TaxTMI 
TaxTMI 
2014 (7) TMI 91
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.... The assessee was governed by Karnataka Improvement Boards Act, 1976 ["KIBA" for short]. The Assessee was constituted as a statutory body with statutory powers for the purpose of rehabilitation of people in Bagalkot consequent to the displacement by construction of Almatti Dam. The assessee was accordingly constituted by virtue of 12A of the KIBA. As per the provisions of section 39 of KIBA, the Board which includes the assessee shall have to maintain its own fund to which it shall credit monies received from the Government by way of grants, loans, advances or otherwise; all monies received by the Board by way of rents or profits or in any other manner or from any other source. Section 39(2) further lays down that the fund shall be applied by the Board in the administration of KIBA and for no other purpose. Section 46 of the Act provides for audit of the accounts. 4. The return of income filed by the assessee declaring Nil income was accepted by the Assessing Officer in an order of assessment u/s. 143(3) of the Act dated 02.11.2010. 5. The CIT in exercise of his powers u/s. 263 of the Act and on perusal of the assessment records of the assessee for the A.Y. 2008-09 was of the vie....
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.... as far as the present appeal is concerned. 7. In reply to the show cause notice issued by the CIT u/s.263 of the Act as set out in para-5 above, the assessee submitted that it was an authority constituted under KIBA and existing for a charitable purpose. It was also pointed out that the entire funds belonged to Govt. of Karnataka and the assessee is acting as an agent on its behalf and implementing and executing projects. The assessee further submitted that during the year under consideration it has made fresh deposits and redeposit of accrued interest under different fund accounts (KJBNL Fund Account, Corner Plot Account and Site Cost Account) of Rs.15,80,86,596. The Assessee submitted that these deposits are made for creation of corpus fund as per the direction of Govt. of Karnataka vide letter No.HRD 26/REH 2006 dated 25.02.2006 and No.HRD 100/REH 2010 dated 21.06.2010 issued by the Under Secretary, Revenue Department, Land Acquisition-2 and Rehabilitation. The above said Bank fresh deposits and redeposit of accrued interest towards corpus fund cannot be treated as income or in the alternative has to be treated as application for charitable purpose u/s. 11(1)(a) of the Act as ....
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.... as income as follows: "The assessee has shown income of Rs.47,66,36,982/- and the application of income has been shown at Rs.48,11,29,497/-. This shows that in the application of the income, the income of the past years have also been included. Out of the income of the year of Rs.47,66,36,982/-, as per section 11(2) of the I.T. Act, the assessee was required to apply 85% of the income which comes to Rs.40,51,41,434/- for charitable purposes during the year. Whereas the assessee has actually applied for charitable purposes out of the income of this year only to the tune of Rs.31,85,50,386/- (47,66,36,982 - 15,80,86,596) [as mentioned above Rs. 15,80,86,596/- is not application of income for charitable purposes but represents deposits/redeposits in FDs]. As per the provisions of section 11(2) of the I.T. Act the difference of Rs.40,51,41,434/- and of Rs.31,85,50,386/- which comes to Rs.8,65,91,048/- should have been assessed as total income of the assessee for the A.Y. 2008-09." Accordingly the CIT directed the AO to enhance the income of the Assessee by Rs.8,65,91,048/- for the A.Y. 2008-09 and adopt the total income of the assessee for the A.Y. 2008-09 at Rs.8....
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....of the Act. We are of the view that this decision will not be relevant in the present case for the reason that the requirement in the present case is filing of Form 10 u/s. 11(2) r.w. Rule 17 of the I.T. Rules, 1962. Secondly, Form 10B in the case cited by the ld. counsel for the assessee had been filed during the course of assessment proceedings, whereas in the present case Form 10 has not been filed by the assessee. Therefore, the decision relied upon by the ld. counsel for the assessee will not be of any assistance to the plea put forth by the assessee before us. 14. The ld. DR reiterated the stand of the CIT as reflected in the impugned order. 15. We have given a very careful consideration to the rival submissions. With regard to the plea of the assessee that interest income to the tune of Rs.3,10,86,586 which is interest on funds parked in FDs for specific purposes pending utilization, we find that the ratio laid down by the Hon'ble High Court of Karnataka in the case of KUIDFC (supra) will be squarely applicable to the assessee's case. In this regard, we have already seen that under the provisions of section 39(1)(d) of KIBA, all funds have to be treated as funds of the ass....
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....ent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that subsection is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely :- (a) such person specifies, 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 accumulated or set apart, which shall in no case exceed ten years ; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) : Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulat....
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....lication in Form No. 10 within the time allowed under s. 139(1)/139(2) as extended by the ITO. The CBDT is then approached by these trusts for condoning the delay for filing applications. The Board by virtue of the powers vested in it under s. 119(2)(b) has been condoning the delay in individual cases after satisfying itself that certain conditions are satisfied. 3. With a view to expediting the disposal of applications filed by trusts for condoning the delay, the Board has passed a general order under s. 119(2)(b) (reproduced, infra) by which the CIT have been authorised to admit belated applications under s. 11(2) r/w r. 17 of the IT Rules, 1962. A copy of this order is enclosed. All applications for condoning the delay under s. 11(2) will henceforth be disposed of by CIT in terms of the enclosed order." IV. COPY OF ORDER F.NO. 180/57/80-IT(AI), DATED 3RD JUNE, 1980 In exercise of the powers conferred under s. 119(2)(b) of the IT Act, 1961 (43 of 1961), the CBDT hereby authorises the CIT to admit applications under s. 11(2) r/w r. 17 of the IT Rules, 1962, from persons deriving income from property held under trust wholly for charitable or....
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....m No. 10. If during the assessment proceedings the AO does not have the necessary information, question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particular part of the income from the net of taxation arises from s. 11 and is subjected to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time he completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules even then, it is reasonable to presume that the intimation required under s. 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of this income the assessing authority cannot entertain the claim of the assess....