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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
Per : Kuldip Singh, Judicial Member:
Aforesaid appeals bearing common question of law and facts pertaining to AYs 2018-19 and 2019-20 are being disposed of by way of composite order to avoid repetition of discussion.
The appellant, M/S. Board of Examination for Seafarers Trust, Mumbai (hereinafter referred to as ‘the assessee) by filing present appeals for AYs 2018-19 and 2019-20, sought to set aside the impugned orders both dated 12.12.2022 passed by Commissioner of Income Tax (Appeals)-53, Mumbai [hereinafter referred to as the CIT(A)] on identically worded grounds except the difference in
2 denial of amounts of accumulation (grounds from appeal bearing ITA No.299/M/2023 for A.Y. 2018-19 are taken for the sake of brevity) on the grounds inter-alia that :-
“1. In the facts of the case and under the circumstances and in law, the Ld. CIT(A) has erred in upholding denial of accumulation of Rs. 2,43,25,000/- u/s 11(2) of the Act by the Ld. Assistant Commissioner of Income-tax Central Circle 5(3), Mumbai ('the Ld. Assessing Officer) while passing the assessment order.
In the facts of the case and under the circumstances and in law, the Ld. CIT(A) has completely misdirected himself in holding that the appellant has not set apart funds on a regular basis for acquiring a fixed asset (building premises in this case) for the purposes of accumulation u/s 11(2) of the Act, in clear disregard to the legal requirement of that section. In concluding this, the Ld. CIT(A) has also erred in the correct interpretation of the rigors and requirements of section 11(2) of the Act, which grants the taxpayer a benefit to accumulate funds up to 85% of the income derived during the previous year.
In the facts of the case and under the circumstances and in law, the Ld. CIT(A) has erred in disregarding the Form 10 filed by the Appellant and placing reliance upon the ruling of the Hon'ble Kolkata High Court in the Director of Income tax vs. Singhania Charitable Trust [(1993) 199 ITR 819)] as the facts were completely different in that case.
In the facts of the case and under the circumstances and in law, the Ld. CIT(A) erred in denying accumulation claimed u/s 11(2) of the Act by alleging that the appellant had not shared any concrete action / plan with the Ld. Assistant Commissioner of Income-tax Central Circle 5(3), Mumbai (the Ld. Assessing Officer) for the acquisition of asset, without appreciating the fact that the purposes for which accumulation was being made, was categorically stated and intimated to the Ld. Assessing Officer, by filing requisite Form no. 10 within the stipulated timelines. 5. In the facts of the case and under the circumstances and in law, the Ld. CIT(A) has resorted in nit-picking on the wrong
3 mentioning of the Assessment Year in the resolution passed by the appellant for accumulating funds for the specific purpose, without appreciating the fact that the year ending had been correctly mentioned therein, thus demonstrating the pre-set mind of the Ld. CIT(A) in arriving at the conclusion. 6. In the facts of the case and under the circumstances and in law, the Ld. CIT(A) has failed to appreciate the fact that the appellant had actually utilized, within the stipulated time, the accumulations made by it for the specific purpose mentioned In the Form 10.
In the facts of the case and under the circumstances and in law, the Ld. CIT(A) has erred in not considering the Purchase Agreements for acquisition of the Building premises for the Appellant, which were submitted during the appellate proceedings, by rejecting them as additional evidences. In any case, to meet the ends of justice, the Ld. CIT(A) ought to have called for a remand report from the Ld. Assessing Officer to verify the veracity and the authenticity of these documents.”
Briefly stated facts necessary for consideration and adjudication of the issues at hand are: the assessee is a charitable trust, registered u/s 12A of the Income Tax Act, 1961 (for short the Act) being into conducting examination, assessment, certification, for personnel entering into shipping and transport industry. The assessee filed its return of income for AY 2018-19 and 2019-20 declaring total income of Rs. Nil. AO noticed that the assessee has claimed accumulation u/s 11(2) of the Act to the tune of Rs. 2,43,25,000/- and Rs. 1,63,95,983/- for AY 2018-19 and 2019-20 respectively. Declining the contention raised by the assessee AO proceeded to deny the accumulation claimed by the assessee u/s 11(2) of the Act by framing assessment u/s 143(3) of the Act.
The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has confirmed the order passed by the AO by
4 dismissing the appeals. Feeling aggrieved with the impugned orders passed by the Ld. CIT(A) the assessee has come up before the Tribunal by way present appeals.
We have perused the order passed by the ld CIT(A) for AY 2018-19, which he has followed for deciding the identical issue raised in AY 2019-20, the operative part of which, for ready reference, is extracted as under:- “DECISION FOR A.Y. 2018-19 13. Ground No. 1 is regarding denying accumulation u/s. 11(2) of the Act by the AO in respect of Rs. 2,43,25,000/-. 13.1.1 A perusal of the resolution passed during the 45th meeting of the Trust held on 29.09.2018 reads as follows: "Resolved that a sum of Rs.2,43,25,000/- (Rupees Two Crore Forty Three Lakhs Twenty Five Thousand only) to be accumulated out of the Income of the Board of Examinations for Seafarers Trust for the year ending 31.03.2018 relevant to the AY 2019-20 to be spent towards general objects of the Trust including acquisition of capital assets in the next year". As can be seen from the above, the A.Y. mentioned is 2019-20 and not 2018-19. It also indicates that sum is set aside for general objects of the Trust. 13.1.2 A perusal of the resolution passed during the 48th meeting of the Trust held on 29.09.2019 reads as follows: "Resolved that a sum of Rs.76,45,500/- (Rupees Seventy Six Lakhs Forty Five Thousand Five Hundred only) to be accumulated out of the Income of the Board of Examinations for Seafarers Trust for the year ending 31.03.2019 relevant to the AY 2020-21 to be spent towards general objects of the Trust including acquisition of capital assets in the next year. As can be seen from the above, the A.Y. mentioned is 2020-21 and not 2019-20. It also indicates that sum is set aside for general objects of the Trust. 13.1.3 In the Form No.10 relevant for AY 2018-19, the "purpose for which amount is being accumulated or set apart is "Building Fund". In the Form No.10 relevant for AY 2019- 20, the "purpose for which amount is being accumulated or set apart is "General Objects including acquisition of capital
5 assets". The period of accumulation setting apart is stated to be ending on 31.03.2020 in AY 2019-20 as opposed to 31.03.2023 mentioned in the form of AY 2018-19.
13.1.4. In Form No. 10B dated 03.09.2018 relevant for AY 2018-19, it is surprisingly shown that Rs. 21,50,000/- unutilized building fund set aside during F.Y. 2011-12 has not been utilized. [Column 8(c)]. However, no such entry is mentioned in Form 10B relevant for AY 2019-20. 13.1.5 In Form No. 10B dated 03.09.2018 relevant for AY 2018-19, in response to Column no (6) of Form No. 10B i.e. "Whether the amount of income mentioned in item 5 above has been invested or deposited in the manner laid down in section 11(2)(b)? If so, the details thereof, a sum of Rs. 9,28,56,201/- is said to be kept as deposits in Schedule Bank or Co-operative Societies as per Sec. 11(5)(ii). In the Form 10B relevant for AY 2019-20, the figures are quantified at Rs.1,71,86,599/-. Thus, there is a significant drop in such invested sums from Rs.9.28 crores to Rs. 1.71 crores. 13.1.6 Normally, when a fixed asset is proposed to be acquired, a dedicated plan is made and funds are set apart on regular basis. In this case, a sum of Rs. 2,43.25,000/- is claimed to have been set apart in A.Y. 2018-19 while a sum of Rs. 76,45,500/- is claimed to have been set apart in A.Y. 2019- 20. From the perusal of the assessment order, no concrete action/plan seems to have been shared with the AO for the acquisition of assets in the next year.
13.1.7 In the assessment order of A.Y. 2018-19, the AO has mentioned that "For the year under consideration, the assessee has claimed accumulation u/s. 11(2) of the Act at Rs. 2,43,25,000/- for the purposes mentioned in computation of income as "Seafarers enhancement programme scheme" and in Balance sheet and Income & Expenditure it is mentioned as "General Object of Trust". However in Form 10, it is mentioned that the said amount is accumulated for "Building Fund". This contention of the AO has been verified from the computation of Income filed by the appellant and found to be correct. In the computation of income, the sum of Rs.2,43,25,000/- is stated to be set apart for "Seafarers enhancement programme scheme". As regards the Balance sheet and income & Expenditure, the same has not been filed
6 before the undersigned. Similarly, in the computation of income filed by the assessee for AY 2019-20, it is seen that Rs.76,45,500 is set apart for "General Object.
13.1.8 Thus, there are contradicting submissions / claims by the assessee wherein the appellant itself has stated that accumulation is for the purpose of general objects of the Trust. This, with my understanding is discussed in the decision of the Hon'ble Calcutta High Court in 199 ITR 819 in the case of Trustee of Singhania Charitable, wherein it is held that-
It is sub-section (2) which provides for the long-term accumulation of the income. Obviously, such long-term accumulation should be for a definite and concrete purpose or purposes. What the assessee has sought to be permitted to do here is to accumulate not for any determinate purpose or purposes but for the objects as enshrined in the trust deed in a blanket manner. Accumulation in such a global manner is definitely not in the contemplation of section 11(2) when it is construed in its setting. The assessee's contention that saving and accumulation of income for future application of the same is for the purposes of the trust in the widest terms so as to embrace the entirety of the objects clause of the trust deed would render the requirement of specification of the purpose for accumulation in that sub-section redundant. The purposes to be specified cannot, under any circumstances, tread beyond the objects clause of the trust. The Legislature could not have thought of the need of specification of the purpose if it did not have in mind the particularity of the purpose or purposes falling within the ambit of the objects clause of the trust deed. When subsection (2) of section 11 requires specification of the purpose, it does so having in mind a statement of some specific purpose or purposes out of the multiple purposes for which the trust stands. Were it not so, there would have been no mandate for such specification. For, a charitable trust, in no circumstances, can apply its income, whether current or accumulated, for any purposes other than the objects for which it stands. The very fact that the statute requires the purpose for accumulation to be specified implies such a purpose to be a concrete one, an itemized purpose or a purpose
7 instrumental or ancillary to the implementation of its object or objects. The very requirement of specification of purpose predicates that the purpose must have an individuality. In our view, the provision of sub-section (2) is a concession provision to enable a charitable trust to meet the contingency where the fulfillment of any project within its object or objects needs heavy outlay to call for accumulation to amass sufficient money to implement it. Therefore, specification of purpose as required by section 11(2) admits of no amount of vagueness about such purpose".
13.1.9 In view of the multiple contradictions and inconsistencies of the appellant p including that it is for the "General Objects" at some places, Lam unable to agree with the appellant that a view in its favour must be taken and am constrained to hold otherwise. This ground is dismissed.
13.2 As regards the claim of the appellant that it has purchased two office premises at Office No. 1007 and 1008 at 10th Floor of NMS Titanium Plot No. 74. Sector 15, CBD Belapur, Navi Mumbai for Rs. 2,36,15,000/- each in March, 2022, these evidences appear to be in the nature of fresh evidences, much after the conclusion of assessment proceedings. In view of the detailed reasoning given above and in the absence of specific request for admission of fresh evidences, these additional evidences are not taken into account. Accordingly, Ground No. 1 of the appeal is dismissed.” 6. Undisputedly vide resolution passed by the assessee trust dated 29.09.32018 an amount of Rs. 2,43,25,000/- and Rs. 76,45,500/- was resolved to be accumulated out of income of the assessee trust for the AY 2018-19 and 2019-20 respectively towards general object of the trust including acquisition of capital asset in the next year. It is also not in dispute that u/s 11(2) of the Act a trust is required to spend atleast 85% of its income drawn from the property at the object of the trust, however trust is also permitted to carry forward its income up to 85% for some specific purpose u/s 11(2) of the Act. It is also not in dispute in AY 2017-18 revenue authorities itself allowed
8 accumulation fund to the tune of Rs. 1,85,25,000/- u/s 11(2) of the Act.
In the backdrop of the aforesaid undisputed facts, the ld AR for the assessee contended that until the year under consideration i.e. 2018-19 and 2019-20 the assessee trust was functioning in the rented premises and now has decided to purchase its own property for which the fund in question were earmarked/ accumulated. The ld AR contended that object of accumulation of fund has been duly disclosed in Form 10. However, on the other hand the ld DR for the revenue by relying upon the orders passed by the ld CIT(A) contended that object given by the assessee are vague and Form No. 10 needs to be clear and unambiguous.
Perusal of the provision contained u/s 11 shows that in order to claim exemption u/s 11(2) the trustee should have inter alia specific purpose in mind for which it requires accumulation of income to be spent over a long period; that such specific purpose for which the accumulation is done is to be decided by the trustee in their meeting by adopting a resolution; that on the basis of such resolution, the claim u/s 11(2) can be granted if Form 10 is also filed and submitted within the prescribed time; the amount should be invested in the prescribed mode u/s 11(5) of the Act and that on the basis of such resolution passed by the trustee auditor will also specified the sum accumulated u/s 11(2) of the Act in its audit report in Form 10B.
To examine the facts if the assessee has fulfilled the condition as required u/s 11 of the Act it is necessary to peruse the resolution passed by the board for AY 2018-19 and 2019-20 which are extracted as under:-
On the basis of board resolution the auditor of the assessee trust prepared From 10, which was undisputedly filed by the assessee trust within prescribed period in order to claim the accumulation. Perusal of the Form 10 for AY 2018-19 shows that accumulation of Rs. 2,43,25,000, which is 48.81% of the income of the trust is sought to be accumulated for the purpose of “building fund”. Similarly, in Form 10 for AY 2019-20 the assessee sought accumulation for “general object including acquisition of the capital assets.”
11 11. The ld CIT(A) while declining the relief u/s 11(2) to the assessee trust has returned findings that the assessee itself has not shared any concrete action plan for acquisition of the asset with the AO; that there are contradiction and inconsistency in the contention raised by the assessee as to highlighting the objects.
We are of the considered view that the ld CIT(A) has erred in declining the relief to the assessee of accumulation u/s 11(2) of the Act on the conjectures and surmises because when resolution passed by the trustee is categoric one that the accumulation is being sought “for acquisition of capital asset” and “for the purpose of building” as referred to in Form 10 which was filed within prescribed period, no contradiction has come on record to decline the relief.
The assessee trust has also brought on record the fact that during the first appellate proceedings the assessee has already purchased 2 office premises bearing No. 1007and 1008 at 10th Floor, NMS Titanium Bldg, Plot No. 74, Sector-15, CBD Belapur, Navi Mumbai-400614 for Rs. 23615000/- each in March 2022, however, the ld CIT(A) brushed aside this contention on the ground that this is fresh piece of evidence which has not been given at the time of assessment proceedings. The ld CIT(A) was required to call the remand report qua this fresh evidence, if so requires, because it was not in existence before the AO at the time of passing the order on 17.06.2021.
To further support his argument the ld AR brought on record the sale deed dated 23.03.2020 of purchasing a property in the name of the trust for a sale consideration of Rs. 23,65,000/- in Form 10 of office No. 1007 and 1008 detailed at page 7 of the paper book and copy of sale deed at page No. 109 to 139, which goes to prove that
12 the assessee trust has spent the accumulated amount as decided by the trust and as such was entitled for benefit of accumulation sought for u/s 11(2) of the Act.
We are however of the view that the entire case of the assessee for both the years hinges upon resolution passed by the trustee as well as of Form 10 which leads to the conclusion that the accumulation has been sought for the assessee trust u/s 11(2) for the purpose of acquisition of the capital asset/ purchasing building for the trust as it was earlier operating in the rented premises.
So far as the question of not sharing the concrete plan by the assessee trust with AO as pointed out by the CIT(A) in the impugned order is concerned, there is no such requirement u/s 11(2) of the Act. Again the ld CIT(A) has proceeded on the wrong premises.
In view of what has been discussed above, we are of the considered view that the ld CIT(A) has erred in declining the relief of accumulation sought for by the assessee trust u/s 11(2) of the Act. Hence, order is set aside and the AO is directed to provide the relief of accumulation as sought for by the assessee trust u/s 11(2) of the Act for AY 2018-19 and 2019-20.
Resultantly, the appeals filed by the assessee are allowed.
Order pronounced in the open court on 19.05.2023.
Sd/- Sd/- (GAGAN GOYAL) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 19.05.2023. * Ajay Kumar Keot, Sr. P.S.
Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench
//True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.