose and for which the funds have been used accordingly in subsequent years. As the facts noted by the CIT(A) in his order that the assessee has applied the accumulation of funds as specified which were in accordance with the object of the trust. The facts of the case of Madras High Court is identical to the facts of the case of Calcutta High Court. Therefore, that judgment is also distinguishable on facts. In the light of the above discussion, we uphold the order of CIT(A) wherein he has rightly allowed accumulation of Rs. 29,33,907/- under section 11(2) of the Act as purpose for accumulation specified in Form No.10B is in accordance with law. In the light of the facts, the order of CIT(A) is confirmed on the issue.
5. In the result, appeal filed by the Revenue is dismissed.