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

10. According to the AO, the purpose for the accumulation of income as shown in Form no. 10 was “Acquiring, constructing, repairing building premises of sabha, purchase of furniture, fixture, equipment, computer system, educational and medical relief of poor and needy people, other charitable objects”. These purposes for accumulation according to AO was general in nature and not for specific purpose. Therefore, he issued show cause notice to the assessee as to why the same [deduction u/s 11(2) of the Act] should not be disallowed. Pursuant to which the assessee replied, which reply has been reproduced by the AO at page no. 2 & 3 of his order. The AO was not satisfied with the reply filed by the assessee and according to him sub-section (2) of section 11 of the Act, require assessee to state the specific purpose for accumulation. And since the assessee has given many purposes in general manner (including 3 A.Y. 2016-17 The Bombay Catholic Sabha charitable activities) the very requirement of specification of purpose of accumulation has not been satisfied and therefore he denied deduction u/s 11(2) of the Act by relying on the decision of the Hon’ble Calcutta High Court in the case of DIT Vs. Trustees of Singhania Charitable (1993) (199 ITR 819) (Cal), and thus he disallowed Rs.38,38,781/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to dismiss the same. Aggrieved, the assessee is before us.

5. 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: - 6 A.Y. 2016-17 The Bombay Catholic Sabha A. Whether, on the facts and circumstances of the case, the Tribunal is justified in holding that the accumulation of income by the assessed under Section 11(2) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for all objects for which the trust was created and not for specific purpose was neither prejudicial nor erroneous to the interests of the Revenue ? B. Whether Section 11(2) of the Act makes it necessary for the assessed to make specific mention of any purpose or purposes to enable it to accumulate the income ?"

6. And answered the same by observing as under: - “2. Briefly stated the material facts, leading to the present appeal, are that the respondent-assessed is a company registered under Section 25 of the Companies Act, 1956. It had been granted registration under Section 12A(a) of the Act. For the relevant previous year ending March 31, 1992, by means of a resolution, the assessed decided to accumulate its income for a period of ten years for fulfillment of the objects for which it had been created. Notice to that effect was given by filing the requisite statutory form, giving particulars of the income sought to be accumulated and invested in the specified securities. However, while completing the assessment for the relevant assessment year the Assessing Officer declined to take into consideration the amounts so accumulated on the ground that in the statutory form the specific object for which the income was sought to be accumulated was not indicated. He, accordingly, brought the said amount to tax.

3. 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.

7 A.Y. 2016-17 The Bombay Catholic Sabha

4. 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.

6. 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.

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

(2015) 370 ITR 490 (Del) wherein the Hon’ble High Court has framed the question of law as under: - “Whether the ITAT was correct in holding that by mentioned (sic. mentioning) "Further utilization in Form No. 10 read with Rule 17 of the Income Tax Rules, 1962 the Assessee has fulfilled its obligation as required under Section 11 (2) of the Act'.

(i) Members in the age group of below 50 years (as on 31-7-85) will be entitled to the following benefits:- (a) A sum of Rs.500/- p.m. shall be paid to the nominee of the deceased member for a period of 15 years.

10 A.Y. 2016-17 The Bombay Catholic Sabha (b) Lump sum additional payment of Rs.15,000/- shall be made to the nominee of the deceased member in addition in the benefit referred above if the member dies during the period of service in the bank. (ii) Members in the age group of above 50 years (as on 31-07-1985) will be entitled to the following benefits:- (a) A sum of Rs.500/- p.m. shall be paid to the nominee of the deceased member till the age of retirement with a minimum period of 5 years. (b) A lumpsum payment of Rs.15,000/- shall be made to the nominee of the deceased member in addition to the benefit referred above (ii-a) if the member dies during the period of service in the bank. Other benefits are also there which are in case of retirement and these have been given in part "B" of this scheme to the extent that a sum of Rs.500/- per month shall be paid to the members as per calculation given in the same. Further, other benefits in the cases of death and permanent disability have also been given. Lastly, benefit have been given on resignation from bank prior to the retirement. The contention of the learned counsel is that this is the only object of the assessee and there are no plurality of the objects and as such if the assessee had mentioned in form no. 10 that the accumulation of the funds w0ere for "further utilization" the very purpose is to utilize the amount of accumulation for further benefits to be given to the members in the case of death, retirement, permanent disability ' 10. Other benefits which were specified in part (b) of the Scheme, which stipulated that a sum of Rs.500/- shall be paid to the members on the event specified therein.

11. 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).

5. 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. 15 A.Y. 2016-17 The Bombay Catholic Sabha 2017-18 which is placed at page no. 39 to 57 of PB as well as and perusal of page no. 49, which would reveal that assessee had applied accumulated amount u/s 11(2) of the Act to the tune of Rs.38,38,781/- for AY. 2017-18. We also find that it is not the case of AO/Ld. CIT(A) that income sought to be accumulated by the assessee, was for any non-charitable activities, which are not for achieving the objects of the assessee. In other words, the purpose of accumulations were beyond the object of the trust or for not charitable purpose. 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 formed. Before us, the Ld. DR could not point out that purpose shown in Form 10 for accumulating Rs.38,38,781/- was not for objects of the assessee. 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. In the light of the aforesaid facts and in the light of the judicial precedents as laid down by the Hon’ble Delhi High Court in the case of CIT Vs. Hotel and Restaurant Association (261 ITR 190) and decision of the Hon’ble Delhi High Court in the case of DIT(E) v Daulat Ram Education Society (2005) 278 ITR 260 (Del) and the decision of the Hon’ble Delhi High Court in the case of DIT(E) v Nbie Welfare Society (2015) 370 ITR 490 (Del), we are inclined to allow the prayer of the assessee to allow accumulation of income u/s 11(2) of the Act of Rs.38,38,781/- by taking note of the facts and the ratio of the Hon’ble High Court decisions (supra) which were noted by the Co-ordinate Bench decision in the case of Bal Jeevan Trust (supra); and since AO’s view is also possible, in the facts 16 A.Y. 2016-17 The Bombay Catholic Sabha and circumstances discussed (supra) we relying on the decision of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. (88 ITR 192) (SC), allow the claim of assessee. Therefore, the appeal of the assessee is allowed.