ITO (EXEMPTION)-2(3) MUMBAI, MUMBAI vs. SAYAJI-U-BA KHIN MEMORIAL TRUST, MUMBAI

4. Whether on the facts of the case and in law the Ld.CIT(A) erred in allowing the accumulation or setting apart of 15% of income of Rs. 56,37,4627- as the assessee has expended the entire income toward object of the trust as Application of income and there is no surplus left to be accumulated. However, in assessee's own case the Question of law on this issue has been admitted by Hon'ble Bombay High court vide order, of 2013 dated 26th April 2026, for A. Y. 2007-08.

5. Whether on the facts of the case and in law the Id.CIT(A) erred in allowing the carry forward of deficit of Rs. 1,52,81,656/- and allowing set off against the income of the subsequent years, -—— 6. Whether, on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing the claim of the assessee for carry forward of the said deficit, ignoring the fact that there was no express provision in the I T Act, 1961 permitting allowance of such claim."

7. Whether, on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing the claim of the assessee for carry forward of the said deficit by relying upon the judgment of Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection, ignoring the fact that the Department has not accepted the said decision of the jurisdictional High Court on merit of the case , but due to smallness of tax effect appeal was not filed before Hon'ble Supreme Court. However, on this issue the department has filed SLP before the Apex Court in the case of MIDQSPL (Civil) 9891 of 2024) and the matter is pending before the Hon'ble Supreme Court.”

3 ITA 5883/Mum/2016 to the subsequent years. The AO also rejected the claim of the assessee’s accumulation of income to the extent of 15% of gross receipts u/s 11(1) (a) of the Income-tax Act, 1961.

Aggrieved by the order of CIT(A), revenue is in appeal before us.

“4. We have considered submissions of ld.representatives of parties and orders of authorities below. We observe that there is no reason to interfere with the order of ld.CIT(A) on this issue as the income of the trust is required to be computed u/s 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust. Ld CIT(A) has rightly observed that the reliance placed by the department in the case of Escorts Ltd (supra) is not applicable to the facts of the assessee’s case. It is also observed that a Coordinate Bench of this Tribunal in assessee’s own case for assessment year 2004-05 by following the decision of Hon’ble Jurisdictional High Court in the case of Institute of Banking Personnel Selection (supra) allowed the claim of depreciation, which is followed by ld CIT(A) in the impugned order. Hence, we uphold his order and reject Ground No.1 of appeal taken by department.”

5 ITA 5883/Mum/2016 of income u/s 11(1)(a) of the Income-tax Act, 1961. The AO rejected accumulation of income u/s 11(1)(a) on the ground that when there is no surplus available for accumulation of income, there is no provision under the Act to accumulate 15% of gross receipts for future years. The Ld.AR for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT, Mumbai Bench in its own case for AY 2007-08. We find that the co-ordinate bench of ITAT in assessee’s own case for AY 2007-08 in has allowed the claim of the assessee towards accumulation of 15% income u/s 11(1)(a) of the Act. The relevant portion of the order is extracted below:-

7. We observe that ld CIT(A) has allowed the claim of the assessee, inter alia, observing as under: “6.3 I have considered the A.O.’s order as well as the appellant’s A/R submission. I have also carefully observed the findings of the Hon’ble Supreme Court in the case of Programme for community Organization reported in 248 ITR I, wherein the Hon’ble Supreme Court, while delivering the said judgement has stated that “Having regard to the plain language of the above provisions, it is clear that a charitable or religious trust is entitled to accumulate twenty five percent. Thus, taking note of all these facts, I find merits in the arguments of the appellant. Besides this, I also get strong opined from the recent judgement of Hon’ble Bombay High Court in the case of CIT vs. Trustees of Bhat Family Research Foundation, wherein the Hon’b!e Bombay Bombay High Court states that “It is clear from clause (a) of sub-section (1) of section 11 that income derived from proper held under trust wholly for charitable purposes or religious purposes shall not be included in the total income to the extent to which it is applied for such purposes in India and, where it is accumulated for such application, to the extent that the accumulation is’ not in excess of 25% of the income of Rs. 10, 000/-, whichever is higher. The exemption of accumulated income to the extent of 25% or Rs. 10,000/-, whichever is higher, is unqualified and unconditional.. “Further to that, I also place reliance to the judgement of Hon’ble Supreme Court in the case of’ Addl. CIT vs. A. I N. Rao Charitable Trust (1995) 129 CTR 205, wherein it is held that exemption available u/s 11(1)(a) i.e. 15% of income is unfettered and not subject to any conditions.

6 ITA 5883/Mum/2016 6.4 Considering all the above factual position as well as the case laws referred as above, I consider it proper and appropriate to hold that the A.O. was rot justified in denying the claim of the appellant for the accumulation of income. Accordingly, this ground of appeal is allowed.” 8 We observe that ld CIT(A) has relied on the decision of Hon’ble Supreme Court in the case of A.I.N. Rao Charitable Trust (supra), wherein , it is held that exemption available u/s.11(1)(a) i.e. 15% of income is unfettered and not subject to any conditions. In the case before us, assessee has claimed 15% accumulation u/s.11(1)(a) of the Act. Hence, we do not see any reason to interfere with the order of ld CIT(A) and reject ground of appeal taken by department. “

8. In this view of the matter and consistent with the view taken by the co-ordinate bench, we are of the view that the assessee is eligible for accumulation of income to the extent of 15% of gross receipts u/s 11(1)(a) of the Act. The CIT(A) after considering relevant facts has rightly allowed the claim. We do not find any error in the order of the CIT(A). Hence, we are inclined to uphold the findings of CIT(A) and reject ground raised by the revenue.

“9. In regard to Ground No.3 of appeal, we heard ld.

7 ITA 5883/Mum/2016 Representatives of parties and perused orders of authorities below. We observe that ld CIT(A) by allowing the claim of the assessee has relied on the decision of Hon’ble Bombay High Court in the case of CIT vs Institute of Banking Personnel Selection (supra), wherein it has been stated that income derived from the trust property has to be computed on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable purposes in subsequent year in which such adjustment has been made. Hence, there is no reason to interfere with the order of the ld.CIT(A). Accordingly, we uphold the same by rejecting ground No.3 of appeal taken by revenue.”