INSURANCE INSTITUTE OF INDIA,MUMBAI vs. ACIT(EXEM) CIRCLE-1, MUMBAI

The assessee has challenged this appeal on the grounds of disallowance of exemption u/s. 11 r.w.s. 12A of the Act for the reason that the purpose of accumulation u/s.11(2) specified by the assessee are vague and general and the purposes stated are beyond the Memorandum of Association (MOA for short) of the assessee.

The brief facts are that the assessee is an institution registered under the Societies Registration Act, 1860, established in the year 1955and the assessee was formerly

(A.Y.2016-17) Insurance Institute of India vs. ACIT (Exem) known as „Federation of Insurance Institute‟. The assessee was engaged in providing educational services related to insurance sector and is also approved by Insurance Regulatory and Development Authority of India (IRDA for short). The assessee is registered as a „charitable institution‟ with the charity commissioner u/s.12A of the Act, since A.Y. 2013-14 and the same was upheld by the Hon'ble Jurisdictional High Court vide order dated 26.02.2018. The assessee has also got its approval u/s.10(23C) (vi) of the Act and has been renewing the same from time to time. The assessee filed its return of income dated 27.09.2016, declaring total income as „nil‟. The assessee claimed exemption for surplus accumulation u/s.11(2) of the Act for application of funds for the objects of the trust. The assessee‟s case was selected for scrutiny and the assessment order dated 14.12.2018 was passed u/s.143(3) of the Act where the AO determined the total income at Rs.59,96,45,763/- on the ground that the assessee trust has contravened the provisions of section 11(2) of the Act, thereby rejecting the exemption u/s. 11(2) of the Act for the impugned year. The assessee challenged the assessment order before the ld. CIT(A) who confirmed the impugned addition made by the AO on the ground that the purpose of the assessee trust specified was beyond the object mentioned in the MOA.

The assessee is in appeal before us, challenging the order of the ld. CIT(A).

It is observed that the assessee has filed its audit report in Form 10B dated 27.09.2016 while filing the return of income, in which the assessee trust has claimed for accumulation or set apart a sum of Rs.59.96 crores which was surplus of income over expenditure for which the assessee was unable to apply 85% of the income derived from the property held under the „trust‟. The AO has rejected the claim of the assessee on the (A.Y.2016-17) Insurance Institute of India vs. ACIT (Exem) ground that the assessee has contravened the provisions of section 11 and 12 of the Act by not specifying the purpose for accumulation for that period for which income is to be accumulated. The AO has also specified that Form No. 10B was filed on 27.09.2016 and Form No. 10 was filed on 18.01.2017 that there was delay in filing the said form and the AO has also specified that Form No. 10 does not have a specific purpose for accumulation and has only the general-purpose as “for the object of the institute”. The assessee submitted that it had filed an application for condonation of delay dated 13.11.2018, explaining the reasons for the delay along with the CBDT Circular No. 7 dated 20.12.2018 which had authorized commissioner to condone such delay where there was a reasonable cause for such delay. The assessee further submitted that by way of resolution passed by the Trustees Administrative Committee Meeting dated 26.05.2016 , the accumulation of surplus funds has been approved along with the specified proposed utilisation of the funds in consonance with the object of the trust as mentioned below: i. To establish college of insurance in every state and union territory in India. ii. To invest in the development of education in the areas of Risk Management, Health insurance, Pension Management and establishment of a portal for online delivery of insurance education. iii. To invest in Research in the areas of Risk Management, Health insurance, Pension Management, Life and General insurance. iv. Maintenance & heavy repairs of society properties. v. Development of study course material vi. And matters incidental thereto.

The assessee has also specified that the solitary purpose of the assessee trust was only to impart education on insurance and that the objects mentioned for accumulation are akin to the objectives of the association. The assessee relied on the decision of the coordinate bench in the case of Sadhana Education Society vs. DDIT(E) (in dated 11.04.2018) and the decision of the Hon‟ble Delhi High Court in (A.Y.2016-17) Insurance Institute of India vs. ACIT (Exem) the case of Bharat Krishak Samaj vs. DDIT(E) [2008] 306 ITR 153 (Del), in which it was held that the accumulation should be for the overall objectives of the trust and even if there are many purposes for accumulation, the same is not precluded but is dependable on the main purpose for which accumulation is made. The co-ordinate bench in the case of Southern Educational Society (supra) held that if the objects are charitable in nature and if the purposes are mentioned in Form 10, non-furnishing of details as to how the amount is to be proposed to be spent in future does not become a ground for denying the exemption u/s. 11(2) of the Act. The assessee has also relied on the CBDT Circular No. 6/2020 dated 19.02.2020 which had empowered the Commissioner to condone the delay in filing Form 10 where the return of income was also filed belatedly. The assessee stated that in assessee‟s case only Form No. 10 was filed belatedly and return of income and Form 10 B was filed on time. The submission made by the assessee was not accepted by the Assessing Officer, for the reason that not only was form 10 filed belatedly on 18.01.2017, the assessee trust has failed to specify the purpose of the accumulation of the funds which is mandated u/s.11(2) of the Act. The AO has also not considered the decision of the Hon'ble Apex Court in the case of CIT vs. Nagpur Hotel Owners Association [2001] 247 ITR 201 (SC), in which it was held that Form 10 and association of the trust can be filed before the completion of the assessment by the A.O.

The ld. CIT(A) has also failed to considered the submission of the assessee and has stated that object of the MOA and the purposes specified in Form No. 10 are different in various aspects. The ld. CIT(A) has also held that as per the minutes of 265th Administrative Committee Meeting, it is evident that the assessee trust was more inclined

The ld. AR for the assessee contended that in Form No. 10 the purpose for accumulation has been specified as „For the Object of the Institutes‟ and for which the assessee has relied on the minutes on 265th Administrative Committee Meeting, which consists of the resolution of the trust which is akin to that of the objects specified in MOA. The ld. AR further stated that amongst the purpose of accumulation, the lower authorities has relied on the purpose of infrastructure for developing insurance education

The learned Departmental Representative (ld. DR for short) for the Revenue, on the other hand, controverted the same and stated that the assessee has belatedly filed Form 10 and the purposes mentioned in Form 10 is also not related to the purpose of the objective of the assessee trust. The ld. DR relied on the decision of the lower authorities.

Having heard the rival submissions and perused the material available on record, it is evident that the primary objective of the assessee is to impart knowledge in insurance related subjects for which the Assessee aims to establish college of insurance in every

From the above said decision it is evident that specifying the purpose of accumulation is one of the requirement which has to be satisfied by the assessee and any defect in the said declaration can be condoned by the concerned authority if all other conditions are fulfilled. In the present case in hand, the lower authorities have contended that the assessee in the minutes of 265th Administration Committee Meeting has emphasized more for the requirement to create Infrastructure for the purpose of the assessee trust whose primary object was to impart education related to insurance sector. The lower authorities have stated that the assessee trust was intending to develop more into real estate than its primary object. This contention was not supported neither by the AO nor by the CIT(A) by giving cogent evidence as to this fact in issue. Having said (A.Y.2016-17) Insurance Institute of India vs. ACIT (Exem) that, we of the considered opinion that the assessee has not diverted itself from its primary object and the need for creating a proper infrastructure is ancillary to the main object and is also a mandatory requirement for the purpose of achieving the object of the assessee.

From the above observation, we deem it fit to allow the claim of the assessee. Ground no. 1& 2 raised by the Assessee is allowed. Ground No.3 has not been pressed by the Ld. AR and ground no. 4 is general in nature and requires no adjudication.

In the result, the appeal filed by the assessee is allowed.