BALJEEVAN TRUST ,MUMBAI vs. INCOME TAX OFFICER (EXEM. WARD 1(1), MUMBAI

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.”

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.

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.

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'.”

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:

The aforesaid contention has been accepted by the Tribunal. The findings recorded are in consonance with ratio of several decisions of this Court.

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:-

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.