TaxTMI 
TaxTMI 
2022 (1) TMI 594
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.... that the solitary issue in the present appeal is whether, in the case of a charitable trust, the amount treated as exempt u/s 11(1)(a) of the Act ,on account of setting aside/accumulation of income to a specified percentage,15% in the present case,is to be calculated on the gross/net income of the trust/society. The assessee in the present case is a charitable trust carrying on charitable activities of education and medical relief and registered u/s. 12A of the Act vide order of the Commissioner of Income Tax Karnataka-2, Bangalore dated 18.04.1997.For the impugned year it had claimed exemption of 15% of its gross income u/s 11(1)(a) of the Act,the gross receipts being Rs. 51,05,58,582/-,while the AO calculated the same on the net surplus of the assessee of Rs. 17,33,05,882, thus reducing the claim of exemption to Rs. 2,59,95,882/- resulting in taxable income being assessed of Rs. 3,27,84,934/- as under;(as per assessment order): Income from other sources 16,89,70,375 Add: Depreciation 43,35,507 Net Surplus 17,33,05,882 Less: Capital Expenditure 3,45,25,066 Total 13, 87,80,816 Less: Less: Dedcuction u/s. 11(1)(a) @ 15% 2,59,95,882 Taxable ....
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....exempted from income-tax. That exhausts the operation of s.11(1)(a). Then follows sub-s. (2) which naturally deals with the question of investment of the balance of accumulated income which has still not earned exemption under sub-s. (1)(a). So far as that balance of accumulated income is concerned, that also can earn exemption from income-tax meaning thereby the ceiling or the limit of exemption of accumulated income from. income-tax as imposed by sub-s. (1)(a) of s.11 would get lifted if additional accumulated income beyond 25% or Rs. 10,000, whichever is higher, as the case may be: is invested as laid down by s. 11(2) after following the procedure laid down therein. I have carefully considered the impugned assessment order, the submissions made by the appellant through the AR. The AO has relied on Hon'ble Supreme Court judgment in the case of Escorts Ltd.(199 ITR 043). However the impugned judgment is pertaining to deduction u/s. 35(2)(iv) in respect of capital expenditure. The AO has further relied on the judgment of Kerala High Court confirming ITAT, Cochin judgment in the case of Lissie Medical Institutions. The AO in this case is stationed at Bangalore and the A....
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....63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of [fifteen] per cent of the income from such property;" 7.2 As is evident from a bare perusal of the above the said section deals with exemption of income from property held for charitable purposes and provides exemption to all such income actually applied to charitable purposes and also to a specified percentage of such income which is set aside/accumulated for application to such purposes. Thus incomes from property held under charitable trusts are exempt from tax to the extent: a) Actually applied to charitable purposes and, b) Accumulated /set aside for such application upto limit specified. 7.3 Before us the issue relates to the second limb of the exemption ,the limited point bei....
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....that a charitable or religious trust is entitled to accumulate twenty-five 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. 2,57,376, would constitute its property and it is entitled to accumulate twenty-five 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." 9. In the case of Kanehialall Lohia Trust (supra), cited by the Ld. Counsel for the assessee before us, the ITAT Kolkata Bench, took note of the decision of the Special Bench of the ITAT in the case of Bai Sonabai Hirji Agiary Trust Vs. ITO [2005] 93 ITD 70 (SB) for laying down the afore-stated proposition that it is the gross receipts which are to be considered for the purposes of accumulation of income for charitable purposes. We have gone through the relevant portion of the order of the special bench of the ITAT reproduced in the said decision. We find that the special bench was seized with the identical issue whether for the purposes of computing accumulation of incom....
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.... No.1515/Bang/2016 for AY 2011-12 is as to whether 15% accumulation for application in future has to be calculated on gross receipts or net receipts after deduction of revenue expenditure. The Assessee claimed accumulation of income for application for charitable purpose at 15% of the gross receipts. The AO was of the view that accumulation will be allowed only to the extent of 15% of the income after revenue expenditure. In other words income to be set apart u/s.11(1)(a) of the Act has to be computed at 15% of the net income i.e., gross receipts minus revenue expenditure and not on the gross receipts as claimed by the Assessee. Since in the case of the Assessee, the gross receipts after revenue expenditure was nil, the AO denied the benefit of accumulation to the Assessee. 17. On appeal by the Assessee, the CIT(A) allowed the claim of the Assessee. Aggrieved by the order of the CIT(A), the Revenue has raised the aforesaid ground of appeal before the Tribunal. 18. The issue to be decided is therefore as to whether for the purpose of computing accumulation of income of 15% under Sec.11(1)((a) of the Act, one has to take the gross receipts or gross receipts after ex....
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.... five per cent to be accumulated. Their Lordships, as noted earlier, affirmed the decision of Kerala High Court in (1997) 141 CTR (Ker) 502: (1997) 228 ITR 620 (Ker)(supra) wherein it is held as under: "At the outset, the statutory language of s. 11(1)(a) of the IT Act, 1961, relates to the income derived by the trust from property. The trust is required to be wholly for charitable or religious purposes, and the income is expected to have relation to the extent to which such income is applied to such purposes in India. It is thereafter the statutory provision proceeds further that such income is not to be understood to be in excess of 25 per cent of the income from such properties. In other words, the very language of the statutory provision under consideration sets apart 25 per cent of the income from the source of property with reference to the extent to which such income is applied for such purposes, charitable or religious. In other words, for the purpose of s. 11(1)(a) of the Act, the income in terms of relevance would be the income of the trust from and out of which 25 per cent is set apart in accordance with the spirit of the statutory provision." This mean....