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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-1, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The grounds raised
by the assessee in this appeal read as under:
1. The Ld. CIT(A) erred in not allowing the claim of exemption u/s 10(23C)(iiiab)/ (iiiad) of the Act.
2. The Ld. CIT(A) erred in denying the benefit of accumulation of Rs.17,00,000/- u/s 11(2) of the Act.
The Ld. CIT(A) erred in not allowing set off of the deficit incurred and assessed in earlier years without assigning any reasons in the order. 3. We begin with the 1st and 2nd ground of appeal
and discuss them together as they address a common issue. Briefly stated, the facts of the case are that the assessee-trust had claimed accumulation of Rs.17,00,000/- u/s 11(2) during the year. The Assessing Officer (AO) observed that Form No. 10 and resolution of the Board which are mandatory for claiming the benefit of accumulation u/s 11(2) were not filed. The AO held that even if filing of Form No. 10 during the assessment proceedings is considered valid, the decision with respect to accumulation should have been taken by the Board of the trust by way of a Board Resolution by the end of the financial year, which in the instant case has not been done. The AO thus held that there is no reason why this income of Rs.17,00,000/- may not be taxed as income of the trust for the year under assessment denying the benefit of accumulation u/s 11(2). Finally, the AO brought to tax an amount of Rs.1,38,04,414/- being surplus as per income and expenditure account.
4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). During the course of appellate proceedings, the assessee filed a copy of the resolution dated 18.06.2010 and Form No. 10 dated 11.07.2011 before the Ld. CIT(A). The resolution clearly specifies that Rs.17,00,000/- surplus is to be invested in interest bearing deposits of Corporation Bank, Juhu Branch. The said resolution reads as under:
Sadhana Education Society "RESOLVED THAT the Council of Management of the Sadhana Education Society do hereby ratify/approve the investment of the available surplus funds of the Sadhana Education Society amounting to Rs.17,00,000/- made during the year ending 31st March, 2010, from time to time in the interest bearing deposits of Corporation Bank, Juhu Branch. RESOLVED FURTHER THAT the Council of Management of the Sadhana Education Society do approve the utilization of the said amount of Rs.17,00,000/- towards capital and/or revenue expenditure towards teaching and non-teaching staff members as well as other capital expenditure including towards purchase of computers, laptops, gymnasium equipment, air-conditioners, wafer coolers, and such other equipment for use of the students of the pre-primary, primary, schools, College of Educations, the Arts and the Commerce College the various courses conducted by the institutions under the aegis of Sadhana Education Society, as well as for the repairs, renovations and maintenance of the premises of the Sadhana Education Society. RESOLVED FURTHER THAT the funds so accumulated of Rs.17,00,000/-and invested in bank deposits be utilized by the Sadhana Education Society within 5 years time in line with section 11(2) read with section 11(5) of the Income Tax Act, 1961," 4.1 The Ld. CIT(A), having gone through the above resolution by the Board, observed that the retention of surplus is not necessitated by any specific requirement or future need of funds for such purposes as enumerated in the objectives of the trust. As per him, it is a case of ‘investment of available surplus in the interest-bearing deposits’, delinked from future requirement of funds for the objectives of the trust. Under such circumstances, the requirement of section 11(2)(a) of the Act for ‘specified purpose’ of accumulation is not satisfied.
Sadhana Education Society The Ld. CIT(A) thus held that it is not the plurality of purpose mentioned in Form No. 10 of the assessee filed for the purpose of accumulation of Rs.17,00,000/-, rather it is the general and vague purpose noted in the Form, which is in violation of section 11(2)(a) of the Act. The resolution is dated 18.06.2010 which shows that the surplus of Rs.17,00,000/- remained un-spent/accumulated in the normal course without conscious accumulation for any purpose. In view of the above, the Ld. CIT(A) upheld the order of the AO on the above issues.
Before us, the Ld. counsel of the assessee submits that during the year, the assessee-trust opted for the benefit of accumulation of income u/s 11(2) of the Act. It accumulated an amount of Rs.17,00,000/- (approx. 2.5% of the total income) and invested the same in fixed deposits with nationalized bank before the end of the financial year. The same was consented/approved by passing the Board resolution to that effect on 18.06.2010. The assessee-trust also obtained Form No. 10 and filed the same along with the return of income. The AO denied the benefit of accumulation u/s 11(2) on the reason that Form No. 10 was not filed and the decision of accumulation was not taken by the Board by the end of the financial year. With regard to the same, the Ld. counsel submits that: (i) the assessee-trust opted for accumulation of income available u/s 11(2) before the end of the financial year, (ii) the accumulation amount was invested in fixed deposits with nationalized bank in accordance with provisions of section 11(5), (iii) the decision of accumulation was consented/approved by the board vide resolution dated 18.06.2010, (iv) the return could not be filed in time due to Sadhana Education Society (v) however, Form No. 10 was filed alongwith return of income and also during the assessment proceedings. The Ld. counsel thus submits that the delay in submission of Form No. 10 is a mere technical default without any malafide intention and hence the same may be condoned. Reference was made to CBDT Circular 273 dated 03.06.1980 wherein the conditions under which late submission of Form No. 10 can be condoned are mentioned. It is stated that all the conditions in the said Circular are fulfilled by the assessee and hence the accumulation of benefit u/s 11(2) may be granted. The Ld. counsel relies on the order of the ITAT ‘E’ Bench, Mumbai in the case of the assessee for the AY 2008-09 (ITA No. 7349/Mum/2011) and the decision in CIT v. Moti Ram Gopi Chand Charitable Trust (2014) 360 ITR 598 (All.), Bharat Kalyan Pratisthan v. Director of Income Tax (Exemption) (2007) 211 CTR 354 (Del), Director of Income Tax v. Mitsui & Co. Environmental Trust (2007) 211 CTR 352 (Del), Director of Income Tax (Exemptions) v. Envisions (2015) 378 ITR 483 (Karn), Samaj Seva Nidhi v. ACIT (2015) 376 ITR 507 (T&AP).
On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A) and submits that the stated purpose of accumulation are general and vague in relation to objects of the trust.
We have heard the rival submissions and perused the relevant materials on record. The Hon’ble Supreme Court had an occasion to consider section 11 of the Act in CIT v. Nagpur Hotel Owners’ Association Sadhana Education Society (2001) 247 ITR 201 (SC), wherein the issue related to the time period within which the information should be furnished to the assessing authority. The Supreme Court categorically held that intimation required u/s 11 of the Act has to be furnished before the assessing authority before he completes the concerned assessment. In view of the ratio laid down by the Hon’ble Supreme Court in the above case and the fact that in the instant case Form No. 10 was filed along with the return of income and also during the assessment proceedings, we do not agree with the order of the Ld. CIT(A) on the above issue. The decision in Nagpur Hotel Owners’ Association (supra) has been subsequently followed in Moti Ram Gopi Chand Charitable Trust (supra) and Samaj Seva Nidhi (supra). In Envisions (supra), the objects of the trust, as given in the trust deed, were 14 in number. The Hon’ble High Court held that “merely because more than one purpose had been specified and details about the plan of such expenditure had not been given, the same would not be sufficient to deny the benefit u/s 11(2) to the assessee. As long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in form 10 are for achieving the objects of the trust, merely because of non-furnishing of the details, as to how the amount is proposed to be spent in future, the assessee could not be denied the exemption as was admissible under sub-section (2) of section (11)”.
Sadhana Education Society Bharat Kalyan Pratisthan (supra), the assessee has only three objects as far as its trust deed is concerned. The trust deed requires the trust to utilize its funds for charitable purposes which are medical relief, education and relief to the poor. In the application seeking exemption, the assessee has specified these three objects. The Hon’ble High Court held that it was not required for the assessee to be more specific with regard to the utilization of the funds. Plurality of purposes is permitted and if it is so happens that an assessee has only three objects or purposes, it may well utilize the funds for all the three objects and purposes. In Mitsui & Co. Environmental Trust (supra) the Hon’ble High Court held that assessee having applied for accumulation of income stating that the amount would be utilized for its objects, it could not be said that the purpose of accumulation was not specified; since an order was passed under section 12 of the Foreign Contribution (Regulation) Act, 1976, prohibiting utilization of the amount received by the assessee, accumulation of income could not be denied on the ground on non- utilization of the amount for the purposes of the trust. In the instant case under appeal before us, the accumulation which is mere 2.5% of the total income was invested in fixed deposits with Corporation Bank which is in accordance with section 11(5) of the Act. In view of the position of law delineated hereinbefore, we set aside the order of the Ld. CIT(A) on the above issues and allow the 1st and 2nd ground of appeal.