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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
PER OM PRAKASH KANT, AM
This appeal by the assessee is preferred against order dated 09.03.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds:
“1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in allowing the accumulation at 15% of gross receipts instead of net income.”
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Briefly stated facts of the case are that the assessee was Briefly stated facts of the case are that the assessee was Briefly stated facts of the case are that the assessee was engaged in the business of Environmental protection through land engaged in the business of Environmental protection engaged in the business of Environmental protection fill etc. In the assessment completed u/s 143(3) of the Income n the assessment completed u/s 143(3) of the Income-tax n the assessment completed u/s 143(3) of the Income Act, 1961 (in short ‘the Act’) dated 20.03.2015, the total income was rt ‘the Act’) dated 20.03.2015, the total income was rt ‘the Act’) dated 20.03.2015, the total income was determined at Nil. Subsequently, the Assessing Officer issued show t Nil. Subsequently, the Assessing Officer issued show t Nil. Subsequently, the Assessing Officer issued show cause notice proposing to rectify the assessment order , which was cause notice proposing to rectify the assessment order cause notice proposing to rectify the assessment order passed u/s 143(3) of the Act u/s 143(3) of the Act, on the ground that the on the ground that the assessee trust was allowed accumulation u/s 11(1) of the Act on gross receipt was allowed accumulation u/s 11(1) of the Act on gross receipt was allowed accumulation u/s 11(1) of the Act on gross receipt instead of net income which instead of net income which resulted in under assessment of under assessment of income by Rs.1,71,17,333/ income by Rs.1,71,17,333/-. The assessee objected for rectification, . The assessee objected for rectification, however, the Ld. Assessing Officer in his order u however, the Ld. Assessing Officer in his order u/s 154 of the Act /s 154 of the Act dated 04.09.2019 restricted the accumulation of income u/s 11(1) dated 04.09.2019 restricted the accumulation of income u/s 11(1) dated 04.09.2019 restricted the accumulation of income u/s 11(1) of the Act on net income. On further appeal, the Ld. CIT(A) allowed of the Act on net income. On further appeal, the Ld. CIT(A) allowed of the Act on net income. On further appeal, the Ld. CIT(A) allowed relief to the assessee observing as under: relief to the assessee observing as under:
“5. Decision “5. Decision 1. The assessee has raised six grounds of 1. The assessee has raised six grounds of 1. The assessee has raised six grounds of appeal. Ground Nos. 1, 4, 5 and 6 are general in nature and Ground Nos. 1, 4, 5 and 6 are general in nature and Ground Nos. 1, 4, 5 and 6 are general in nature and no specific adiudication is called for. Hence, the same no specific adiudication is called for. Hence, the same no specific adiudication is called for. Hence, the same are dismissed. are dismissed. 2. Ground No. 2 & 3 relates to disallowance of 2. Ground No. 2 & 3 relates to disallowance of 2. Ground No. 2 & 3 relates to disallowance of accumulation u/s 11(1)(a). After carefully considering accumulation u/s 11(1)(a). After carefully considering accumulation u/s 11(1)(a). After carefully considering the e-submission filed submission filed by appellant and upon perusal by appellant and upon perusal of the order of the assessing officer. The appellant is of the order of the assessing officer. The appellant is of the order of the assessing officer. The appellant is registered as a company under section 25 of the registered as a company under section 25 of the registered as a company under section 25 of the Companies Act. 1956 as per the Certificate of Companies Act. 1956 as per the Certificate of Companies Act. 1956 as per the Certificate of incorporation granted on 0 incorporation granted on 0-11-1998. The appellant is 1998. The appellant is also registered as a ch also registered as a charitable institution under aritable institution under section 12A of the Income Tax Act. section 12A of the Income Tax Act. The main objects of the appellant as per Memorandum The main objects of the appellant as per Memorandum The main objects of the appellant as per Memorandum of Association areas under: of Association areas under:
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a)To constitute and maintain an organization for a)To constitute and maintain an organization for a)To constitute and maintain an organization for treatment of Industrial solid wastes generated in treatment of Industrial solid wastes generated in treatment of Industrial solid wastes generated in the area of ope the area of operation b)To act as an advisor for the process and b)To act as an advisor for the process and b)To act as an advisor for the process and treatment of pollution such as Air Pollution, Water treatment of pollution such as Air Pollution, Water treatment of pollution such as Air Pollution, Water Pollution, Pollution, Pollution, Waste Waste Waste Water Water Water Pollution, Pollution, Pollution, Sewage, Sewage, Sewage, Industrial Hazardous Solid Wastes, Chemicals, Industrial Hazardous Solid Wastes, Chemicals, Industrial Hazardous Solid Wastes, Chemicals, Gases Effluents from Industries and all other kinds Gases Effluents from Industries and all other kinds Gases Effluents from Industries and all other kinds of of environmental environment al pollution. pollution. Accordingly Accordingly such such income was claimed exempt under section 11, income was claimed exempt under section 11, income was claimed exempt under section 11, being being being a a a registered registered registered charitable charitable charitable organization. organization. organization. However, However, However, the the the assessing assessing assessing officer officer officer passed passed passed the the the rectification order us 154 of IT Act stating that rectification order us 154 of IT Act stating that rectification order us 154 of IT Act stating that there was a mistake apparent from record in the there was a mistake apparent from record in t there was a mistake apparent from record in t assessment order and restricted accumulation of assessment order and restricted accumulation of assessment order and restricted accumulation of 15 percent u/s 11(1)(a) to Rs. 15814824 as against 15 percent u/s 11(1)(a) to Rs. 15814824 as against 15 percent u/s 11(1)(a) to Rs. 15814824 as against Rs. 31990443/ Rs. 31990443/- allowed in the assessment order allowed in the assessment order u/s 143(3) of the IT Act. As per Section 11(1) of the u/s 143(3) of the IT Act. As per Section 11(1) of the u/s 143(3) of the IT Act. As per Section 11(1) of the IT Act, the existing provisions related to, two kinds IT Act, the existing provisions related to, two kinds IT Act, the existing provisions related to, two kinds of accumulation are possible: of accumulation are possible: 1. Accumulation upto 15% of income under section 1. Accumulation upto 15% of income under section 1. Accumulation upto 15% of income under section 11(1). 11(1). 11(1). Such Such Such accumulations accumulations accumulations are are are not not not subject subject subject to to to application within a maximum permissible period of 5 application within a maximum permissible period of 5 application within a maximum permissible period of 5 years. In -other words, 15% of income can be retained other words, 15% of income can be retained by a charitable organisa by a charitable organisation without applying it for tion without applying it for charitable purposes in the year in which the income charitable purposes in the year in which the income charitable purposes in the year in which the income was accrued. This 15% accumulation is an indefinite was accrued. This 15% accumulation is an indefinite was accrued. This 15% accumulation is an indefinite accumulation and the organisation does not have to accumulation and the organisation does not have to accumulation and the organisation does not have to apply it for charitable purposes in subsequent years. apply it for charitable purposes in subsequent years. apply it for charitable purposes in subsequent years. It can be retained It can be retained as a part of its corpus of capital. as a part of its corpus of capital. 2. Accumulation beyond 15% of income under section 2. Accumulation beyond 15% of income under section 2. Accumulation beyond 15% of income under section 11(2). Such accumulations are subject to application 11(2). Such accumulations are subject to application 11(2). Such accumulations are subject to application within a maximum permissible period of 5 years. In within a maximum permissible period of 5 years. In within a maximum permissible period of 5 years. In other words income in excess of 15% cannot be other words income in excess of 15% cannot be other words income in excess of 15% cannot be retained by a char retained by a charitable or religious organisation. If itable or religious organisation. If the income is not spent in the current year then the the income is not spent in the current year then the the income is not spent in the current year then the assessee is permitted to spend it within the next 5 assessee is permitted to spend it within the next 5 assessee is permitted to spend it within the next 5 years. Further, Further, Further, the the the appellant appellant appellant submitted submitted submitted that that that the the the accumulation is with respect to the income of the accumulation is with respect to the income of the accumulation is with respect to the income of the appellant and n appellant and not receipts net of application of income. ot receipts net of application of income. The receipts of Rs. The receipts of Rs. 21,32,69,612/- is the income for is the income for
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the purposes of accumulation of as per section the purposes of accumulation of as per section the purposes of accumulation of as per section 11(1). From the reading of section 11 (1), it is clear that the From the reading of section 11 (1), it is clear that the From the reading of section 11 (1), it is clear that the benefit of accumulation of benefit of accumulation of 15% of income should be 15% of income should be calculated with reference to the total receipts of the calculated with reference to the total receipts of the calculated with reference to the total receipts of the charitable institution and not with reference to income charitable institution and not with reference to income charitable institution and not with reference to income after reducing the amount applied. Therefore, the after reducing the amount applied. Therefore, the after reducing the amount applied. Therefore, the appellant has rightly calculated the accumulation appellant has rightly calculated the accumulation appellant has rightly calculated the accumulation amount of Rs. 3,19,90,442 being 15% of Rs. amount of Rs. 3,19,90,442 being 15% of Rs. amount of Rs. 3,19,90,442 being 15% of Rs. 21,32,69,612 as per the provisions of section 11(1). 1,32,69,612 as per the provisions of section 11(1). 1,32,69,612 as per the provisions of section 11(1). Accordingly, I have relied on the decision of Mumbai Accordingly, I have relied on the decision of Mumbai Accordingly, I have relied on the decision of Mumbai Special Bench in the case of Sai Sonabai Hiri Trust Vs. Special Bench in the case of Sai Sonabai Hiri Trust Vs. Special Bench in the case of Sai Sonabai Hiri Trust Vs. ITO on 22 September 2014 in the favour of assesse. ITO on 22 September 2014 in the favour of assesse. ITO on 22 September 2014 in the favour of assesse. Hence, the A is directed to delete the addit Hence, the A is directed to delete the addit Hence, the A is directed to delete the addition the addition and allow the accumulation at 15% of gross addition and allow the accumulation at 15% of gross addition and allow the accumulation at 15% of gross receipts. Ground No. 2 & 3 of appeal are allowed. receipts. Ground No. 2 & 3 of appeal are allowed. receipts. Ground No. 2 & 3 of appeal are allowed.” 3. Despite notifying, before us notifying, before us none attended on behalf of the none attended on behalf of the assessee and therefore appeal was heard ex fore appeal was heard ex-parte qua the assessee parte qua the assessee after hearing arguments of the Ld. Departmental Representative guments of the Ld. Departmental Representative guments of the Ld. Departmental Representative (DR).
We find that under the provisions of section 11(1) of the Act We find that under the provisions of section 11(1) of the Act We find that under the provisions of section 11(1) of the Act the accumulation of the income @ 15% has been permitted on the accumulation of the income @ 15% has been permitted on the accumulation of the income @ 15% has been permitted on income received from the property income received from the property, which means gross receipt which means gross receipt has to be considered for the purpose of the accumulation of income. ed for the purpose of the accumulation of income. Th ed for the purpose of the accumulation of income. provisions of the Act are clear and there is no ambiguity in said provisions of the Act are clear and there is no ambiguity in said provisions of the Act are clear and there is no ambiguity in said provisos. For ready reference said provisions are reproduced as provisos. For ready reference said provisions are reproduced as provisos. For ready reference said provisions are reproduced as under:
“11. (1) (1) Subject Subject to to the the provisions provisions of sections of sections 60 to 63 63, the following income shall not be included , the following income shall not be included in the total income of the previous year o in the total income of the previous year of the person f the person in receipt of the income in receipt of the income—
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(a) income derived from property held under trust income derived from property held under trust income derived from property held under trust wholly for charitable or religious purposes, to the wholly for charitable or religious purposes, to the wholly for charitable or religious purposes, to the extent to which such income is applied to such extent to which such income is applied to such extent to which such income is applied to such purposes in India; and, where any such income is purposes in India; and, where any such income is purposes in India; and, where any such income is accumulated or se accumulated or set apart for application to such t apart for application to such purposes in India, to the extent to which the income so purposes in India, to the extent to which the income so purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per accumulated or set apart is not in excess of fifteen per accumulated or set apart is not in excess of fifteen per cent of the income from such property; cent of the income from such property; (b) income derived from property held under trust in income derived from property held under trust in income derived from property held under trust in part only for suc part only for such purposes, the trust having been h purposes, the trust having been created before the commencement of this Act, to the created before the commencement of this Act, to the created before the commencement of this Act, to the extent to which such income is applied to such extent to which such income is applied to such extent to which such income is applied to such purposes in India; and, where any such income is purposes in India; and, where any such income is purposes in India; and, where any such income is finally set apart for application to such purposes in finally set apart for application to such purposes in finally set apart for application to such purposes in India, to the extent India, to the extent to which the income so set apart is to which the income so set apart is not in excess of fifteen per cent of the income from not in excess of fifteen per cent of the income from not in excess of fifteen per cent of the income from such property; such property; (c) income derived from property held under trust income derived from property held under trust income derived from property held under trust— (i) created on or after the 1st day of April, 1952, created on or after the 1st day of April, 1952, created on or after the 1st day of April, 1952, for a charitable purpose which tends to for a charitable purpose which tends to promote promote international welfare in which India is interested, international welfare in which India is interested, international welfare in which India is interested, to the extent to which such income is applied to to the extent to which such income is applied to to the extent to which such income is applied to such purposes outside India, and such purposes outside India, and (ii) for charitable or religious purposes, created for charitable or religious purposes, created for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to before the 1st day of April, 1952, to the extent to before the 1st day of April, 1952, to the extent to which suc which such income is applied to such purposes h income is applied to such purposes outside India: outside India: Provided that the Board, by general or special order, that the Board, by general or special order, has directed in either case that it shall not be included has directed in either case that it shall not be included has directed in either case that it shall not be included in the total income of the person in receipt of such in the total income of the person in receipt of such in the total income of the person in receipt of such income; (d) income in the form of income in the form of voluntary contributions voluntary contributions made with a specific direction that they shall form made with a specific direction that they shall form made with a specific direction that they shall form part of the corpus of the trust or institution. part of the corpus of the trust or institution.[subject to [subject to the condition that such voluntary contributions are the condition that such voluntary contributions are the condition that such voluntary contributions are invested or deposited in one or more of the forms or invested or deposited in one or more of the forms or invested or deposited in one or more of the forms or
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modes modes specified specified in sub-section section (5) (5) maintained maintained specifically for such corpus]” specifically for such corpus]” 4.1 In view of the provisions of the Act, we don’t find any error in 4.1 In view of the provisions of the Act, we don’t find any 4.1 In view of the provisions of the Act, we don’t find any the order of the Ld. CIT(A) on the issue in dispute which has been the order of the Ld. CIT(A) on the issue in dispute which has been the order of the Ld. CIT(A) on the issue in dispute which has been passed as per the provisions of the Act and therefore, we passed as per the provisions of the Act and therefore, we passed as per the provisions of the Act and therefore, we accordingly, we uphold the same. The sole ground raised by the uphold the same. The sole ground raised by the uphold the same. The sole ground raised by the Revenue is accordingly dismissed. Revenue is accordingly dismissed.
In the result, the appeal filed by the Revenue is dismissed. In the result, the appeal filed by the Revenue is dismissed. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on 25 nounced in the open Court on 25/07/2023. /07/2023. Sd/ Sd/- Sd/ Sd/- (KAVITHA RAJAGOPAL KAVITHA RAJAGOPAL) (OM PRAKASH KANT AKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 25/07/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai