HARMONY FOUNDATION,MUMBAI vs. ITO EXEM WARD 1(3), MUMBAI

The Assessee in response to the said notices, furnished the requisite details called for viz. copy of return of income along with computation of income, copy of audited' accounts, income and expenditure account and balance sheet, audit report in Form 10B, letter of authority, copy of Trust Deed, certificate of Registration u 12A, certificate u/s. 80G, details of Trustees, etc.

The AO thus, perusing the aforesaid details and documents filed during the assessment proceedings, observed that the Assessee trust is registered with the Commissioner of Income Tax (Exemption), Mumbai u/s 12A under registration No.40409 and u/s 80G of the Act. The Assessee trust is also registered with the charity Commissioner, Mumbai and is engaged in the charitable activities. The main objects of the trust are: -

The AO further observed that the Assessee trust has not accumulated income u/s 11(2) of the Act for the “specific purpose”. It is mandatory that accumulation should be for “specific purpose” of future need. The Assessee has accumulated income of Rs.16,20,586/- for the general purpose/for the purpose of “to work towards all communities without any discrimination, as to religious, caste, creed, gender, education and social justice”.

The AO thus, in order to examine the case of the Assessee, show caused the Assessee vide letter dated 16.11.2018 u/s 142(1) of the Act “as to why accumulation of Rs.16,20,586/- claimed u/s 11(2) should not be denied and held as taxable income”.

The Assessee in response to the aforesaid show cause notice, filed its reply/submissions vide letter dated 21.11.2018, inter alia stating as under:

Further for claiming Exemption for Accumulation of Income in Excess of Specified Limit [Sec 11(2)], where 85% of income derived from trust property is not applied or is not deemed to have been applied to have been applied to charitable or religious purposes, but is accumulated or set apart for application to such purposes in India, Exemption can be claimed for the income so accumulated or set apart in excess of 15% limit, provided the following conditions are complied with:

However, your good self has mentioned in your Annexure to the notice that, assessee trust has not accumulated Income u/s. 11(2) of the Income Tax Act, 1961 for the 'specified purpose'. It is mandatory that accumulation should be for specific purpose of future need. The accumulated Income of Rs.16,20,586/- for the general purpose/ for the purpose of object of the trust.

The AO though considered the aforesaid reply/submission of the Assessee, however not being satisfied with the same, ultimately denied such claim of the Assessee qua accumulation of funds/income u/s 11(2) of the Act, by observing and holding as under:

3 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.

4 When Sub-section (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 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.

5 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.

6 The view is also supported by the decision of The Hon'ble ITR 819 (Cal). The Hon'ble Court has not even allowed the plurality of objects. Also in the case of Bharath Kalyan Pratishthan Vs. Director of Income Tax (Exemption) (2008) 299 ITR 406 (Del), it was held that specification object is necessary.

7. Under the above circumstances, accumulation made u/s.11(2) of 1. T. Act, 1961 is hereby denied to the assessee.

The Assessee being aggrieved challenged the said addition on account of disallowance of accumulated income, by filing first appeal before the Ld. Commissioner, who vide impugned order affirmed the decision of AO in denying the accumulation made u/s.11(2), by dismissing appeal of the Assessee, observing and holding as under:

1. Ground of Appeal 1, 2, 3, and 5-Lack of Specific Purpose:

1.1. The appellant's assertion that stating "to work towards all communities without any discrimination as to religion, caste, creed, gender, education and social justice" in Form No.10 constitutes a sufficient purpose for accumulation is fundamentally flawed and inconsistent with the mandate of section 11(2) of the Act. Section 11(2) requires a definite, identifiable, and particular 'specific purpose' for the future application of accumulated income. This is not merely a procedural formality but a substantive condition designed to ensure that the tax benefits extended to charitable trusts are utilized for concrete, time-bound projects or activities. A general statement, which is essentially a reiteration of the trust's broad objects, fails to provide the necessary clarity on how the specific sum of Rs.16,20,586/- will be applied.

1.2. The distinction between the general objects of a trust and a specific purpose for accumulation is critical. While a trust's objects define its overall mission and range of activities, accumulation under section 11(2) is a special concession for setting aside funds for a distinct, future project that requires substantial outlay and 10

2. Ground of Appeal 4 - Interpretation of "Specific Purpose":

2.1. The appellant's contention that the term "specific" is not explicitly defined in section 11(2) and, therefore, the AO's interpretation is legally flawed, demonstrates a misapprehension of statutory interpretation. While the word "specific" may not be accompanied by a definition, its inherent meaning in the context of section 11(2)(a) and the legislative scheme of the Act implies a clear, identifiable, and definite objective for which funds are being set aside. This interpretation is not arbitrary but is derived from the necessity for accountability and effective monitoring of tax- exempt income.

2.2. The absence of a precise, specific purpose for accumulation would render the provisions of section 11(2) ineffective, allowing trusts to indefinitely hoard funds under the guise of broad charitable objectives without any concrete plan for their utilization. The requirement of specifying a "purpose" and a "period" (not exceeding five years) for accumulation inherently demands a degree of precision that allows the revenue authorities to ensure proper application of the funds within the stipulated timeframe. A general purpose fails to meet these underlying principles.

3. Ground of Appeal 6 - Reliance on Case Laws:

3.1. The appellant's reliance on various judicial pronouncements, including CIT v. Hotel & Restaurant Association and Bochasanwasi Shri Akshar Purshottam Public Charitable Trust, is misplaced or misconstrued in the context of the present appeal. While certain judgments may acknowledge the permissibility of multiple purposes for accumulation, provided they are within the main objects of the trust, these decisions do not dilute the fundamental requirement for specificity when it comes to earmarking funds under section 11(2). The term "plurality of purpose" does not equate to vagueness or generality. Each of the 11

3.2. In the present case, the appellant has merely reiterated a general overarching objective of the trust, which cannot be construed as a specific project or activity for which the sum of Rs.16,20,586/- has been set apart. The cited cases generally deal with situations where the trust, though perhaps not perfectly articulating the purpose in Form 10, could nevertheless demonstrate a concrete future plan for the accumulated funds or where the context of the assessment was different. Here, the AO has explicitly highlighted the vagueness of the stated purpose, and the appellant has failed to provide any concrete or specific project details for the utilization of the accumulated income, either in their submissions or during the appellate proceedings. Therefore, the cited judgments do not provide any relief to the appellant's case where the stated purpose for accumulation is overly broad and lacks the necessary specificity required by the statute.

4. Contradictions and Flaws:

4.1. There are discernible contradictions and inherent flaws in the appellant's arguments. On one hand, the appellant claims to have duly complied with the requirements of section 11(2) by providing a purpose in Form No. 10. On the other hand, they seek to justify the generality of this purpose by citing perceived limitations in the format of Form No. 10 itself. This inconsistent stance highlights the appellant's inability to specify a clear, concrete, and identifiable project for the accumulated funds.

4.2. Furthermore, the appellant's reliance on broad objectives like "social justice," "communal harmony," and "humanitarian aid" without any tangible plan for the utilization of the accumulated sum of Rs.16,20,586/- demonstrates a fundamental lack of specificity. The examples of past charitable activities provided by the appellant (e.g., relief work during floods, rescue of trafficked minors) are instances of routine application of income, not specific future projects for which a distinct sum is accumulated. These arguments do not effectively counter the AO's reasoned conclusion that the purpose was general and not specific as required by law.

Conclusion

1. The appellant has failed to demonstrate that the accumulated income of Rs.16,20,586/-was for a 'specific purpose' as required by section 11(2) of the Income-tax Act, 1961. The stated purpose is too general and does not meet the statutory requirement.

2. The appeal is dismissed, as the appellant's contentions are incorrect and do not align with the provisions of the Act and judicial interpretations.”

Thus, the Assessee being aggrieved with the impugned order has preferred the instant appeal and contended that the Assessee has accumulated the amount of Rs.16,20,586/- u/s 11(2) for a period of 5 years, after complying with all the terms and conditions as prescribed u/s 11(2) of the Act. The Assessee every year hosts the ‘Mother Teresa Memorial Award’ for social justice to felicitate intrepid individuals, who have channeled all their energies and creativities towards furthering the aims of social justice public utilities, as to encourage the society to imbibe these virtue of peace, which are an integral part in the constitution of India. Further, the applications of accumulations are within the objects of the trust and thus the specification of certain purpose is needed for accumulation of income of the trust and the same cannot be beyond the objects of the trust. The plurality of purpose for accumulation is not precluded, as long as the purpose is to achieve the objects of the trust, the trust cannot be denied for the benefit of entitlement as enshrined in section 11(2) of the Act. The Assessee further claimed that the provision of section 11(2) of the Act, is a concessional provision to enable a charitable trust to meet the contingency where the fulfillment of any project within its object or objects needs heavy outlay calling for accumulation to amass sufficient money to implement it. The Assessee has complied with all the conditions laid down under the provisions of the statute and the accumulated u/s 11 of the Act of Rs.16,20,586/- which is 65% of the income of the trust specifically shown in Form No.10 in time with specified object. The Assessee further claimed that even otherwise in Form No.10 at Sl. No.1, a limited space was provided for mentioning the objects of the trust and therefore in the limited space, the Assessee has depicted one of main objects of the trust. However, it is a fact that vide resolution dated 27.08.2016 filed before the AO demonstrated the expansion of scope for applying the accumulated income, for the main purposes of the trust. Admittedly, the Assessee has not applied any part of the income outside the scope of objects of the trust. Even otherwise, in the provisions of section 11(2) of the Act, there is no mandatory requirement of mentioning any particular/specific purpose or application of the accumulated income.

On the contrary, the Ld. D.R. refuted the claim of the Assessee by drawing attention of this Court to the relevant provision of section 11(2) of the Act and by submitting that the Assessee was required to submit a statement to the AO, stating the specific purpose for which the income being accumulated. However, in this case, the Assessee just simply mentioned part its main objects, without specifying the purpose for applying the accumulated income and therefore the AO and the Ld. Commissioner have rightly disallowed the claim lodged by the Assessee and as such there is no perversity, impropriety and/or illegality in the impugned order specifically and therefore the appeal under consideration may be dismissed.

Having heard the parties and perusing the material available on record and giving thoughtful consideration to rival contentions of the parties, it is observed by this Court that the sole issue involved, relates to the mentioning of purpose in the statement given in Form No.10 for accumulation of the income/funds and claiming the deduction for the same.

Though the Assessee was/is having 04 main objects as reproduced above in this order, however, in Form No.10 has specified, the following object/purpose:

Thereafter, the Assessee during the Assessment Proceedings by filling resolution dated 27.08.2016, demonstrated the expansion of scope of application of accumulated income, which read as under:

The AO though also taken cognizance of the such fact that the Assessee vide resolution dated 27.08.2016 has expanded the scope of application of the accumulated income, however discarded said resolution by observing that resolution is not accompanied by minutes of the meeting held in this regard, which shows that the resolution letter is given just to meet the requirements of scrutiny assessment proceedings.

For brevity and easy understanding, it would be appropriate to peruse the relevant provisions of section 11(2) of the Act, according to which, where 85% of the income is not applied or not deemed to have applied to charitable or religious purposes in India during the previous year but is accumulated or set apart, either whole or in part, for application to such purposes in India, such income so accumulated or set apart, shall not be included in the total income of the previous year of the person in receipt of the same, provided the following conditions are complied with.

In the instant case, though the Assessee fulfilled all the conditions, as enshrined in section 11(2) of the Act, as both the authorities below have also not doubted the compliance thereof however, both the authorities below denied the claim of the Assessee mainly on the reason that the Assessee has not specified ‘any specific or concrete purpose’ for which accumulation was required. Whereas from the simple reading of the provisions of the Ac, it is clear that the Assessee is required to furnish a statement in the prescribed form and manner stating the purpose for which the income is being accumulated or set apart.

This Court further observes that identical issue has also been cropped up before the Hon’ble Delhi High Court in the case of CIT Vs. Hotel and Restaurant Association, {2003} 261 ITR 190 (DEL), wherein the AO declined to entertain the claim of the Assessee on the ground that in the statutory form, the specific object for which the income was sought to be accumulated was not indicated. However, on appeal, the Ld. Commissioner accepted the claim of the Assessee by observing that notice to accumulate income by the Assessee was in order, as the Assessee has passed a resolution to accumulate its income, so as to apply the same in India and the money had been invested in the specified securities. The said order of the Ld. CIT(A) subsequently affirmed by the Tribunal and thus the Hon’ble High Court on appeal, affirmed the Tribunal’s order by observing and holding as under:

We do not agree. It is true that specification of certain purpose or purposes needed for accumulations of the trust's income under s. 11(2) of the Act. At the time the purpose or purposes to be specified cannot be beyond the objects 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 assessee to achieve the object for which the assessee was incorporated. It is not the case of the Revenue that the objects of the assessee-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.

We, accordingly, decline to entertain the appeal. The same is dismissed.”

This Court further observes that the Hon’ble Gujarat High Court in the case of Commissioner of Income Tax (Exemption) Vs. Bochasanwasi Shri R. Axar Purushottam Public Charitable Trust (2018) 409 ITR 591 (Guj.) has also dealt with identical issue and held that even though the details furnished by the Assessee in Form 10 were not sufficient, however in the course of assessment , on being called upon by the AO, the Assessee having explained in detail the purpose of accumulation and thus requirement of section 11(2) stood satisfied and therefore the income was validly accumulated. The Hon’ble High Court also observed that 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 purpose for which the accumulation is needed.

The Hon’ble Co-ordinate Bench of the Tribunal in the case of Arhatic Yoga Ashram Management Trust Vs. ITO (Exemptions) [ITA No.2920/CHNY/2017 decided on 20.01.2021, (2021) 188 ITD 14(Chennai) has also dealt with the identical issue and held as under:

In this case, on perusal of facts available on record, cl. 4k of trust deed provides for extending help and relief to distressed and destitute, homeless and underprivileged and funds accumulated under s. 11(2) is covered under main objects of the trust. We, therefore are of the considered view that AO as well as learned CIT(A) has erred in denying benefit of accumulation of income under s. 11(2) of the Act. Hence, we direct the AO to delete the additions made towards denial of accumulation of income under s. 11(2) of the 18

Coming to the charitable activities carried out by the Assessee it is required to be seen, whether the Assessee carried out its activities, in pursuance to or within the parameters of its objects.

The Assessee has claimed the Assessee is conferring Mother Teresa Awards every year to the distinguished personalities, as a tribute to one of the greatest humanitarians of our time, Saint Mother Teresa, whose life was dedicated to serving the poorest, the suffering, and the forgotten. The Assessee’s aim is to embody the values of Mother Teresa, renowned for her compassion, service, and unconditional love for humanity. Awards honor individuals and organizations, who go beyond personal interest to serve the society, especially the poor, the vulnerable, and the marginalized. In a world where humanitarian efforts often go unrecognized, the Mother Teresa Awards act as a reminder that kindness, empathy, an selfless service and powerful forces for positive change. The awards to be an inspiration for others to follow the path of service. Thus, the Assessee has given/conferred awards to the exceptional personalities that to promote, encourage and generosity, serving as role models for people of all ages especially the youth, as detailed below: -

The Assessee further contended that the awards also serve as a platform to bring global attention to people like these, highlighting the initiatives of these unseen heroes, who work silently yet powerfully to uplift humanity. Through their stories, the awards inspire society to embrace empathy, respect, and service as essential values. They keep Mother Teresa's legacy alive not merely as a memory, but as a guiding light for generations. And that is Assessee’s aim and mission: to spread love, understanding, charity and most importantly, service to humanity. The Assessee has mentioned in Form no. 10 the object to work towards all the communities without any discrimination as to religion, caste, creed, gender, education and social justice. And claimed that Harmony Foundation's core focus is on Social Justice. The objective is achieved through providing essential humanitarian aid and conducting awareness campaigns on various social issues that affect the society. The Foundation has partnered, facilitated and engaged with human rights activists and organizations in the rescue of trafficked minors from all over India for the past couple of years. Another important focus area has been to encourage participation and engagement of the youth in the area of social justice through youth consultation and awareness campaigns. A significant initiative has been the Child to Child Connect Initiative which was a humanitarian initiative for refugee support in terms of 22

From the aforesaid acts of the Assessee trust, it has become clear that the Assessee trust as claimed, during the AY under consideration carried out its activities in pursuance to or within the parameters of its objects and thus fulfilled the conditions prescribed in the relevant provisions of the Act, as applicable and therefore question posed answered in ‘affirmative’.

It is also an admitted fact that in the previous years, the Assessee has also accumulated the income of the previous years and the Revenue has not doubted the same and continuously allowed the income to be accumulated further, which resulted into accumulation of income to the tune of Rs.16,20,585/-.

Thus, considering the ratio laid down in the judgments referred to above and the aforesaid peculiar facts and circumstances in totality, specific to the effect that the Assessee due to constraint of space in Colum of Form no.10 qua object to be specified, has specified particular object, may be general in nature but the same was in consonance with the major objects of the Assessee Trust and it is not the case of the Revenue Department that the purpose specified, was outside of the scope of the objects of the Assessee trust. Further it is also not the case of the Department that the Assessee has not spent part of the accumulated income for achieving its one of the main objects, as set out in the trust deed and has not worked within the scope of objects of the trust and/or violated any provisions of the trust. it is also not the case of the Department that the Assessee has not followed any other conditions and/or has not met out other parameters as mandated u/s 11(2) of the Act, the Assessee’s claim qua accumulation of income is allowed.

In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 20.11.2025. (NARENDER KUMAR CHOUDHRY) JUDICIAL MEMBER