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Income Tax Appellate Tribunal, “SMC” BENCH,
Before: SHRI ABY T. VARKEY, JM & SHRI S RIFAUR RAHMAN, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI S RIFAUR RAHMAN, AM आयकर अपील सं/ I.T.A. No.1872/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2016-17) Bal Jeevan Trust बिधम/ ITO (E), Ward-1(1) A/14, Sterling Apartments, Piramal Chamber, Lal Vs. Peddar Road, Mumbai- Baug, Parel, Mumbai- 400026. 400012. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAATB2973M (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee by: Shri J. D. Mistri Revenue by: Shri S. N. Kabra (Sr. AR) सुनवाई की तारीख / Date of Hearing: 29/11/2023 घोषणा की तारीख /Date of Pronouncement: 12/12/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee trust against the order of the Ld. Commissioner of Income Tax (Appeals)/(NFAC), Delhi dated 15.03.2023 for the assessment year 2016-17. 2. The main grievance of the assessee is against the action of the Ld. CIT(A) in not allowing the accumulation of Rs.30 Lakhs as per section 11(2) of the Income Tax Act, 1961 (hereinafter “the Act”) read with Rule 17 of the Income Tax Rules, 1962 (hereinafter “the Rules”).
Brief facts are that the assessee trust filed its return of income on 17.10.2016 declaring total income of Rs.11,83,030/-. The AO notes that the assessee is a public charitable trust registered u/s 12A of the Act vide registration No.TR/32671 dated 11.07.1996 and also with Charity Commissioner. The AO noted the object of the assessee trust
2 A.Y. 2016-17 Bal Jeevan Trust inter-alia as Healthcare, Nutrition, Literacy and Basic Education to rag picking/street children in Mumbai, functioning from two (2) classrooms in Vakola Municipal Schools. The AO noted that the assessee had shown gross receipts of Rs.69,49,289/- and has offered towards the object of the trust a sum of Rs.18,83,357/- out of which it has spent only a sum of Rs.15,99,351/- for educational activities. According to the AO, as per section 11(1)(a) of the Act, the assessee had to apply 85% of gross receipts towards the object during the relevant year. But has utilized only 10% of the gross receipt and accumulated 75% of the gross receipt (Rs.30 Lakhs) u/s 11(2) of the Act by filing Form 10. According to the AO, the purpose for the accumulation of income as shown in Form-10 was “Basic Education, Health Care and Nutrition to Underprivileged children”, which is not for a specific purpose and instead was for general purpose. And the AO further noted that assessee has been accumulating receipts for earlier six years and not utilizing the sum accumulated for charitable purpose, and instead has been adding back the sum in the sixth year of accumulation year on year. According to him, accumulation of amount u/s 11(2) of the Act is for the fulfillment of any project within its object or objects needs heavy outlay of money. And since the assessee has merely mentioned that the accumulation was for the purpose of “Basic Education, Health Care and Nutrition to Underprivileged children” which is not specific, he wondered as to what purpose the assessee has accumulated the amount as per Form 10. Therefore, he was of the opinion that the accumulation claim made u/s 11(2) of the 3 A.Y. 2016-17 Bal Jeevan Trust Act needs to be disallowed and consequently he added back the same to the total income of the assessee trust. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A)/NFAC who reiterated the view of the AO and after citing the decision of the Hon’ble Calcutta High Court in the case of Director of Income Tax v Trustees of Singhania Charitable Trust (1993) 199 ITR 819 (Cal) and the decision of the Hon’ble Punjab & Harayana High Court in the case of Maharaja Ranjit Singh War Museum v CIT order dated 20.03.2020 (ITA. No.259 of 2019), Ld CIT(A) held that since the reason given for accumulation was not specific and is only a reiteration of the broad objectives of the trust, the assessee doesn’t satisfy the requirement of section 11(2) of the Act read with Rule 17 of the Rules. Aggrieved by the aforesaid action of the Ld. CIT(A)/NFAC, the assessee is before us.
We have heard both the parties and perused the records. The Ld. Sr. Counsel Shri J. D. Mistri appearing for the assessee Trust submitted that the assessee is entitled to accumulate income under sub- section (2) of section 11 of the Act, which permits the assessee trust to accumulate or set of apart, either in whole or in part, for application to such purposes in India, such income accumulated or set apart out of the 85% of its income then, the such income shall not be included in the total income of the previous year of the assessee, if assessee satisfy three (3) conditions: -
a. such person furnishes a statement in the prescribed form (Form 10) and in the prescribed manner (Rule 17) to the 4 A.Y. 2016-17 Bal Jeevan Trust Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years;
b. the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5);
c. the statement referred to in clause (a) is furnished the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year.”
According to the Ld. Sr. Counsel, the assessee has fulfilled the condition as prescribed u/s 11(2) of the Act i.e conditions enumerated under clause (a), (b) & (c) (supra). According to the Ld. Counsel merely because assessee has stated the purpose for which the income is being accumulated as “Basic Education, Health Care and Nutrition to Underprivileged children”, the Ld. CIT(A) could not have upheld the action of the AO. To bolster his contention, the Ld. Sr. Counsel referred to the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Hotel and Restaurant Association (261 ITR 190) wherein the Hon’ble Delhi High Court in similar case framed the question of law as under: -
A. “A. Whether, on the facts and circumstances of the case, the Tribunal is justified in holding that the accumulation of income by the assessed under Section 11(2) of the 5 A.Y. 2016-17 Bal Jeevan Trust Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for all objects for which the trust was created and not for specific purpose was neither prejudicial nor erroneous to the interests of the Revenue ? B. Whether Section 11(2) of the Act makes it necessary for the assessed to make specific mention of any purpose or purposes to enable it to accumulate the income ?"
And answered the same by observing as under: -
“2. Briefly stated the material facts, leading to the present appeal, are that the respondent-assessed is a company registered under Section 25 of the Companies Act, 1956. It had been granted registration under Section 12A(a) of the Act. For the relevant previous year ending March 31, 1992, by means of a resolution, the assessed decided to accumulate its income for a period of ten years for fulfillment of the objects for which it had been created. Notice to that effect was given by filing the requisite statutory form, giving particulars of the income sought to be accumulated and invested in the specified securities. However, while completing the assessment for the relevant assessment year the Assessing Officer declined to take into consideration the amounts so accumulated on the ground that in the statutory form the specific object for which the income was sought to be accumulated was not indicated. He, accordingly, brought the said amount to tax.
Aggrieved the assessed preferred an appeal to the Commissioner of Income-tax (Appeals), who, by his order dated April 26, 1995, accepted the claim of the assessed. While holding that the notice to accumulate income by the assessed was in order, the Commissioner (Appeals) observed that the assessed had passed a resolution to accumulate its income so as to apply the same in India in the next ten
6 A.Y. 2016-17 Bal Jeevan Trust years to achieve the object for which it had been incorporated ; notice of this fact had been given to the Assessing Officer in the prescribed format and further the said money had been invested in the specified securities. The Commissioner (Appeals), thus, held that the assessed was entitled to exemption under Section 11(1)(b) of the Act.
Being dissatisfied, the Revenue carried the matter in appeal to the Tribunal. The Tribunal has affirmed the view taken by the Commissioner (Appeals). It has also noticed that the assessed had applied the accumulated income for achieving its object. Hence, the present appeal.
We have heard Mr. R.D. Jolly, learned senior standing counsel for the Revenue, Mr. Jolly submits that the appellate authorities have failed to appreciate that in the prescribed form the assessed had failed to indicate the specific purpose for which the income was sought to be accumulated and, therefore, the statutory requirement had not been strictly complied with, disentitling the assessed from relief under Section 11(2) of the Act.
We do not agree. It is true that specification of certain purpose or purposes is needed for accumulations of the trust's income under Section 11(2) of the Act. At the same time the purpose or purposes to be specified cannot be beyond the objects of the trust. Plurality of the purposes for accumulation is not precluded but it depends on the precise purpose for which the accumulation is intended. In the present case, both the appellate authorities below have recorded a concurrent finding that the income was sought to be accumulated by the assessed to achieve the object for which the assessed was incorporated. It is not the case of the Revenue that any of the objects of the asses-see-company were not for charitable purpose. The aforenoted finding by the Tribunal is essentially a finding of fact giving rise to no question of law.
7 A.Y. 2016-17 Bal Jeevan Trust 7. We, accordingly, decline to entertain the appeal. The same is dismissed.”
The Ld. Sr. Counsel drew our attention to the decision of the Hon’ble Delhi High Court in the case of DIT(E) v Daulat Ram Education Society (2005) 278 ITR 260 (Del) wherein the Hon’ble High Court reiterated the judicial precedent laid down in Hotel and Restaurant Association (supra) and observed as under: - “4. The Tribunal has placed reliance upon the judgment of a Division Bench of this court in CIT v. Hotel & Restaurant Association [2003] 261 ITR 190. In that case also the assessee had accumulated the unspent amount for being spent on more than one purposes specified by it. The question for consideration was whether it was necessary for the assessee to make a specific mention of any purpose or purposes to enable it to accumulate the income. The court held that section 11(2) of the Act did not prohibit plurality of purposes. The court also held that the purposes which the assessee had specified formed part of its objects and were charitable in nature. The position is no different in the instant case. Here too, out of 29 purposes/objects stipulated in the memorandum of association, the assessee has specified eight purposes in Form No. 10 for which it was accumulating the unspent income while claiming benefit under section 11. It is not the case of the revenue that any of these eight purposes are not charitable or that the same do not figure in the memorandum of association. In the circumstances, just because more than one purpose have been specified and just because details about the plans which the assessee has for spending on such purposes are not given may not be sufficient to deny the exemption admissible to it under section 11. So long as one or more of the purposes specified by the assessee find place in the objects for which the society has been incorporated and so long as the 8 A.Y. 2016-17 Bal Jeevan Trust said purpose are charitable in character, the benefit admissible under section 11 must flow to the assessee. 5. In the light of what is stated above, no substantial question of law arises for consideration. The appeal fails and is hereby dismissed.”
The Ld. Sr. Counsel also cited the decision of the Hon’ble Delhi High Court in the case of DIT(E) v Nbie Welfare Society (2015) 370 ITR 490 (Del) wherein the Hon’ble High Court has framed the question of law as under: -
“Whether the ITAT was correct in holding that by mentioned (sic. mentioning) "Further utilization" in Form No. 10 read with Rule 17 of the Income Tax Rules, 1962 the Assessee has fulfilled its obligation as required under Section 11 (2) of the Act'.” 9. And the Hon’ble Delhi High Court while answering the question of law has also referred to the decision of the Hon’ble Calcutta High Court in the case of DIT(E) v Trustees of Singhania Charitable Trust (1993) 199 ITR 819 (Cal) which was cited by Ld. CIT(A) in the impugned order in order to uphold the action of the AO; and the Hon’ble High Court (supra) has distinguished on the facts the decision in Trustees of Singhania Charitable Trust (supra), wherein that charitable trust had as many as eighteen (18) objectives and there was no specific objective for which accumulation had been sought, and thus distinguished that case law; and the Hon’ble Delhi High Court followed the judicial precedent laid down in Hotel and Restaurant Association (supra), Bharat Kalyan Pratisthan v DIT(E) (2008) 299 ITR 406 (Del), Daulat Ram Education Society (supra), DIT(E) v
9 A.Y. 2016-17 Bal Jeevan Trust Mamta Health Institute for Mother and Children (2007) 293 ITR 380 (Del) and the Hon’ble High Court held as under: - “9. In the present case, the assessing officer himself had noted in the assessment order that the aim and objective of the assessee was to work for the welfare of the employees of New Bank of India. This undoubtedly was the purpose and objective of the society. Therefore, during the course of assessment proceeding as is apparent from the appellate proceedings, the assessee has clarified and stated that the money in question would only be used for the purpose of making payments to the members or their legal representatives in case of their death, retirement or permanent disability. The Tribunal in the impugned order has also referred to the scheme floated by the respondent assessee under which the employees who were desirous of becoming members had to deposit Rs.10/- as admission fees and thereafter pay Rs.25/- per month for a period of 25 years. The scheme devised provided:— ' PRESENT SCHEME Membership : Membership of the society shall be open to the permanent employees of New Bank of India. Any employee desirous of becoming member may apply on the prescribed form on payment of Rs.10/- as admission fee, duly recommended by any of the office bearer or Managing Committee member of the society employees appointed on part-time basis and 1/3rd or 2/3rd salary are not eligible for membership. Subscription : Under the present scheme, every member shall subscribe a sum of Rs.25/- per month for a period of 25 years. Benefits: (a) in the case of death:
10 A.Y. 2016-17 Bal Jeevan Trust
(i) Members in the age group of below 50 years (as on 31-7-85) will be entitled to the following benefits:-
(a) A sum of Rs.500/- p.m. shall be paid to the nominee of the deceased member for a period of 15 years. (b) Lump sum additional payment of Rs.15,000/- shall be made to the nominee of the deceased member in addition in the benefit referred above if the member dies during the period of service in the bank. (ii) Members in the age group of above 50 years (as on 31-07-1985) will be entitled to the following benefits:- (a) A sum of Rs.500/- p.m. shall be paid to the nominee of the deceased member till the age of retirement with a minimum period of 5 years. (b) A lumpsum payment of Rs.15,000/- shall be made to the nominee of the deceased member in addition to the benefit referred above (ii-a) if the member dies during the period of service in the bank. Other benefits are also there which are in case of retirement and these have been given in part "B" of this scheme to the extent that a sum of Rs.500/- per month shall be paid to the members as per calculation given in the same. Further, other benefits in the cases of death and permanent disability have also been given. Lastly, benefit have been given on resignation from bank prior to the retirement. The contention of the learned counsel is that this is the only object of the assessee and there are no plurality of the objects and as such if the 11 A.Y. 2016-17 Bal Jeevan Trust
assessee had mentioned in form no. 10 that the accumulation of the funds w0ere for "further utilization" the very purpose is to utilize the amount of accumulation for further benefits to be given to the members in the case of death, retirement, permanent disability ' 10. Other benefits which were specified in part (b) of the Scheme, which stipulated that a sum of Rs.500/- shall be paid to the members on the event specified therein. 11. The aforesaid contention has been accepted by the Tribunal. The findings recorded are in consonance with ratio of several decisions of this Court. 12. In view of the factual background, the substantial question of law in terms of the decisions of this court has to be answered in favour of respondent assessee and against the appellant. The appellant revenue, is not entitled to succeed. The appeal is disposed of. There will be no order as to costs.”
In the light of the aforesaid case laws, the Ld. Sr. Counsel wants us to allow the accumulation of income u/s 11(2) of the Act. For completeness, he also drew our attention to page no. 20 of PB, wherein the chart depicting the statement of income, expenses, and accumulation from AY. 2010-11 to AY. 2023-24 is given, which is reproduced as under:-
12 A.Y. 2016-17 Bal Jeevan Trust
BALJEEVAN TRUST STATEMENT OF INCOME EXPENSES AND ACCUMULATION Assessment Income 15% Exemption Income after Application and Excess of Accumulation years exemption Expenses Income over Application AY. 2010-11 1213535 182030 1031505 850614 180891 180891 AY. 2011-12 2304084 345613 1958471 981651 976820 975000 AY. 2012-13 1393294 208994 1184300 1112200 1039883 72100 AY. 2013-14 2802540 420381 2382159 1342276 1112127 850000 AY. 2014-15 3171909 475786 2696123 1583996 2255003 1100000 AY. 2015-16 4480209 672031 3808178 1553175 4002138 2010000 AY. 2016-17 6949289 1042393 5906896 1904758 774506 3000000 AY. 2017-18 3906695 586004 3320691 2546185 892033 775000 AY. 2018-19 4021910 603287 3418624 2526591 2562332 530000 AY. 2019-20 8915851 1337378 7578474 5016142 2562332 3000000 AY. 2020-21 4660578 699087 3961491 3482837 478654 500000 AY. 2021-22 5039796 755969 4283827 3413125 870702 900000 AY. 2022-23 3774910 566237 3208674 3864102 -655429 3000000 AY. 2023-24 3583555 537533 3046022 4370325 -1324303 2850000
Drawing our attention to the chart above, the Ld. Sr Counsel pointed out that assessee trust takes care of the street-children and takes care of the welfare/education of the children; and it can be seen that in AY. 2022-23 & AY. 2023-24, the assessee has been applying excess income for charitable purpose, which fact can be discerned from the negative figures reflecting therein, which fact shows the bonafides of the assessee trust to utilize the income for the benefit of the street-children. In the light of the above facts, the Ld. Sr. Counsel want us to allow the accumulation of Rs.30 Lakhs u/s 11(2) of the Act. Per contra, the Ld. DR supporting the action of the Ld. CIT(A) relied on the decision of the Hon’ble Calcutta High Court(supra) as well as the Hon’ble Punjab & Harayana High Court (supra) and wants us not to interfere with the impugned action of Ld CIT(A). In his rejoinder, the Ld. Sr. Counsel submitted that when there are two views possible; and when there is no decision of the jurisdictional High Court on the issue, then the view which is favorable to the tax payer should be adopted by Tribunal and cited the decision of the Hon’ble Supreme
13 A.Y. 2016-17 Bal Jeevan Trust Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (1973) 88 ITR 192. 12. Having heard both the parties and after perusal of the records, we note that the assessee is a public charitable trust registered u/s 12A of the Act with the main objective to do philanthropic acts and to take care/education of street-children/under-privileged children. The objective for the Trust, which is discernable from perusal of the page no. 6 of PB, were to do philanthropic acts and to take care of street- children/under-privileged children and especially their (i) Health Care (ii) Nutrition (iii) Literacy and basic education (iv) Self-esteem (v) Group skill, support services and associated support services (vi) Income generating schemes and (vii) Advancement of any other, social welfare objective. In this case, the assessee filed its return of income declaring income at Rs.11,83,030/- which was e-filed on 17.10.2016. The assessee had shown gross receipts of Rs.69,49,289/- and had applied towards the object of the trust a sum of Rs.18,83,357/- [Excluding depreciation as per section 11(6) of the Act]. Thus, it was found that only a sum of Rs.15,99,351/- was applied for education activities out of Rs.18,83,357/-. According to AO, the assessee had not applied 85% of the income but has accumulated income of Rs.30 Lakhs u/s 11(2) of the Act for the purpose of “Basic Education, Health Care and Nutrition to Underprivileged children” which reason for accumulation, according to him, was not for a specific purpose, and instead was only a reiteration of the broad objectives of the trust. According to AO, this general purpose cannot satisfy the requirement
14 A.Y. 2016-17 Bal Jeevan Trust of section 11(2) of the Act read with Rule 17 of the Rules. According to AO, accumulation of income u/s 11(2) of the Act must be for heavy outlay of expenses and therefore he disallowed the same. On appeal, the Ld. CIT(A) confirmed the action of AO after citing the decision of the Hon’ble Calcutta High Court in the case of Director of Income Tax v Trustees of Singhania Charitable Trust (1993) 199 ITR 819 (Cal) and the decision of the Hon’ble Punjab & Harayana High Court in the case of Maharaja Ranjit Singh War Museum v CIT order dated 20.03.2020 (ITA. No.259 of 2019).
We do not countenance the action of the Ld. CIT(A). We note that assessee Trust while making a claim for accumulating income to the tune of Rs.30 Lakhs as per sub-section (2) of section 11 of the Act, has fulfilled the conditions prescribed therein by filing the Form 10 wherein the assessee has spelled out the purpose for accumulation as “Basic Education, Health Care and Nutrition to Underprivileged children” which we find is in consonance with the purpose/object of the trust itself. Therefore, according to us, the claim for accumulation u/s 11(2) of the Act cannot be denied to assessee. The Hon’ble Delhi High Court in the case of Hotel and Restaurant Association (supra), held that even though it is true that specification of certain purpose or purposes is needed for accumulation of trust’s income u/s 11(2) of the Act, but at the same time, the purpose or purposes to be specified cannot be beyond the objects of the Trust. Their Lordships observed “Plurality of the purposes for accumulation is not precluded, but it depends on the precise purpose for which the accumulation is 15 A.Y. 2016-17 Bal Jeevan Trust intended”. Thus, we find that in the present case that income sought to be accumulated by the assessee was to achieve the object for which the assessee was incorporated. We find that it is not the case of AO/Ld. CIT(A) that any of the objects of the assessee trust were not for the purpose beyond the object of the trust or not charitable purpose. Further, we note from the statement of financials of the trust that assessee has applied its income for the education, feeding and clothing of the street children of Mumbai. We note that the income sought to accumulated by assessee was to achieve the three objects for which the assessee was formed. Before us, the Ld. DR could not point out that purpose shown in Form 10 for accumulating Rs.30 Lakhs was not for object of the trust. In such a scenario, since assessee has satisfied the conditions laid down in section 11(2) of the Act for accumulation of the income, the same has to be allowed. It is also noted that from chart (supra) (statement of income, expenses and accumulation) it shows that the assessee in AY. 2022-23 & AY. 2023-24 has offered excess amount which had been applied for achieving the objects of the trust. In the light of the judicial precedents as laid down by Hon’ble Delhi High Court as noted (supra), we are inclined to allow the prayer of the assessee to allow accumulation of income u/s 11(2) of the Act of Rs.30 Lakhs by following the ratio of the Hon’ble Supreme Court decision in the case of M/s. Vegetables Products Ltd. (supra) since other view is also possible. Therefore, the appeal of the assessee is allowed.
Ground no. 6 is against the action of the Ld. CIT(A) in not allowing the credit for TDS of Rs.86,058/-. At the time of hearing no 16 A.Y. 2016-17 Bal Jeevan Trust arguments was advanced on this issue. However, we note that the Ld. CIT(A) has remanded this issue back to the file of the AO for verification and pass order. We confirm the action of the Ld. CIT(A) to the extent of remand back to the AO, and direct the AO to adjudicate the issue afresh without being influenced by the observation of Ld. CIT(A) given therein, and to give credit in accordance to law after hearing the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 12/12/2023. (S RIFAUR RAHMAN) JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 12/12/2023. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai गार्ड फाईल / Guard file. 5. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //// उि/सहधयक िंजीकधर /(Dy./Asstt.