2016 (11) TMI 1313 - HC - Income Tax

Court affirms Tribunal decision on Section 11(2) claim, accepts revised Form No.10

The court affirmed the Tribunal's decision, allowing the assessee's claim for accumulation under Section 11(2) of the Income Tax Act. The court held that ... Eligibility to claim accumulation under section 11(2) - Revenue contended that unless there is a specific purpose mentioned in Form No.10, the language ‘for general purpose’ would not permit the assessee to claim the benefit under Section 11(2) - revised Form No.10 filled - continuous proceeding Held that:- In the present case Form No.10 was already filed and the Revised Form No.10 filed for sub-head of the purposes falling under the main head of the objects of the Trust, was accepted by the Commissioner (Appeals) in the proceedings of the appeal. If the matter is considered in light of the above referred decision in the case of Mayur Foundation [2004 (12) TMI 48 - GUJARAT High Court ] and is considered that the appeal is a continuous proceeding, it cannot be said that the CIT (Appeals) had no authority to accept Revised Form No.10 nor can it be said that Revised Form No.10 could not at all be considered for allowing the claim made under Section 11(2) of the Act. In view of the aforesaid, we find that the Tribunal was right in allowing the claim of the assessee under Section 11(2) of the Act. Hence, the question is answered in the affirmative in favour of the assessee Issues Involved:1. Eligibility to claim accumulation under Section 11(2) of the Income Tax Act.2. Requirement of specifying the purpose of accumulation in Form No.10.3. Acceptance of revised Form No.10 during appellate proceedings.Detailed Analysis:1. Eligibility to Claim Accumulation under Section 11(2):The primary issue addressed in both appeals was whether the assessee is eligible to claim accumulation under Section 11(2) of the Income Tax Act. The court noted that the respondent-assessee had filed returns and claimed setting apart of amounts under Section 11(2) by filing Form No.10. The Assessing Officer disallowed the claim on the grounds that the specific object and itemized purpose were not mentioned. However, the CIT (Appeals) accepted a revised Form No.10, which specified purposes such as 'development of infrastructure for furtherance of education' and 'meeting of operating and administrative expenses for providing education facilities.' The Tribunal upheld the CIT (Appeals) decision, noting that the income of the trust is to be computed on commercial principles and that depreciation should be allowed as a deduction to determine the income under Section 11 of the Act.2. Requirement of Specifying the Purpose of Accumulation in Form No.10:The court examined the statutory requirements under Section 11(2) and Rule 17, which mandate that the purpose for which income is accumulated must be specified in writing to the Assessing Officer. The Tribunal observed that the Delhi High Court in the case of Daulat Ram Education Society had held that as long as the purposes specified are within the objects of the Trust and are charitable, the benefit under Section 11 should be granted. The court also referred to its own decision in the case of Envisions, which held that merely because details of how the amount is proposed to be spent are not furnished, the assessee cannot be denied the exemption under Section 11(2).3. Acceptance of Revised Form No.10 During Appellate Proceedings:The court addressed whether the CIT (Appeals) could accept a revised Form No.10 during the course of hearing. The revenue argued that the revised form should not be accepted as it was too vague and general. However, the court noted that the appeal is a continuous proceeding and cited the Gujarat High Court's decision in the case of Mayur Foundation, which held that additional grounds could be entertained even when the appeal is pending before the Tribunal. The court concluded that the CIT (Appeals) was within its rights to accept the revised Form No.10 and that the Tribunal was correct in allowing the claim under Section 11(2).Conclusion:The court affirmed the Tribunal's decision, allowing the assessee's claim for accumulation under Section 11(2) and dismissed the appeals. The question was answered in the affirmative in favor of the assessee and against the Revenue, emphasizing that the purposes specified in Form No.10 were within the objects of the Trust and that the revised Form No.10 could be accepted during appellate proceedings.