BHARTIYA SHIKSHA SAMITI PURVI UTTAR PRADESH,ALLAHABAD vs. ASS. COMMISSIONER(CPC), BANGALORE

The only issue arises in this appeal of assessee is regarding adjustment of Rs.2,15,216/- was made while processing the return of income on account of re-computation of quantum, equivalent to 15% of the income derived by the assessee u/s.11(1)(a) of the Income Tax Act [Act]. The return of income filed by the assessee was processed u/s.143(1) of the Act on 09-11-2014 by the Central Processing Centre (CPC), whereby an adjustment of Rs.2,15,216/- was made. The said adjustment was made in the proceedings u/s.143(1) of the Act by re-computing the amount of 15% allowed u/s.11(1)(a) of the Act. The assessee has claimed the amount accumulated or set apart to the tune of Rs.11,31,351/- u/s.11(1)(a) of the Act, which is computed on the gross receipts of Rs.75,42,343/-. Against this amount of Rs.11,31,351/-, the CPC has worked out a sum of Rs.9,16,135/- as an amount allowable u/s.11(1)(a) of the Act, equivalent to 15% of the gross receipts. It appears that the difference in the said amount is due to the reason that assessee has also exercised its option u/s.11(1) r.w. Clause-2(1) of Explanation-I to Section 11(1) of the Act as the sum of Rs.14,34,775/- was set apart by the assessee due to non-receipt of the said amount during the year. Thus, the said amount of accumulation and option exercised by the assessee was reduced from the gross receipts while computing 15% accumulation u/s.11(1)(a) of the Act. The assessee

Before the Tribunal, the Ld.AR of the assessee has submitted that this is only a mistake in computing the amount of accumulation as permitted u/s.11(1)(a) of the Act being 15% of the income of the trust, which is deemed as applied for chartable purpose. He has further submitted that while computing such amount of accumulation, not exceeding 15% only, the income derived by the assessee-trust has to be taken into account and not the actual receipt of income during the year under consideration. Therefore, the adjustment made while processing the return of income is unjustified and liable to be deleted.

On the other hand, Ld.DR has submitted that the provisions of Section 11(1) of the Act stipulates that certain income shall not be included in the total income of the previous year of the person in receipt of income and therefore the receipt of income during the year is relevant for computing the relaxation of 15% as provided u/s.11(1)(a) of the Act. He has pointed out that since the assessee has not received a sum of Rs.14,34,775/- and exercised the option u/s.11(1) read with Explanation-I, therefore, the said amount which was set apart on the ground of non-receipt of the same during the previous year is required to be reduced from the total receipts for computation of 15% as provided u/s.11(1)(a) of the Act. He has relied upon the impugned order of the CIT(A) and submitted that the CIT(A) has rightly considered the total

Having considered the rival submissions as well as the relevant material on record, it is noted that there is no dispute regarding total income derived by the assessee during the year under consideration at Rs.75,42,343/-. It is also not in dispute that the assessee has applied a sum of Rs.49,76,217/- for charitable purpose during the year under consideration and also exercised its option for setting apart a sum of Rs.14,34,775/- on account of non-receipt of said income during the previous year relevant the assessment year under consideration. After exercising this option, the balance amount is within the limit of 15% of income as allowable u/s.11(1)(a) of the Act. Thus, to the extent of accumulation or set apart not exceeding 15% of the income as provided u/s.11(1)(a) of the Act, the same is eligible for exemption u/s.11 of the Act. Further, as per explanation-I to Section 11(1) of the Act, the trust is further allowed to defer the application of income which is even falling short of 85% of the income derived from the year if the assessee has exercised an option before the date of filing of return of income u/s.139(1) of the Act. In the case on hand, the assessee has duly exercised the said option which is also accepted by the department and the amount which was set apart as per Explanation-I was reduced from the income derived from property held under trust. It is pertinent to note that once the income of trust is considered as the income received as well as accrued, then, at the time of allowing the relaxation of application of the said income

In the result, the appeal of assessee is allowed.