2020 (11) TMI 219 - AT - Income Tax

Tribunal rules in favor of assessee in income tax dispute, emphasizing correct computation of accumulation.

Bhartiya Shiksha Samiti Purvi Uttar Pradesh Versus Asst. Commissioner (CPC), Bangalore

Bhartiya Shiksha Samiti Purvi Uttar Pradesh Versus Asst. Commissioner (CPC), Bangalore - TMI Issues:Adjustment of Rs. 2,15,216 made while processing the return of income under Section 11(1)(a) of the Income Tax Act.Analysis:The appeal dealt with the adjustment of Rs. 2,15,216 made during the processing of the income tax return concerning the computation of 15% allowed under Section 11(1)(a) of the Act. The Central Processing Centre (CPC) recalculated the amount of 15% allowed under Section 11(1)(a) based on the gross receipts of the assessee, resulting in a variance with the amount claimed by the assessee. This variance arose due to the assessee setting apart an amount of Rs. 14,34,775 due to non-receipt during the year, which was deducted from the gross receipts for the 15% accumulation calculation. The assessee contested this adjustment before the CIT(A) but was unsuccessful.Before the Tribunal, the assessee argued that the adjustment was erroneous as only the income derived by the trust should be considered for computing the 15% accumulation under Section 11(1)(a) and not the actual receipt of income during the year. On the contrary, the Revenue contended that the receipt of income during the year is relevant for calculating the 15% relaxation as per Section 11(1)(a) and that the amount set apart due to non-receipt should be deducted from the total receipts. The Revenue supported the CIT(A)'s decision to calculate the 15% based on total receipts of Rs. 61,07,568 instead of Rs. 75,42,343.The Tribunal noted that the assessee's total income during the relevant year was Rs. 75,42,343, of which Rs. 49,76,217 was applied for charitable purposes, and Rs. 14,34,775 was set apart due to non-receipt. After considering the option exercised by the assessee and the provisions of Explanation-I to Section 11(1) allowing deferral of income application, it was concluded that the adjustment made during the return processing was not in line with Section 11(1) of the Act. The Tribunal emphasized that the computation of 15% of the income derived should be based on the income declared by the assessee for all purposes, and the term 'receipt' in Section 11(1) pertains to the person in receipt, not the income derived from trust property. Therefore, the adjustment was deemed unjustified, and the appeal of the assessee was allowed.