AI Drafter 
TaxTMI 
TaxTMI 
2016 (12) TMI 301
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....l fund available with the assessee for application under section 11(1) of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee is a trust and enjoying registration under section 12A(a) of the Income Tax Act. It has filed its return of income on 28.12.2010 declaring income of Rs. 1,44,200/-. Controversy involved in this appeal is whether deduction available under section 11(1) of the Income Tax Act at the rate of 15% is a standard deduction or it is to be allowed, if assessee has applied some part of its income on its objects during the relevant year. The ld.CIT(A) has held that total application of the income for the purpose of assessee's object was not upto to 85% of the total income. In other words, it has fallen ....
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....Rs. 6, 50,000/- has been accumulated, the condition of 85 % is met as per appellant. 7.7 Moreover, it is not very clear from the assessment order as to whether donations of Rs. 14,81,000/- are covered u/s 12(1) of the Income Tax Act or not ? If these donations were specific contributions, which should form part of corpus of the Trust, then, the same are not covered u/s 12 (1) and for the purpose of determining 85 % of the income, the income will have to be taken at Rs. 11, 11, 185/-which has been done by the assessing officer. The assessment order in para 8 refers to this amount of Rs. 14,81,000/- as corpus donation. If that finding is correct, the amount of 85 % will only be Rs. 9,44,507/- { 85 % of Rs. 11, 11, 185/-) against which appl....
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....be allowed in each and every case. As per provisions of section 11(2) where 85 per cent of income is not applied, the law permits the assessee to accumulate the income for a specific purpose to be applied within the specified time. Therefore, in a case when 85 per cent of income is not applied, the assessee can accumulate such income for specific purpose to be spent in specified period not exceeding of 5 years. Thus in order to qualify for 100 per cent exemption, as mentioned above, the assessee has either to spend 85 per cent of income for its objects in the year of its receipt or accumulate u/s 11(2) for specified purpose to be spent in specified period. 9. Hon'ble Delhi High Court had an occasion to explain the decision of Hon'....
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....g the scope of exemption by removing the restriction imposed by section 11(1)(a) was held not to take away the exemption allowed bysection 11(1)(a). Hon'ble Delhi High Court has, thus, in Bagri Foundation's case has held that the additional condition by way of section 11(2) inserted with effect from 1/04/2003 is intended only to apply in respect of accumulation in excess of 15 per cent and not to accumulation upto 15 per cent under section 11(1)(a) of the Act. In view of the decision of Hon'ble Delhi High Court it is held that the income applied u/s 11(1)(a) and accumulated u/s11(2) taken together should 85% in order to claim 100% exemption of the income derived by the assessee u/s section 11 of the Act. Any portion of income fa....
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....maining accumulated income of Rs. 80,000/- for the previous year, a further sum of Rs. 25,000/- will get exempted from payment of income tax as per second part of Section 11(1)(a). Thus out of the total income derived from property as aforesaid during previous year, that is, Rs. 1,00,000/-, Rs. 45,000/- in all will get excluded from the tax net on a combined operation of first and second part of Section 11(1)(a). (iii)The aforesaid ceiling of Rs. 25,000/- of accumulated income property of previous year, will get c under Section 11(2) to the extent the balance of such accumulated income is invested as laid down by Section 11(2).To take an illustration if, say, an additional amount of Rs. 20,000/- out of the balance of accumulated income o....