TaxTMI 
TaxTMI 
2016 (1) TMI 1492
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce. 2 The learned Commissioner erred in issuing order refusing to accept the contentions of the appellant in the section 263 proceedings, to grant 15% accumulation on the gross income. 3 The learned Commissioner ought to have directed the assessing officer to rectify the assessment as per section 154 application filed by the Assessee. 4 The learned Commissioner erred in pointing out that the Appellant had failed to exercise their option for accumulation vi] s 11 (2) as the benefits under this sub section can be availed after exhausting the benefits available under sub section (1). 5 The learned Commissioner ought to have found that accumulation or setting apart of surplus as per section 11(1)(a) shall be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ture in I/E Account Rs. 4,46,75,721 Less: 15% retained (15% of Rs. 4,46,75,721/-) Rs 67,01,358 Amount to be utilized Rs. 3,79,74,363/- Utilization as capital expenditure Rs. 3,54,03,781/- Total Income Rs. 'Nil' 6 The AO gave accumulation u/s 11(1)(a) of the act on 15% of the surplus/ net income (Rs.4,46,75,721) as shown in the income and expenditure account. Since the accumulation/set apart as per section 11 (1)(a) of the act was given only on the net income and not on the gross income, the assessee filed rectification u/s 154 of the Act , before the AO which is pending disposal. 7 In the meanwhile, the CIT(E) passed an order u/s 263 of the Act. According to CIT, there was a surplus to the extent o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t year 2010-11 is erroneous is so far as it is prejudicial to the interest of revenue. Accordingly, invoking the provisions of section 263 of the I T Act, 1961, the assessment order dated 6.3.2013 is set aside with a direction to the AO to redo the same afresh after considering all issues raised hereinabove and after affording an opportunity of being heard to the assessee." 8 The assessee being aggrieved is in appeal before us. The ld counsel for the assessee submitted that the accumulation of 15% u/s 11(1)(a) of the Act is to be calculated on the gross income and not on the surplus/net income as per income and expenditure statement. In support of the above contention, the assessee relied on the CBDT circular no.5-P(LXX-6 of 1968 dated 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s issue has been decided by the several judicial pronouncements and also clarified by the Board circular, which are as under: i). Circular no.5-P(LXX-6) of 1968 dated 19.6.1Rs. 968 The circular clearly stated that "the reference in clause (a) of Section 11(1) is invariably to 'income' and not to 'total income'. The expression 'total income' has been specifically defined in section 2(45) as 'the total amount of income computed in the manner laid down in this Act." It would accordingly, be incorrect to assign to the word 'income' used in section 11(1)(a), the same meaning as has been specifically assigned to the expression 'total income' vide section2(45)." ii) CIT vs Programme for Community Organization 228 ITR 620....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Court held that (at page 180): "a mere look at section11 (1) and 11(2) is sufficient to dispel this argument. U/s 11(1) every charitable or religious trust, irrespective of whether it has filed a declaration u/s 11(2) or not, is entitled to deduction of certain income from its total income of the previoys year. The income so exempt is the income which is applied by the charitable or religious trust to its charitable or religious purposes in India. If the entire income is so applied, the entire income would be exempted. If the entire income is not applied but some income is accumulated by such a trust, then also u/s 11(1)(a) such accumulated income to the extent of 25% of the total income (or Rs. 10,000/-, whichever is higher) woul....