TaxTMI 
TaxTMI 
2020 (6) TMI 22
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....or that on the facts and circumstances of the case and in law, the Id. CIT(A) erred in sustaining the action of ld. A/O deducting Rs. 13,56,000/as estimated establishment expenses from gross income for calculating the allowable 15% accumulation of income u/s 11(1)(a) of Income tax Act, 1961 resulting in addition ofRs. 203400/. Alternative to ground no. 2 : For that on the facts and circumstances of the case and in law, the Id. CIT(A)' erred in sustaining the ld. A/O's action of estimating the establishment expenses in the sum of Rs. 1356000/while deducting it from gross income for calculating the allowable 15% accumulation of income u/s 11(1)(a) of Income tax Act, 1961. 3. Against lowering down of amount of application of income u/s 11(1)(a) For that on facts and circumstances of the case and in law; the ld. CIT(A) erred in not disturbing ld. A/O's action of lowering down the amount of application of income for charitable purposes u/s 11(1)(a) by: a) not allowing excess application of income for charitable purposes made in earlier year amounting Rs.I003387/as application of income. b) not allowing tax deducted at sou....
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....e inference against the entire amount of corpus donation of Rs. 7,95,000/- and treated the same as normal donation. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who called for remand report, which has been reproduced by him at pages 21-22 of the impugned order. Considering the same the ld. CIT(A) gave partial relief to the assessee by restricting the addition by to Rs. 2,95,000/-. Aggrieved, the assessee is before us. 4. After hearing both parties, it is noted that appellant is a charitable trust registered u/s. 12A of the Act. The Appellant Trust income for year under this appeal, and the effect of AO's action is given in the form of chart at a glance, which is as under:- 5. I note that the ld. CIT(A) has called for the remand report, wherein the AO after enquiry from M/s. Uma Road Carriers P.Ltd and M/s. Jayshree Chemicals Ltd had concluded by stating "it can be concluded from the above discussions that out of the claim of total corpus donation of Rs. 7,95,000/the donations received from Uma Road Carriers Pvt. Ltd and Jayshree Chemicals Ltd. totalling of Rs. 5 lakhs can be considered as Corpus Donation received by the assessee during the FY 201112." ....
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....e of assessee's claim of Rs. 4,60,983/-. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who confirmed the action of the AO. Aggrieved, the assessee is before us. I note that aforesaid facts are not disputed. I find that the issue under consideration in respect of accumulation of income allowed u/s. 11(1)(a) is no longer res integra. For that we rely on the decision of the co-ordinate bench decision of this Tribunal [Bangalore] in the case of Green Wood High Trust Vs. ACIT(Exemption) (2018) 62 ITR (Trib) (2018) 264 ITAT, Bangalore, wherein it was held as under: 3.4.3 The issue to be decided by us is as to whether for the purpose of accumulation of income for application for charitable purposes under section 11 (1)(a) of the Act is to be allowed at 15 per cent. of the gross receipts or the net receipts i.e. ; gross receipts less revenue expenditure. We find that the issue in question was considered and adjudicated by a coordinate bench of the Tribunal in the case of Mary Immaculate Society an in its order in I. T. A. Nos. 240 and 241/Bang/2015 dated June 23, 2015 held that the assessee is to be allowed accumulation of income for application for charitable....
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....on, it is clear that a charitable or religious trust is entitled to accumulate twentyfive per cent of its income derived from property held under trust. For the present purposes, the donations the assessee received, in the sum of Rs. 2,57,346 would constitute its property and it is entitled to accumulate twentyfive per cent. thereout. It is unclear on what basis the Revenue contended that it was entitled to accumulate only twenty five per cent. of Rs. 87,010. For the aforesaid reasons, the civil appeal is dismissed." It is clear from the above that deduction of twentyfive per cent. was held to be allowable not on total income as computed under the Incometax Act. Any amount or expenditure, which was application of income, is not to be considered for determining twenty five per cent to be accumulated. Their Lordships, as noted earlier affirmed the decision of Kerala High Court in CIT v. Programme for Community Organisation [1997] 228 ITR 620 (Ker) ; [1997] 141 CTR 502 (Ker) wherein it is held as under (page 623 of 228 ITR) : "At the outset, the statutory language of section 11 (1)(a) of the Incometax Act, 1961, relates to the income derived by the trust fro....
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....ccumulated. Having regard to the clear pronouncement of their Lordships of the Supreme Court, it is difficult to accept that outgoings which are in the nature of application of income are to be excluded. The income available to the assessee before it was applied is directed to be taken and the same in the present case is Rs. 3,42,174. Twentyfive per cent. of the above income is to be allowed as a deduction. Similar view has also been taken by the hon'ble Madhya Pradesh High Court in Parsi Zorastrian Anjuman Trust Mhow v. CIT [1987] 163 ITR 832 (MP). No reason whatsoever has been given by the Revenue authorities for deducting Rs. 2,17,126 in this case for purposes of section 11(1)(a). The decision cited on behalf of the Revenue did not take into account the decision of the Supreme Court referred to above. The circular of the Central Board of Direct Taxes has also been considered by the hon'ble Kerala High Court in its decision referred to above. Accordingly the question referred to is answered in the affirmative and in favour of the assessee.' 16. The aforesaid decision clearly supports the plea of the assessee. Following the same, we hold that the accu....
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....ed in the case before us is squarely covered by the judgment of the Hon 'ble High Court of Bombay in the case of CIT Vs. Institute of Banking (2003) 264 ITR 110 (Bom). We find, that the Hon'ble High Court while dismissing the appeal of the revenue had observed, that as the income of the trust was to be computed on commercial principles, thus adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years, against the income earned by the trust in the subsequent year, was to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year. We find that the Hon'ble High Court had in unequivocal terms observed, that the adjustment of the expenses incurred by the trust in the earlier years, against the surplus of the subsequent year, will have to be excluded from the income of the trust under Sec. l1(l)(a) of the Act. Still further, a similar view had been taken by the Hon 'ble Supreme Court in the case of CIT(Exemption) Vs. Subros Educational Society (2018) 166 TDR (SC) 257. The' Hon'ble Apex Court, while affirming the judgment of the Hon'ble High Court of Delhi, had in th....
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....o. 4 in respect of action of the ld. CIT(A) in not allowing the establishment expenses as application of income, we note that the said issue is no longer res integra since Hon'ble Calcutta High Court in Birla Janhit Trust (1994) 208 ITR 372 (Cal) held that salaries and miscellaneous expenses, which are incurred for carrying out the objects and purposes of the trust must be considered as application for charitable purposes. I note that the assessee had claimed total expenses of Rs. 11,27,264/- (establishment expenses), however, AO estimated the expenses at Rs. 13,56,000/- which is per-se arbitrary and erroneous and ld. CIT(A) erred in confirming it. So relying on the ratio laid by the Hon'ble Calcutta High Court in Birla Janhit Trust (supra), I direct the AO to allow the establishment expenses claimed by the assessee to the tune of Rs. 11,27,264/- as application of income u/s. 11(1)(a) of the Act. 15. Before parting, it is noted that the order is being pronounced after ninety (90) days of hearing. However, taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion,....