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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SMT. BEENA PILLAI & MS. PADMAVATHY S
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA Nos.226/Bang/2022 Assessment Years : 2013-14 M/s. Sri Shridevi Charitable Trust, Vs. DCIT (Exemptions), Shivadeepthi, 3rd Cross, Circle – 1, Someshwara Extension, Bengaluru. Tumkur – 572 102. PAN : AADTS 8255 N APPELLANT RESPONDENT
Assessee by : Shri. Sandeep Chalapathy, CA Revenue by : Smt. Susan Dolores George, CIT(OSD)(DR)(ITAT), Bengaluru. Date of hearing : 07.06.2022 Date of Pronouncement : 10.06.2022 O R D E R Per Padmavathy S, Accountant Member
This appeal against the order of the CIT(A)-4, Bengaluru, dated 16.03.2020, for Assessment Year 2013-14 2. The grounds raised by the assessee are as follows:
That the order of the learned Commissioner of Income-Tax 1. (Appeals) in so far it is prejudicial to the interests of the appellant is bad and erroneous in law and against the facts and circumstances of the case.
ITA Nos.226/Bang/2022 Page 2 of 7
That the learned Commissioner of Income-Tax (Appeals) 2. erred in law and on facts in not allowing the deduction of 15% u/s 11(1)(a) of the Act on gross receipts on the ground that the balance surplus is taken care of accumulation made u/s. 11(2) of the Act and restricting the same to the extent of surplus.
That the learned Commissioner of Income-Tax (Appeals) 3. ought to have held that the deduction u/s. 11(1)(a) of the Act has to be allowed on gross receipts before application of income and accumulation u/s. 11(2) of the Act.
The assessee is a charitable trust running various education 4. institutions. The assessee is registered under section 12A of the Income Tax Act, 1961 (the Act) and is also recognized under section 80G(5)(vi) of the Act. The assessee filed the return of income for the Assessment Year 2013-14 on 30.09.2013, declaring a total income of Nil after claiming deduction under section 11 of the Act as per the computation below:
ITA Nos.226/Bang/2022 Page 3 of 7
The case was selected for scrutiny. The AO completed the assessment by making additions / disallowances towards (a) Disallowed the depreciation (b) Denied carried forward deficit by subsequent years (c) Denied deduction under section 11(1)(a) and recomputed the income as under
Particulars Amount 3,01,81,681 Excess of Expenditure as per income and expenditure account Add: Depreciation 3,00,34,328 Total Income 6,02,16,009 Less: Capital Expenditure 3,12,85,442
ITA Nos.226/Bang/2022 Page 4 of 7 Balance Income 2,89,30,567 2,89,30,567 Less: Deducation u/s 11(2) form 10 given for Rs. 10,00,00,000/- limited to the actual balance available. Balance Income Nil Tax there on Nil
On further appeal, the CIT(A) partially allowed the appeal in favour of the assessee and sustained the AO’s order with respect to denial of deduction under section 11(1)(a). Assessee is in appeal before the Tribunal aggrieved by the order of the CIT(A). The learned AR submitted that the AO has not given the 6. deduction under section 11(1)(a) and the same is confirmed by the CIT(A) stating that there is no balance left to accumulate 25% at gross receipts. The AR also submitted that manner of computation done by AO is not correct and that the deduction under section 11(1)(a) should be adjusted first before considering any other deduction. In this regard, the learned AR placed reliance on the decision of the Co- ordinate Bench of the Tribunal in the case of Shraddha Trust, ITA No.899/Bang/2016 dated 07.04.2017. The learned DR supported the order of the lower authorities.
We heard the rival submissions and perused the material on record. Before we go into the merits, we will look into the provisions of section 11(1)(a) which reads as under:
ITA Nos.226/Bang/2022 Page 5 of 7 “(a) 3 income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty- five per cent of the income from such property;”
Though the Act does not specify the chronological order in which the deductions under section 11 are to be allowed, the sequence of the section implies that the deduction under section 11(1)(a) is to be deducted first before considering any other deduction. From the plain reading of section 11(1)(a) it is clear that 25% of income of the trust should be allowed as a deduction. We notice that the Co-ordinate Bench in the case of Shraddha Trust (supra) relied on the decision of Hon’ble Supreme Court in the case of CIT Vs. Programme for Community Organisation (248 ITR 1) (SC) and held as under:
“7. The other grounds of appeal relates to Whether accumulation of income should be on gross receipt or net income after deducting the expenditure, is covered by the decision of the Hon'ble Supreme Court in the case of t77- vs. Programme for Community Organisation (248 ITR 1)(SC) wherein it was held that 25% should be calculated on the gross receipts of income and not on the net income. Therefore, these grounds of appeal raised by the revenue are dismissed.”
The ratio laid down by the Hon’ble Supreme Court in the case of Programme for Community Organisation (supra) is that for the purpose of accumulation of income, the gross receipts of the Trust
ITA Nos.226/Bang/2022 Page 6 of 7 need to be considered. We notice that the assessee in the computation of income has claimed the deduction u/s.11(1)(a) on the net income. We also notice that the AO in the computation disallowing depreciation did not give deduction under section 11(1)(a) and has directly gone into 11(2) deduction. This in our view is not the right way. In the light of the above discussion, we remand the issue back to the AO to recompute the income of the assessee as per the law. The AO is directed to consider the ratio laid down by the Hon’ble Supreme Court while recomputing the total income of the assessee and give a reasonable opportunity of being heard to the assessee. The assessee is directed to provide all the details that may be called for by the AO and co-operate with the proceedings. It is ordered accordingly. 9. In the result, the appeal is allowed for statistical purposes. Pronounced in the open court on the date mentioned on the caption page.
Sd/- Sd/- (BEENA PILLAI) (PADMAVATHY S) Judicial Member Accountant Member Bangalore, Dated: 14.06.2022. /NS/*
ITA Nos.226/Bang/2022 Page 7 of 7 Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR 6. Guard file By order
Assistant Registrar, ITAT, Bangalore.