SHRI JAIN UDYOG GRUHA,MUMBAI vs. COMMISSIONER OF INCOME-TAX (APPEALS), NATIONAL FACELESS APPEAL CENTRE (NFAC)

3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) considered the grounds of appeal

, submissions of the assessee and findings of the AO but has confirmed the action of the AO and dismissed the assesse appeal. Aggrieved by the order of the CIT(A), the assesse has filed an appeal before the Hon’ble Tribunal.

4. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in sustaining the disallowance made by the AO under accumulation of income u/s 11(2) of the Act, irrespective of the fact that the assessee has made substantial submissions relying on the judicial decisions. The Ld. AR contentions are that the assessee has been accumulating u/sec 11(2) of the Act in the earlier years Shri Jain Udyog Gruha, Mumbai and was accepted by the revenue. Similarly accumulated amount is spent as per objects of the trust in the subsequent years. The Ld. AR further mentioned that the said amount was spent in the F.Y 2020-21 and the asssessee has disclosed these facts in the A.Y.2021-22 return of income. Further the Ld.AR supported the submissions with the factual paper book and judicial decisions and prayed for allowing the appeal .Per Contra, the Ld. DR relied on the order of the CIT(A).

5. We heard the rival submissions and perused the material on record. The sole disputed issue envisaged by the Ld. AR that the CIT(A) has erred in sustaining the disallowance made by the AO as the accumulation claimed by the assessee u/sec 11(2) of the Act is vague. The Ld.AR submitted that the assessee has submitted the substantial details and information in the proceedings on the disallowance. Further the transactions of the assessee and the genuineness of the activities are accepted by the A.O, which are based on the audited financial statements. Whereas in the Form No. 10B, the AO find that there is no specific purpose for which the accumulation is made and on that reason itself the AO has disallowed the claim. The Ld. AR referred to the audited financial statements, where the assessee has debited the claim in the income and expenditure account I.e “Amount Transferred To Reserve or Specific Funds” placed at Page 5 of the paper book similarly it was disclosed in the Balance sheet under Shri Jain Udyog Gruha, Mumbai schedule A “Development Reserve Fund”. The Ld. AR contentions are that the amount could be utilized for acquisition of movable or immovable property and the same was not disputed by the AO in the earlier years. Similarly the assessee has been accumulating u/sec 11(2) of the Act in the earlier years and was accepted by the revenue and the accumulated amount is spent as per objects of the trust in the subsequent years. The Ld. AR further mentioned and demonstrated that the amount of Rs.26Lakhs was spent in the F.Y 2020-21 and the asssessee has disclosed these facts in the A.Y.2021-22 “Schedule I- of the return of income filed. The Ld. AR has relied on the following judicial decisions as under: 1. Nadigar Sangam Charitable Trust Vs. ADIT (E) [263 Taxman 648] (Madras High Court)

“Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under (Purchase of immovable property) - Assessment year 2001-02 Whether investment in immovable property which is intended to be used for serving cause and objects of trust is more committed and firm 'application' of income of trust - Held, yes Assessee-trust, created for benefit of artists and actors, paid an advance of certain amount for purchase of leasehold rights in an auditorium - Auditorium was to be used for purpose of artists or their families or even serve cause of general public in times of floods or to provide education to children, etc. Assessing Officer was of view that advance amount given by assessee was an 'investment' and could not be treated as application of income towards object of trust and, therefore, assessee was not entitled to exemption under section 11 to said extent of advance given by it It was noted that there was nothing contrary placed by revenue to indicate that purchase of auditorium on lease basis was not going to serve cause of charity as per objects of assessee-trust - Whether advance paid by assessee to Shri Jain Udyog Gruha, Mumbai purchase leasehold right in auditorium was to be considered as 'application of income' within meaning of section 11(1)(a) and, therefore, assessee was entitled to exemption under section 11 - Held, yes [Paras 15 and 17] [In favour of assessee] Words and Phrases: Word 'applied' as occurring in section 11(1)(a) of the Income-tax Act, 1961”

“Section 11 of the Income-tax Act, 1961, read with rule 17 of the Income-Tax Rules, 1962 Charitable or religious trust - Exemption of income from property held under (Accumulation of income) Assessment years 2009-10 and 2010-11 Whether as long as objects of trust were charitable in character and purpose or purposes mentioned in Form No. 10 were for achieving objects of Trust, merely because details were not Shri Jain Udyog Gruha, Mumbai furnished, assessee could not be denied benefit of exemption under section 11(2)- Held, yes [Paras 20 and 22] [In favour of assessee”

Section 11 of the Income-tax Act, 1961- Charitable or religious trust - Exemption of income from property held under (Accumulation of Income) Assessment year 2012-13 - Whether once assessee has accumulated income with a specific purpose and such purpose is specified in main objects of trust, then Assessing Officer cannot deny such accumulation of income merely for reason that purpose specified in Form No. 10 is vague and general in nature and as long as objects of trust provide for such purpose, then assessee can accumulate funds for purpose which is specified in trust deed Held, yes Assessee- trust had filed Form No. 10 along with return of income and accumulated sum under section 11(2) for purpose of objects of trust including specific objects such as Ashram major repair fund, poor children education fund and medical aid fund Assessing Officer had rejected accumulation of income on ground that assessee had accumulated its income not for specific purpose, but merely to defer taxation of surplus of amount which had not been applied towards its objects in corresponding accounting period Objects of trust were to extend help and relief to distressed, poor destitute, homeless and underprivileged students and provide medical relief to needy persons and assessee-trust was regularly accumulating funds for above purpose and such earmarked funds were continuously spent for said purpose Whether Assessing Officer erred in denying benefit of accumulation of income under section 11(2) and he was directed to allow benefit of accumulation to assessee-trust - Held, yes [Para 7.8] [In favour of assessee

“12. Having heard both the parties and after perusal of the records, we note that the assessee is a public charitable trust

Shri Jain Udyog Gruha, Mumbai registered u/s 12A of the Act with the main objective to do philanthropic acts and to take care/education of street- children/under-privileged children. The objective for the Trust, which is discernable from perusal of the page no. 6 of PB, were to do philanthropic acts and to take care of street- children/under-privileged children and especially their (i) Health Care (ii) Nutrition (iii) Literacy and basic education (iv) Self-esteem (v) Group skill, support services and associated support services (vi) Income generating schemes and (vii) Advancement of any other, social welfare objective. In this case, the assessee filed its return of income declaring income at Rs.11,83,030/- which was e-filed on 17.10.2016. The assessee had shown gross receipts of Rs.69,49,289/- and had applied towards the object of the trust a sum of Rs.18,83,357/- [Excluding depreciation as per section 11(6) of the Act]. Thus, it was found that only a sum of Rs.15,99,351/- was applied for education activities out of Rs. 18,83,357/-. According to AO, the assessee had not applied 85% of the income but has accumulated income of Rs.30 Lakhs u/s 11(2) of the Act for the purpose of "Basic Education, Health Care and Nutrition to Underprivileged children" which reason for accumulation, according to him, was not for a specific purpose, and instead was only a reiteration of the broad objectives of the trust. According to AO, this general purpose cannot satisfy the requirement of section 11(2) of the Act read with Rule 17 of the Rules. According to AO, accumulation of income u/s 11(2) of the Act must be for heavy outlay of expenses and therefore he disallowed the same. On appeal, the Ld. CIT(A) confirmed the action of AO after citing the decision of the Hon'ble Calcutta High Court in the case of Director of Income Tax v Trustees of Singhania Charitable Trust (1993) 199 ITR 819 (Cal) and the decision of the Hon'ble Punjab & Harayana High Court in the case of Maharaja Ranjit Singh War Museum v CIT order dated 20.03.2020 (ITA. No.259 of 2019).

Shri Jain Udyog Gruha, Mumbai Care and Nutrition to Underprivileged children" which we find is in consonance with the purpose/object of the trust itself. Therefore, according to us, the claim for accumulation u/s 11(2) of the Act cannot be denied to assessee. The Hon'ble Delhi High Court in the case of Hotel and Restaurant Association (supra), held that even though it is true that specification of certain purpose or purposes is needed for accumulation of trust's income u/s 11(2) of the Act, but at the same time, the purpose or purposes to be specified cannot be beyond the objects of the Trust. Their Lordships observed "Plurality of the purposes for accumulation is not precluded, but it depends on the precise purpose for which the accumulation is intended". Thus, we find that in the present case that income sought to be accumulated by the assessee was to achieve the object for which the assessee was incorporated. We find that it is not the case of AO/Ld. CIT(A) that any of the objects of the assessee trust were not for the purpose beyond the object of the trust or not charitable purpose. Further, we note from the statement of financials of the trust that assessee has applied its income for the education, feeding and clothing of the street children of Mumbai. We note that the income sought to accumulated by assessee was to achieve the three objects for which the assessee was formed. Before us, the Ld. DR could not point out that purpose shown in Form 10 for accumulating Rs.30 Lakhs was not for object of the trust. In such a scenario, since assessee has satisfied the conditions laid down in section 11(2) of the Act for accumulation of the income, the same has to be allowed. It is also noted that from chart (supra) (statement of income, expenses and accumulation) it shows that the assessee in AY. 2022-23 & AY. 2023-24 has offered excess amount which had been applied for achieving the objects of the trust. In the light of the judicial precedents as laid down by Hon'ble Delhi High Court as noted (supra), we are inclined to allow the prayer of the assessee to allow accumulation of income u/s 11(2) of the Act of Rs.30 Lakhs by following the ratio of the Hon'ble Supreme Court decision in the case of M/s. Vegetables Products Ltd. (supra) since other view is also possible. Therefore, the appeal of the assessee is allowed”.

Shri Jain Udyog Gruha, Mumbai 6. We have considered the facts, circumstances and the ratio of the judicial decisions. The revenue has disallowed the claim of accumulation of income u/sec 11(2) of the Act as the disclosure made in the Form.no.10B is not for specific purpose but general purpose. Prima facie the amount was utilised for achieving the objects of the trust in the subsequent years as discussed in the above paragraphs. Accordingly, we follow the judicial precedence and set aside the order of the CIT (A) and direct the Assessing officer to allow the claim of deduction u/sec11(2) of the Act. And we allow the grounds of appeal in favour of the assessee.