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Income Tax Appellate Tribunal, PANAJI BENCH, PANAJI
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER
I.T.A. No. 120/PAN/2018 Assessment Year: 2013-14
Mineral Foundation of Goa Vs. Asstt. Commissioner of Income Post Box 113, Vaglo Building, Tax (Exemption), Circle-1, Behind Clube National, Mangalore Panaji, Goa-403001 [PAN: AAAJM 0218Q] (Appellant) (Respondent)
Appellant by : Sh. Ketan Ved, CA Respondent by: Smt. Rijula Uniyal, Sr. DR Date of Hearing: 31.03.2022 Date of Pronouncement: 04.04.2022 ORDER Per Anikesh Banerjee, JM:
The instant appeal was filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-10, Bengaluru passed u/s 250(6) of the Income Tax Act, 1961 bearing ITA No.3/MNG/CIT(A)MNG/2016-17 dated 30.01.2018 for A.Y. 2013-14. 2. Brief fact is that the assessee is a charitable trust. It is registered u/s 12AA of the Income Tax Act (in brevity the Act). The assessment was made u/s 143(3) for
ITA No. 120/PAN/2018 2 Mineral Foundation of Goa v. ACIT assessment year 2013-14 by the Ld. ACIT(E), Circle-1, Mangaluru. The Ld. Assessing Officer (in brevity the AO) calculated the deduction u/s 11(1)(a) at the rate of 15% on actual receipt of the assessee & passed the order accordingly. The total gross income for the financial year 2012-13 is Rs.9,95,44,952/-. The Ld. AO calculated the actual receipts of the assessee amount to Rs.2,11,16,139/-. Accordingly calculated the deduction u/s 11(1)(a) at the rate of 15% which is amount to Rs.31,67,421/-. On other hand the assessee calculated the deduction u/s 11(1)(a) amount of Rs.60,65,330/- on gross income. The assessee filed an appeal before the Ld. CIT(A) and the Ld. CIT(A) upheld the order of the Ld. AO. after receiving the impugned appeal order, the assessee filed the appeal before the ITAT.
In relation to this disallowance u/s 11(1)(a) the observation of the Ld. AO is as follows:
“6. Deduction claimed U/s. 11(1)(a): As per the provisions of Section 11(1)(a), an amount of 15% of the income available towards application is allowed as a deduction, provided 85% is applied towards the objects of the Trust. This deduction is allowable on the basis of funds available with the Trust for its application. The assesse trust is allowed to claim, deduction in respect of Funds not received during the year. In the case of the assesse, out of an amount of Rs. 9.95 Crores shown as Gross Receipts an amount of Rs. 8.44 Crores has not actually been received during the year. However, an amount of Rs. 0.60 Crores of the previous year has been received during the Current Year. Thus the actual receipts of the assesse Trust for the year amounts to Rs. 2.11 Crores and 15% of the same is allowed as deduction U/s. 11(1)(a) of the Income Tax Act, 1961.”
The Ld. DR relied on the orders of the Revenue Authorities. Accordingly observation of the Ld. CIT(A) is reproduced as under:
ITA No. 120/PAN/2018 3 Mineral Foundation of Goa v. ACIT “5.3.3 I have considered both the calculations of deduction u/s 11(1)(a) of the Act. Section 11(1)(a) refers to income derived from property held under trust wholly for charitable or religious purposes and its application in India for such purposes. An assessee can accumulate or set apart 15% of such income for the said purposes. From the provision of the section it is very clear that it refers to real income and not hypothetical income. Income which has not been actually received cannot be applied for any religious or charitable purposes. So there is no question of accumulating or setting apart for such purposes. Therefore, I am of the considered view that the appellant cannot claim deduction u/s 11(1)(a) on the income which has not been actually received during the year. Accordingly, I uphold the order of the AO so far as it relates to the issue of deduction u/s 11(1)(a) of the Act. Accordingly, this ground of appeal raised by the appellant fails.”
The Ld. counsel of the assessee pointed out that the observations of both the Revenue Authorities are contrary to the order of the Hon’ble Supreme Court in the case of CIT v. Programme for Community Organisation, 241 ITR 1. The Ld counsel relied on the following paragraph of the judgment which is as follows:
“The question that really requires consideration is whether, for the purposes of section 11(1)(a) of the Income-tax Act, 1961, the amount for the grant of exemption of twenty-five per cent should be the income of the trust or it should be its total income as determined for the purposes of assessment to income-tax. This question has to be answered in the light of these facts: The assessee-trust received donations in the aggregate sum of Rs.2,57,376. It applied thereout for its charitable purposes the aggregate sum of Rs.1,70,369 leaving a balance of Rs. 87,010. The question is whether the assessee is entitled to accumulate twenty-five per cent. Of Rs.2,57,376 as it contends, or twenty-five per cent of Rs.87,010, as the Revenue appeared to contend. Section 11(1)(a) reads thus : “11. (1)(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 twenty-five per cent of the income from such property.” Having regard to the plain language of the above provision, it is clear 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.
ITA No. 120/PAN/2018 4 Mineral Foundation of Goa v. ACIT For the aforesaid reasons, the civil appeal is dismissed. No order as to costs.
We heard the rival submission. In the observation of the Ld. CIT(A) is mentioned that the deduction should not be on hypothetical income. But the gross income which was received by the assessee during the year is not hypothetical. The action directed by the Ld CIT(A) is totally devoid of any logic. The gross income is entered in the books of the assessee and accordingly reflected in final accounts. The gross income should be ascertained from books of accounts of the assessee- trust. The calculation on actual receipt of assessee made by the Ld AO is contrary to the view of the Act. Having regard to the clear pronouncement of their Lordships of the Supreme Court the assessee is eligible for deduction amount to Rs. 60,65,330/-U/s 11(1)(a) of the Act. Accordingly the grounds of the assesses are allowed. 7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 04.04.2022
Sd/- Sd/- (Dr. M. L. Meena) (Anikesh Banerjee) Accountant Member Judicial Member Date: 04.04.2022 *GP/Sr. PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(A), (4) The CIT concerned (5) The Sr. DR, I.T.A.T
ITA No. 120/PAN/2018 5 Mineral Foundation of Goa v. ACIT (6) The Guard File