M/S. PRARTHANA EDUCATION SOCIETY,BANGALORE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE-1, BANGALORE

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ITA 1604/BANG/2017Status: DisposedITAT Bangalore04 March 2019AY 2012-1310 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the accumulation of income under section 11(1)(a) of the Act should be allowed as claimed by the assessee, which is on the gross income. The Tribunal relied on the decision of the Bangalore Bench in the assessee's own case for AY 2011-12, which in turn followed the Supreme Court's decision in CIT vs. Programme for Community Development Organisation. The Supreme Court held that a charitable trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust, and this percentage should be applied to the income before deducting expenditures that constitute application of income. The Tribunal noted that any expenditure in the shape of application of income is not to be taken into account for determining the 25% accumulation. The operative direction was to allow the exemption as claimed by the assessee.

What were the facts?

The assessee, M/s. Prarthana Education Society, filed an appeal against the order of the CIT(A)-14, LTU, Bangalore, dated 27.02.2017, for Assessment Year 2012-13. The assessee is registered under section 12A and eligible for exemption under section 11 of the Income Tax Act, 1961. The core dispute concerns whether the computation of exemption under section 11 should be based on the gross income or net income of the assessee. Both parties agreed that this issue was already decided by the Bangalore Bench of the Tribunal in the assessee's own case for Assessment Year 2011-12.

What were the issues?

1. Whether the accumulation of income under section 11(1)(a) of the Income Tax Act, 1961, for charitable purposes should be computed on the gross income or the net income of the assessee? Assessee's contention: The assessee argued that the accumulation should be computed on the gross income, citing the Supreme Court decision in CIT vs. Programme for Community Development Organisation and a co-ordinate bench decision in Mary Immaculate Society vs. DDIT (E). The assessee contended that expenditure in the nature of application of income should not be deducted before calculating the 25% accumulation. Revenue's contention: The Revenue, as per the Assessing Officer and CIT(A), was of the opinion that the income available for charitable trust application under section 11 is the net income after all expenditure incurred to earn that income. The Revenue's stand was that accumulation should be on net income.

Which sections of the Income-tax Act were involved?

Section 11,Section 11(1)(a),Section 12A,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH : BANGALORE

Before: SHRI J. SUDHAKAR REDDY & SHRI LALIET KUMAR

For Appellant: Shri. Shreesh Kumar B. Hegde, CA
For Respondent: Dr. P. V. Pradeep Kumar, Addl. CIT

Per J. Sudhakar Reddy, Accountant Member

1.

This appeal filed by the assessee is directed against the order of the CIT(A)-14, LTU, Bangalore, dated 27.02.2017 for the Assessment Year 2012-13, under section 250 of the Income Tax Act, 1961 (‘the Act’).

2.

The undisputed fact is that the assessee is registered under section 12A of the Act and that it is eligible to claim exemption under section 11 of the Act. The short point for consideration is whether the computation of exemption Page 2 of 10 under section 11 of the Act has to be done on the gross income or the net income of the assessee. Both the parties agreed that the issue is no more res-integra as it is covered by the decision of the Bangalore Bench of the Tribunal in the assessee’s own case for the Assessment Year 2011-12 vide order dated 06.10.2015. This Bench held at para 6, page 4, as follows:

3.

Respectfully following the same, we allow this appeal of the assessee and direct the Assessing Officer to compute the exemption as claimed by the assessee.

4.

In the result, this appeal of the assessee is allowed.

Pronounced in the open court on this 04th day of March, 2019.

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