TaxTMI 
TaxTMI 
1980 (11) TMI 92
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.... of Rs. 13,18,217, later revised to Rs. 10,85,329. The entire income was shown to have been used up as under: Income applied for charitable purposes Rs. 4,66,307 Income put in fixed deposits in pursuance of assessee's application under s. 11(2) for accumulated of income Rs. 6,00,000 Income applied towards charitable purposes during the three months succeeding the end of the accounting year Rs. 42,243 Total income applied or set apart Rs. 11,08,550 Since this amount of Rs. 11,08,550 is more than Rs. 10,85,329, it is the assessee's case that the entire income has been either applied or set apart and that there is no tax liability during the year. 3. The ITO computed the income at Rs. 10,91,406 because of addition due to disallowance....
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.... 42,243 spent during succeeding three months on the ground that there was no exercise of option to within time allowed under s. 139(1) or (2),though he gave a categorical finding that "these amounts have no doubt been expended on charitable purposes as construction of the buildings, purchases of furniture, buses etc. are in pursuance of the objects of the trust". There is, therefore, no dispute as to the nature of expenditure, viz., whether the same was incurred in pursuance of the objects of the trust. The assessee alternatively argued further that it had actually asked for permission to accumulate Rs. 6.5 lakhs in Form 10. It had put Rs. 6 lakhs in fixed deposits and spent Rs. 42,243 in the next succeeding year. Hence, it was claimed that....
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....ire that there should not be accumulation of more than 25 per cent of the income unless there is written notice in the manner prescribed by r. 17 and accumulated income is deposited in as provided under s. 11(2)(b). Rule 17 requires that the application should be in Form 10 and it should be delivered within time allowed under s.139(1) or within time allowed originally or an extension under s. 139(2). Here, such an application was made in Form 10 for accumulation of Rs. 6,50,000 "till the previous year ending 31st March, 1978 in order to enable the Trustees to accumulate sufficient funds for carrying out the following purposes of the Trust", and proceeds to specify this purpose, all for construction of buildings for the named Educated Instit....
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....e before such expiry date, then there is no violation of the undertaking in Form 10. After all the requirements that the accumulated funds should remain in approved investment is to ensure that there is no abuse of funds during the intervening period. If the funds have been utilised before six months allowed by law for investment, there cannot be any inference that there has been no accumulation merely on this score. Having accepted Form 10 for Rs. 6.5 lakhs the authorities cannot say that it is only for Rs. 6 lakhs. if the authorities wanted to reduce the figure from Rs. 6.5 lakhs to Rs. 6 lakhs, they should have told the assessee there and then or, atleast, within a reasonable time. After having allowed accumulation, if there is any failu....
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....f the income specifically spent on charitable purposes "during the period of three months immediately following the previous year" could be treated as application of income within the meaning of sec. 11(1) on option to be exercised in writing within time allowed under s. 139(1) or within time allowed or extended time allowed under s. 139(2). When the assessee applied in Form 10 for accumulation of Rs. 6.5 lakhs and invested Rs. 6 lakhs there is no reason why, at least Rs. 25,099 out of balance of Rs. 50,000 given for the purpose mentioned in Form no. 10 should not be treated as coming under this clause. Again when return was filed voluntarily on 3rd Oct., 1975 prior to issue of notice under s. 139(2), there is no reason why the computation ....