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Facts
The assessee, a trust, filed its return for AY 2018-19 claiming exemption under Section 11. The Assessing Officer disallowed accumulation of Rs. 17,38,70,153/- under Section 11(2), arguing that the purpose specified in Form 10 was vague and not specific. The CIT(A) allowed the appeal, citing various High Court judgments that general purposes within the trust's objects are sufficient.
Held
The Tribunal upheld the CIT(A)'s decision, ruling that the Assessing Officer cannot deny the benefit of accumulation under Section 11(2) merely because the purpose specified in Form 10 is general, as long as it aligns with the charitable objects stated in the trust deed. It clarified that plurality of purposes is permissible and the income was accumulated to achieve the trust's objects, as supported by judicial pronouncements.
Key Issues
Whether accumulation of income under Section 11(2) can be denied if the purpose specified in Form 10 is general or vague, provided it is consistent with the trust's charitable objects.
Sections Cited
250, 11(2), 143(3), 11, 12
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI GEORGE GEORGE K., VP & SHRI INTURI RAMA RAO, AM
O R D E R Per: George George K., VP This appeal at the instance of the Revenue is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 22.04.2024 passed u/s. 250 of Income Tax Act, 1961 (hereinafter "the Act"). The relevant assessment year is 2018-19.
The grounds of appeal raised reads as follows: -
1. The order of the Ld.CIT(A) is opposed to law on the facts and in the circumstances of the case, Yogakshema Trust 2. The Ld.CIT(A) erred in holding that as various courts have held, the AO cannot deny such accumulation of income merely for the reason that purpose specified in Form No. 10 is vague and general in nature.
The Ld.CIT(A) failed to mention the specific case laws relevant to this case/applicable to this issue by holding that.AO cannot deny such accumulation of income merely for the reason that purpose specified in Form No. 10 is vague and general in nature.
The Ld.CIT(A) ignored the provisions of section 11(2) of the IT Act wherein its states that the purpose for which income is being accumulated or set aside to be mentioned specifically and directed the AO to delete the additions when the assessee has violated the provisions of the section 11(2) of the IT Act to the extent that the purpose for which the amount is accumulated or set part is not specific and too general.
The CIT(A) relied upon the decision of the Hon'ble Gujarat High Court in the case of CIT (Exemptions) vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust and directed the AO to delete the additions made towards denial of accumulation of income u/s 11(2) of the IT Act and allow benefit of accumulation as claimed by the assessee, when the facts of the present case are distinguishable from the Gujarat High Court case.
The Ld.CIT(A) has failed to appreciate the fact that in the cited case, the High Court acknowledged that the initial declaration in Form No. 10 by the assessee was insufficient. The mistake was corrected by providing a detailed explanation by the asseesee during the assessment proceedings, which was accepted by the High Court. Whereas, in the present case, the assessee did not furnish the specific purposes for which the income was accumulated as required u/s 11(2) of the IT Act either during the assessment proceedings or appellate proceedings. Hence, the facts of the case are not in similar nature.
Yogakshema Trust 7. For these and such other grounds that may be adduced at the time of hearing, it is prayed that the order of the Ld.CIT(A) may be reversed and that of the Assessing Officer restored.”
Brief facts of the case are that the assessee is a trust formed pursuant to the deed dated 29.11.1998. For AY 2018-19 the return of income was filed on 29,09.2018 declaring Nil income after claiming exemption u/s. 11 of the Act. The assessment was completed u/s. 143(3) of the Act vide order dated 07.04.2021 by disallowing the claim of accumulation u/s. 11(2) of the Act amounting to Rs. 17,38,70,153/-. The reason for denying the claim of accumulation u/s. 11(2) of the Act was that there is no specific reason mentioned in Form 10 how the amount accumulated going to be spent for.
Aggrieved by the order of assessment the assessee filed appeal before the first appellate authority. The CIT(A) allowed the appeal of the assessee. The relevant finding of the CIT(A) reads as follows:-
“The dispute in the present appeal is essentially against the disallowance of exemption against accumulation of income under Section 11(2) of the Income Tax Act. Hence, all the grounds are taken together. The appellant through an application in Form 10 submitted before the assessing authority with respect to the assessment year 2018-19, pursuant to a resolution passed by the trustees, has sought for accumulation of Rs. 17,38,70,153/-. The purposes for which the accumulation as above is sought for has been recorded in the said application as under. "Charitable activities including relief to poor, medical aid, educational aid, Yogakshema Trust marriage aid, rehabilitation, environmental protection, contribution to charitable trusts registered under Section 12", the same objectives for which the trust has been incorporated. The allegation raised by the assessing authority is that "the same should be for a definite or concrete purpose or purposes, since Section 11(2) is a concessional provision to enable the charitable trust to meet a contingency for fulfillment of any project needing a heavy outlay in pursuit of its objects". The assessing authority has sought to rely on the judgment of the Calcutta High Court in Deputy Commissioner of Income Tax vs. Trustees of Singhania Charitable Trust (1993) 199 ITR 819 as well as the judgment of the Madras High Court in Commissioner of Income Tax vs. Mutthiah Chettiar Family Trust (2000) 245 ITR 400. In other words, it is the case of the assessing authority that the purpose of accumulation is to be 'specific and cannot be general in nature’. The appellant rely upon the subsequent judgments rendered by various high courts. In the judgment of the Delhi High Court in CIT vs. Hotel and Restaurant Association, the very same issue as considered by the Calcutta High Court has come up for consideration "It is true that specification of certain purpose or purposes is needed for accumulations of the trust's income under Section 11(2) of the Act. At the same time 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 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 assessed to achieve the object for which the assessed was incorporated. It is not the case of the Revenue that any of the objects of the assessee company were not for charitable purpose." In my considered opinion, as various courts have held, the Assessing Officer cannot deny such accumulation of income merely for the reason that purpose specified in Form No.10 is Yogakshema Trust vague and general in nature. As long as objects of the trust provide for such purpose, then the assessee can accumulates funds for the purpose which is specified in trust deed. This view is fortified by the decision of Hon'ble Gujarat High Court in the case of CIT (Exemption) vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust reported in [2019], where it was held that lack of declaration in Form No.10 regarding specific purpose for which funds were being accumulated by the assessee trust would not be fatal to the exemption claimed u/s.11(2) of the Act. The Hon'ble Supreme Court reported in (2019) has dismissed SLP filed by the Department in the above case and has upheld the findings of the Hon'ble Gujarat High Court. Hence, Assessing Officer is directed to delete the additions made towards denial of accumulation of income u/s 11 (2) of the Act and allow benefit of accumulation as claimed by the appellant. The grounds of appeal are allowed.”
5. Aggrieved by the order of the CIT(A) the Department has filed the present appeal before the Tribunal.
The learned Sr. DR, apart from strongly supporting from strongly supporting the order of the AO, had taken us through the judgement of the Hon'ble Gujarat High Court in the case of CIT (Exemption) vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust [2018] 409 ITR 591 (Guj). It was contended by learned Sr. DR that in the said judgement relied by the CIT(A) it has been clearly specified in Form 10 the reasons for accumulation at u/s. 11(2) of the Act. (refer para 4 of the judgement).
The learned A.R. supported the findings of the CIT(A) and reiterated the submission made before the authorities below.
Yogakshema Trust 8. We have heard the rival submissions and perused the material available on record. The AO denied the claim of accumulation u/s. 11(2) of the Act by observing that the purpose for which the amount is accumulated is not specific and is too general in nature. The assessee has placed on record a copy of the trust deed dated 29.11.1989 and Form 10 filed for the relevant assessment year. The main objects of the trust are as under: - (a) To provide help either in Terms of money or in kind to the handicapped. (b) To rehabilitate those who are deprived of their dwellings places and/or work establishments. (c) To assist and/or undertake the education of the neglected, orphaned and/or desolate. (d) To help such other philanthropic purposes which are akin to those mentioned above and (e) To provide aid to the poor.
A perusal of Form 10 filed for accumulation of income u/s. 11(2) of the Act, we find that reasons stated for accumulation of income is as under: - “Charitable activities including Relief to poor, medical aid, educational aid, marriage aid, Rehabilitation, Environmental protection, contribution to charitable trusts registered under section 12.” 10. The AO does not have case that accumulation u/s. 11(2) of the Act is for purpose outside the objects of the assessee trust. The only reason stated by the AO in denying the claim of accumulation Yogakshema Trust of income u/s. 11(2) of the Act is that the amount set aside for accumulation has not been specifically mentioned or categorised. We find from Form 10 that the assessee had enumerated the reasons for accumulation of income which is well within the objects of the assessee trust. The Hon'ble Delhi High Court in the case of CIT vs. Hotel & Restaurant Association [2003] 261 ITR 190 (Del), while considering identical issue has held as follows: - “7. We do not agree. It is true that specification of certain purpose or purposes is needed for accumulations of trust's income under section 11(2) of the Act. At the same time 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 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 any of 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.
The Hon'ble Delhi High Court in the case of Director of Income Tax (Exemption) vs. Mamta Health Institute for Mother & Children [2007] 293 ITR 380 (Del) has also taken a similar view. The relevant finding of the Hon'ble High Court is as follows: - “12. A perusal of the annual report as well as the overview of these projects clearly shows that the projects were in consonance with the objectives sought to be achieved by the assessee, which were for the benefit of women and adolescent girls particularly in the slums or in a community which was not Yogakshema Trust particularly well off. On-going through the objects of the society, it is clear that the assessee sought to accumulate funds for a charitable purpose. Quite clearly, the Tribunal was correct in its conclusion that the decision of this Court would apply to the facts of the case and that the assessee was entitled to the benefit of accumulation.”
In the light of the aforesaid reasoning and relying on the judicial pronouncements cited supra, we hold that the order of the CIT(A) is correct and no interference is called for. It is ordered accordingly.
In the result, the appeal filed by Revenue is dismissed.
Order pronounced in the open court on 2nd April, 2025.