THE BOMBAY CATHOLIC SABHA,MUMBAI vs. ITO EXEMPTION WARD 2(4), MUMBAI, MUMBAI

We have heard both the parties and perused the records. We note that the assessee filed its return of income on 23.09.2016 along with the Income & Expenditure Account, Balance Sheet and Audit Report in Form No. 10B declaring total income at Rs. Nil. According to the AO, the assessee had shown to have accumulated Rs.38,38,781/- u/s 11(2) of the Act. On query raised by the AO, regarding the accumulation for general purposes, the assessee brought to his notice that the amount accumulated in AY. 2016-17 i.e. Rs.38,38,781/- has already been applied towards expenditure in subsequent assessment year i.e. AY. 2017-18 and filed proof of the same [i.e, by filing the computation of income for AY. 2017-18]. However, the AO was of the opinion that since the assessee had shown the purpose for accumulation inter-alia as education, medical relief of poor etc., were for general charitable purpose and not specific in nature, he disallowed the accumulation of income u/s 11(2) of the Act to the tune of Rs.38,38,781/-. On appeal, the Ld. CIT(A) confirmed the action of the AO. Before us, the Ld. AR submitted that the assessee has been accumulating income from earlier years and applying the same as per

According to the Ld. Sr. Counsel, the assessee has fulfilled the condition as prescribed u/s 11(2) of the Act i.e conditions enumerated under clause (a), (b) & (c) (supra). According to the Ld. Counsel merely because assessee has stated the purpose for which the income is being accumulated as “Basic Education, Health Care and Nutrition to Underprivileged children”, the Ld. CIT(A) could not have upheld the action of the AO. To bolster his contention, the Ld. Sr. Counsel referred to the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Hotel and Restaurant Association (261 ITR 190) wherein the Hon’ble Delhi High Court in similar case framed the question of law as under: -

And answered the same by observing as under: -

Aggrieved the assessed preferred an appeal to the Commissioner of Income-tax (Appeals), who, by his order dated April 26, 1995, accepted the claim of the assessed. While holding that the notice to accumulate income by the assessed was in order, the Commissioner (Appeals) observed that the assessed had passed a resolution to accumulate its income so as to apply the same in India in the next ten years to achieve the object for which it had been incorporated ; notice of this fact had been given to the Assessing Officer in the prescribed format and further the said money had been invested in the specified securities. The Commissioner (Appeals), thus, held that the assessed was entitled to exemption under Section 11(1)(b) of the Act.

Being dissatisfied, the Revenue carried the matter in appeal to the Tribunal. The Tribunal has affirmed the view taken by the Commissioner (Appeals). It has also noticed that the assessed had applied the accumulated income for achieving its object. Hence, the present appeal.

We have heard Mr. R.D. Jolly, learned senior standing counsel for the Revenue, Mr. Jolly submits that the appellate authorities have failed to appreciate that in the prescribed form the assessed had failed to indicate the specific purpose for which the income was sought to be accumulated and, therefore, the statutory requirement had not been strictly complied with, disentitling the assessed from relief under Section 11(2) of the Act.

We do not agree. 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 asses-see-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.

We, accordingly, decline to entertain the appeal. The same is dismissed.”

The Ld. Sr. Counsel drew our attention to the decision of the Hon’ble Delhi High Court in the case of DIT(E) v Daulat Ram Education Society (2005) 278 ITR 260 (Del) wherein the Hon’ble High Court reiterated the judicial precedent laid down in Hotel and Restaurant Association (supra) and observed as under: - “4. The Tribunal has placed reliance upon the judgment of a Division Bench of this court in CIT v. Hotel & Restaurant Association [2003] 261 ITR 190. In that case also the assessee had accumulated the unspent amount for being spent on more than one purposes specified by it. The question for consideration was whether it was necessary for the assessee to make a specific mention of any purpose or purposes to enable it to accumulate the income. The court held that section 11(2) of the Act did not prohibit plurality of purposes. The court also held that the purposes which the assessee had 8 A.Y. 2016-17 The Bombay Catholic Sabha specified formed part of its objects and were charitable in nature. The position is no different in the instant case. Here too, out of 29 purposes/objects stipulated in the memorandum of association, the assessee has specified eight purposes in Form No. 10 for which it was accumulating the unspent income while claiming benefit under section 11. It is not the case of the revenue that any of these eight purposes are not charitable or that the same do not figure in the memorandum of association. In the circumstances, just because more than one purpose have been specified and just because details about the plans which the assessee has for spending on such purposes are not given may not be sufficient to deny the exemption admissible to it under section 11. So long as one or more of the purposes specified by the assessee find place in the objects for which the society has been incorporated and so long as the said purpose are charitable in character, the benefit admissible under section 11 must flow to the assessee. 5. In the light of what is stated above, no substantial question of law arises for consideration. The appeal fails and is hereby dismissed.”

The Ld. Sr. Counsel also cited the decision of the Hon’ble Delhi High Court in the case of DIT(E) v Nbie Welfare Society

And the Hon’ble Delhi High Court while answering the question of law has also referred to the decision of the Hon’ble Calcutta High Court in the case of DIT(E) v Trustees of Singhania Charitable Trust (1993) 199 ITR 819 (Cal) which was cited by Ld. CIT(A) in the impugned order in order to uphold the action of the AO; and the Hon’ble High Court (supra) has distinguished on the facts the decision in Trustees of Singhania Charitable Trust (supra), wherein that charitable trust had as many as eighteen (18) objectives and there was no specific objective for which accumulation had been sought, and thus

In the light of the aforesaid case laws, the Ld. Sr. Counsel wants us to allow the accumulation of income u/s 11(2) of the 11 A.Y. 2016-17 The Bombay Catholic Sabha

Drawing our attention to the chart above, the Ld. Sr Counsel pointed out that assessee trust takes care of the street-children and takes care of the welfare/education of the children; and it can be seen that in AY. 2022-23 & AY. 2023-24, the assessee has been applying excess income for charitable purpose, which fact can be discerned from the negative figures reflecting therein, which fact shows the bonafides of the assessee trust to utilize the income for the benefit of the street-children. In the light of the above facts, the Ld. Sr. Counsel want us to allow the accumulation of Rs.30 Lakhs u/s 11(2) of the Act. Per contra, the Ld. DR supporting the action of the Ld. CIT(A) relied on the decision of the Hon’ble Calcutta High Court(supra) as well as the Hon’ble Punjab & Harayana High Court (supra) and wants us not to interfere with the impugned action of Ld CIT(A). In his rejoinder, the Ld. Sr. Counsel submitted that when there are two views possible; and when there is no decision of the jurisdictional High Court on the issue, then the view which is 12 A.Y. 2016-17 The Bombay Catholic Sabha favorable to the tax payer should be adopted by Tribunal and cited the decision of the Hon’ble Supreme Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (1973) 88 ITR 192. 12. Having heard both the parties and after perusal of the records, we note that the assessee is a public charitable trust 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 13 A.Y. 2016-17 The Bombay Catholic Sabha 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).

We do not countenance the action of the Ld. CIT(A). We note that assessee Trust while making a claim for accumulating income to the tune of Rs.30 Lakhs as per sub-section (2) of section 11 of the Act, has fulfilled the conditions prescribed therein by filing the Form 10 wherein the assessee has spelled out the purpose for accumulation as “Basic Education, Health 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 14 A.Y. 2016-17 The Bombay Catholic Sabha 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.”

Respectfully following decision of the Co-ordinate Bench of this Tribunal in the case of Bal Jeevan Trust (supra) and further taking note of the contemporaneous relevant evidence that the assessee had already applied the accumulated amount of relevant AY. 2016-17 for the objects for which it was formed which is evident from the computation of income for AY. 2017-18 (which fact was brought to the notice of the AO) and also from perusal of the financials of AY.

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