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Facts
The assessee, a charitable trust, claimed deduction under Section 11(2) for accumulated income. The Assessing Officer (AO) disallowed the claim, stating the purpose mentioned in Form No. 10 was vague. The CIT(A) upheld the AO's decision.
Held
The Tribunal held that while a statement of purpose is a requirement, a minor inaccuracy or lack of full declaration in Form No. 10 is not fatal if the purpose was otherwise clearly communicated, such as through a board resolution. The revenue's appeal was dismissed.
Key Issues
Whether the vague mention of "purpose of the trust" in Form No. 10 renders the accumulation claim invalid under Section 11(2) of the Income Tax Act.
Sections Cited
11(2), 13(1)(d)
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI MADHUSUDAN SAWDIA
O R D E R Per Bench : The assessee has filed Stay Application along with appeal in 2018-2019 against the order dated 21.07.2025 passed by the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, thereby disallowing the exemption claimed by the assessee trust u/s.11(2) of the Act on the ground that the purpose mentioned in Form No.10 was too vague and lacked the required specificity.
It was submitted by the Ld.AR that the assessee had during the impugned assessment year filed its form no.10 which reads as follows:-
It was submission that in the Form No.10 the purpose for which the amount was being accumulated or set apart was reported as “purpose of the trust”. It was the submission that the AO held that the Form No.10 where SA No.06/CTK/2025 it is mentioned that the “purpose of the trust” was not clear and there was no specific object mentioned by the assessee for accumulation and, therefore, denied the assessee the benefit of the accumulation and brought to tax the Rs.15 crores, which had been accumulated. It was submission that the accumulation had been initially started during the assessment year 2009-10 and the assessment year 2018-19 was the last year of the said accumulation. It was submission that the Hon’ble Gujarat High Court in the case of CIT Vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust in Tax Appeal No.1260 and 1261 of the 2018, had under similar circumstances held that the assessee having made a clear statement of setting out the purpose for which income was being set apart, the disallowances of the accumulation was not permissible. The said decision of the Hon’ble Gujarat High Court is reported in 409 ITR 591 (Gujarat-HC) and the relevant observations of the Hon’ble High Courts reads as follows:- IT : Lack of declaration in Form No. 10 regarding specific purpose for which funds were being accumulated by assessee-trust, would not be fatal to exemption claimed under section 11(2) ■■■ [2019] 102 taxmann.com 122 (Gujarat) HIGH COURT OF GUJARAT Commissioner of Income-tax (Exemptions) v. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust * Akil Kureshi AND B.N. Karia, JJ R/Tax Appeal Nos. 1260 & 1261 of 2018 OCTOBER 15, 2018 Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under (Accumulation of fund) - Assessment year 2008-09 - Whether lack of declaration in Form No. 10 regarding specific purpose for which funds were being accumulated by assessee-trust, would not be fatal to exemption claimed under section 11(2) - SA No.06/CTK/2025 Held, yes - Whether, therefore, where pursuant to enquiry raised by Assessing Officer, assessee passed a formal resolution specifying that funds were set apart for ongoing hospital projects of trust and for modernization of existing hospitals, it was to be regarded as sufficient compliance of requirements of Act and, thus, assessee's claim for exemption under section 11(2) in respect of funds accumulated was to be allowed - Held, yes [Para 8] [In favour of assessee] FACTS The assessee was a public charitable trust. For the relevant assessment year, the assessee had filed the return of income claiming deduction of a sum of Rs. 3.60 crores under section 11(2).The Assessing Officer questioned the assessee with respect to such claim prima facie believing that the assessee had not indicated the purpose for which the income was set apart which was one of the requirement of section 11 of the Act. He also referred to the declaration to be made by the assessee under Form No. 10 in support of such a claim in which also, according to him, there was no specification of the purpose. The assessee appeared before the Assessing Officer and filed a detailed reply. The gist of the reply was that the assessee-trust was engaged in providing medical facilities at various centers. At the time of setting apart of the funds, two hospital projects were coming up and modern amenities were required to be provided in the existing hospitals. The board of the trustees, therefore, passed the resolution to set apart such amount to finance future requirement of the trust's projects. The Assessing Officer having rejected assessee's explanation, disallowed claim of deduction filed under section 11(2). The Commissioner (Appeals) confirmed the view of the Assessing Officer. The Tribunal, however, taking a view that it was not mandatory to specify object in Form No. 10 for which funds were accumulated, set aside order passed by authorities below. On revenue's appeal: HELD Section 11(2) provides that eighty five per cent of the income which is not utilized by the Trust for charitable or religious purposes would not be included in the total income of the previous year of receipt of the income provided the conditions laid down in clauses (a) to (c) contained therein are satisfied. Clause (a) in particular, which is applicable, provides that such person furnishes the statement in the SA No.06/CTK/2025 prescribed form and in prescribed manner to the Assessing Officer staying the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart which shall in no case exceed five years. Undoubtedly therefore, the statement of purpose for which theincome is being accumulated or set apart is one of the requirements which must be satisfied before the assessee can avail the benefit under sub-section (2) of section 11 of the Act. However, that by itself would not mean that any inaccuracy or lack of full declaration in the prescribed format by itself would be fatal to the claimant. The prime requirement of this clause is of stating of the purpose for which the income is being accumulated or set apart. In the present case, we are prepared to accept the revenue's stand that the declaration made in Form No. 10 by the assessee was not sufficient to fulfil this requirement. However, as noted, during the course of assessment proceedings, the Assessing Officer called upon the assessee to explain the position in response to which, the assessee in detail pointed out background under which the board of trustees had met, considered the material and eventually passed a formal resolution setting apart the funds for the ongoing hospital projects of the trust and for modernization of the existing hospitals. There was thus a clear statement made by the assessee setting out the purpose for which the income was being set apart. Therefore,therewas no error in view of the Tribunal. [Para 8] In view of above, revenue's appeal is dismissed. Mrs. Mauna M. Bhatt for the Petitioner. ORDER Akil Kureshi, J. - These Tax Appeals arise in common back-ground. We may notice facts as emerging from the record of Tax Appeal No. 1260 of 2018.
Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 20.04.21018 raising following questions for our consideration: A. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in interpreting the provisions of section 11(2) of the Act and holding that it is not mandatory to specify the object/purpose in Form No.10 for claiming accumulation u/s. 11(2) of the Act? B. Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in allowing the claim of accumulation of Rs. 3,60,00,000/- u/s. 11(2) of the Act?"
SA No.06/CTK/2025 3. Both questions are arising out of same issue. Such issue arises in following background: 4. Respondent-assessee is a Public Charitable Trust. For the assessment year 2008-09, the assessee had filed the return of income claiming deduction of a sum of Rs. 3.60 crores under section 11(2) of the Income Tax Act, 1961. Assessing Officer questioned the assessee with respect to such claim prima facie believing that the assessee had not indicated the purpose for which the income was set apart which was one of the requirement of section 11 of the Act. He also referred to the declaration to be made by the assessee under Form 10 in support of such a claim in which also, according to him, there was no specification of the purpose.
The assessee appeared before the Assessing Officer and filed a detailed reply. The gist of the reply is that the assessee-Trust is engaged in providing medical facilities at various centers like Ahmedabad, Surat etc. At the time of setting apart of the funds, two hospital projects at Ahmedabad and Atladra were coming up and modern amenities were required to be provided in the existing hospitals. The board of the trustees therefore passed the resolution to set apart such amount to finance future requirement of the trust's projects. We may also note that such resolution was filed along with the return of the income. Board of trustees passed a specific resolution after examining the facts and necessities of the trust. It was for future hospital of the Trust as well as the amount to be set apart to be utilized for purchase of necessary equipments, ambulance van, furniture and fixtures and further expenditure required to be made for modernization of the hospitals.
In such background, the assessee argued that requirements of section 11D were sufficiently met with. The Assessing Officer was of the opinion that there was no such specification in the declaration in Form 10. Even otherwise the resolution of the board of trustees also contained any such specification.
In appeal CIT(A) confirmed the view of the Assessing Officer upon which, assessee filed further appeal. Tribunal, by the impugned judgement allowed the appeal making following observations: "5. We have gone through the record and relevant order, The appellant is a Public Charitable Trust and engaged in providing medical relief at various centers. During the course of re-assessment proceedings Assessing Officer purpose to disallowed the claim of accumulation u/s. 11(2) wherein lower authorities held that it was mandatory to set apart specified object in Form No. 10 where fund to be accumulated and since there was no specific object was mentioned. Therefore claim of the appellant was rejected.
In the regulation passed at the meeting of the trustees clearly indicated that Rs. 3.60 crore were required for the hospital project in respect of hospital run at several places and so accumulates Rs.
SA No.06/CTK/2025 3.60 crore were to be utilized for the current and future project of this said hospitals by way of explanation and in support of its contention Ld. A.R. Also cited a decision in the case of CIT v. Hostel and Restaurant Association (2003) 261 ITR 190 whereas it has been held as under it is true that specification of certain purpose or purpose is needed for accumulation trust's income u/s. 11(2) of the act. At the same time, the purpose or purposes to be specified cannot 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 needed. In this present case. It has been no dispute that appellant trust is resulted to accumulate the funds for medical purpose that for the providing at various centers as evidence from its reply dated 07.05.2013 reproduced by the Assessing officer in this order. It is not the case of the Revenue that the said object from this trust deed not for the charitable purpose."
Section 11(2) of the Act provides that eighty five percent of the income which is not utilized by the Trust for charitable or religious purposes would not be included in the total income of the previous year of receipt of the income provided the conditions laid down in clause (a) to (c) contained therein are satisfied. Clause (a) in particular, which is applicable, provides that such person furnishes the statement in the prescribed form and in prescribed manner to the Assessing Officer staying the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart which shall in no case exceed five years. Undoubtedly therefore, the statement of purpose for which the income is being accumulated or set apart is one of the requirements which must be satisfied before the assessee can avail the benefit under sub-section (2) of section 11 of the Act. However, that by itself would not mean that any inaccuracy or lack of full declaration in the prescribed format by itself would be fatal to the claimant. The prime requirement of this clause is of stating of the purpose for which the income is being accumulated or set apart. In the present case, we are prepared to accept the Revenue's stand that the declaration made in Form 10 by the assessee was not sufficient to fulfill this requirement. However, as noted, during the course of assessment proceedings, the Assessing Officer called upon the assessee to explain the position in response to which, the assessee in detail pointed out background under which the board of trustees had met, considered the material and eventually passed a formal resolution setting apart the funds for the ongoing hospital projects of the Trust and for modernization of the existing hospitals. There was thus a clear statement made by the assessee setting out the purpose for which the income was being set apart. We therefore do not find any error in view of the Tribunal.
Tax Appeals are dismissed.
It was submission that the SLP from the said decision has also been dismissed by the Hon’ble Supreme Court reported in (2019) 263 Taxman SA No.06/CTK/2025 247 (SC). It was the submission that in assessee’s case also the assessee has categorically mentioned that the accumulation is for the purpose of trust. It was the further submission that the amounts has been used during the assessment years 2019-20 to 2021-22 for the construction of AI complex in regard to the computer education. It was the prayer that the addition as made by the AO and as confirmed by the Ld.CIT(A) be deleted.
In reply, the ld, CIT-DR submitted that the term “purpose of the trust” was very vague. It was the submission that the assessee should specify for what purpose the accumulation is being done. It was submission that nothing stopped the assessee from mentioning that amount was being accumulated for the construction of building. He vehemently supported the order of the AO and CIT(A).
We have considered the rival submissions. Here the facts clearly shows that the only issue raised by the AO for the purpose of brining to tax the accumulated amount of Rs.15 crores is the mention “purpose of the trust” in the Form No.10. No violation of section 11 or 13(1)(d) of the Act has been brought out in this year or in the earlier years or in the years in which the amount has been utilized. The impugned assessment year is 2018-19. Today, we are in 2026, till date no violation has been pointed out by the revenue nor is there an assessment order for any of the years, where a violation has been pointed out. It is also an admitted fact that the assessee continues to enjoy the benefit of the Section12A of the Act and even the registration as a charitable trust has not been withdrawn. In these circumstances as it is noticed that the assessee continues to enjoy the