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Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal by assessee is directed against order of NFAC for the assessment year 2018-19 dated 22.5.2024. The assessee raised following grounds:
General ground 1.1. The order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as CIT(A), NFAC) under section 250 of the Act to the extent prejudicial to the appellant is bad in law and liable to be quashed. 2. Denial of accumulation of income under section 11 (2) — Rs. 77.12,882 2.1. The learned AO erred in denying the accumulation of income made under section 11 (2) amounting to Rs. 77, 12,882 and the learned CIT(A), NFAC erred in confirming the same. 2.2. The learned AO erred in concluding that merely because multiple objects were mentioned in Form No 10 filed with 'OR' mentioned in
ITA No.1248/Bang/2024 Sasken Foundation, Bangalore Page 2 of 5 between the objects, the appellant has not accumulated or set apart income under section 11 (2) for any specific purpose or purposes. 2.3. The entire basis and rationale for disallowing the accumulation of income under section 11 (2) amounting to Rs. 77,12,882 by the learned AO and CIT(A) are bad law and liable to be quashed. 2.4. On facts and circumstances of the case and law applicable, accumulation of income under section 11 (2) amounting to Rs. 77, 12,882 should be allowed as claimed in the return of income.
Levy of interest under section 234B and 234C 3.1 The learned AO and the CIT(A), NFAC have erred in confirming the levy of interest under section 234A and 234B. Praver 4.1. In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed under section 250 of the Act by the learned CIT(A), NFAC to the extent prejudicial to the appellant be quashed or in the alternative the above grounds and the appeal be allowed.
Facts of the case are that the assessee is a charitable trust registered under section 12AA and recognized under section 80G of the Income Tax Act 1961. The main objective for setting up the trust are eradication hunger poverty and malnutrition, promoting health care, promoting education, promoting gender equality, ensuring environmental sustainability, protection of national heritage etc. For the year under appeal, the assessee filed return of income and its Form 10 electronically on 30.10.2018 declaring nil income and claiming exemption under section 11 of the Income Tax Act 1961. During the year the assessee had received donation of Rs. 60,76,000/- and interest income of Rs. 16,38,656 and after meeting expenses of Rs. 1774 was left with surplus of Rs. 77,12,882. The assessee filed Form 10 to accumulate set apart Rs. 77,12,882 under provision of section 11 (2) till period ending on 31.09.2023. The purpose stated for which the amount is being accumulated or set apart in Form 10 is for relief of the poor or education or environment protection or women empowerment or protection of national heritage or measures for the benefit of armed forces or training to promote
ITA No.1248/Bang/2024 Sasken Foundation, Bangalore Page 3 of 5 rural sports. The case of the assessee was selected for scrutiny under CASS for verification of Accumulation of Income by Trust. Notice dated 22.09.2019 undersection 143 (2) was issued electronically. Further notices under section 142 (1) were issued and information details documents relevant to issue for selection were called for. In response to the notices the assessee submitted required details and written reply. Vide letter dated 12.2.2021 show cause as to why assessment should not be completed as per draft assessment order. It was stated in the draft assessment order that the purposes mentioned in Form No 10 are with conjunction OR and hence in the absence of any exact or precise purpose for accumulation the amount accumulated under section 11 (2) cannot be allowed as exemption under section 11. The assessee filed its reply and explained in detail as to why the usage of conjunction OR does not in any manner lead to disallowance of income accumulated under section 11(2). However, without properly considering the said reply the assessment was concluded and the order was passed under section 143 (3) read with section 143 (3A) and 143 (3B) dated 04.03.2021. The same was received on 04.03.2021. In the said order the National e-Assessment Centre Delhi hereinafter referred to as NeAC has added back the exemption of Rs. 77,12,882 claimed under section 11(2) . The learned NeAC has stated that the assessee has mentioned various purposes in Form 10 and used OR as conjunction which makes it clear that the assessee did not accumulate set apart the income under section 11 (2) for any specific reason. This has resulted in levy of income tax and interest thereon. Total demand payable is Rs.32,51,969/-. Being aggrieved by the assessment order passed under section 143 (3) the assessee preferred appeal before ld. CIT(A). The NFAC confirmed the order of ld. AO. Against this assessee is in appeal before us. 3. We have heard the rival submissions and perused the materials available on record. The assessee has not mentioned specific object for which accumulation of income has been made and
ITA No.1248/Bang/2024 Sasken Foundation, Bangalore Page 4 of 5 the assessee has stated before the lower authorities that accumulation was made for the following purposes. “Relief of poor or education or environment protection or women empowerment or protection of national heritage or measures for the benefit of armed forces, training to promote rural sports”.
3.1 In our opinion, the accumulation has been made for the objects mentioned in the Trust Deed of assessee and on that basis, denial of accumulation of income u/s 11(2) of the Act cannot be made. This view of ours is fortified by the judgement of Hon’ble Karnataka High Court in the case of CIT (Exemptions) Vs. Gokula Education Foundation (77 taxmann.com 38) (Karn.) (2017) wherein held as follows: The issue centres around the issue of compliance of section 11(2)(a) only, which Jay provides for specification of the purpose for which the income is being accumulated or set apart. Since, there is no controversy for the period for which the amount is set apart, it is found appropriate not to make any further observations in this regard. The only question, therefore, may arise is as to 'whether the specification of the purpose in the present case could be said as sufficient compliance for claiming the benefit under section or not'. [Para 13]
As recorded earlier in the first case, initially there was a broad purpose as 'towards objects of the Trust'. Thereafter, it is in the revised Form No. If, it has been specified under sub-head (a) and (b) which speaks for the 'development of infrastructure for furtherance of education' and 'towards meeting of operating and administrative expenses for providing education facilities'. Whereas in the second case the objects specified is 'to improve/develop the buildings of the trust and to the conduct educational/charitable activities'. Be it recorded that it is not the case of the revenue that any of the purposes specified in form No. 10 are not falling as the object of the trust. But the only case of the revenue is that the purpose should be for specifically mentioned, though it may be one of the objects of the Trust and it may be more than one of the objects of the trust. [Para 14]
The Karnataka High Court in DIT, Exemptions v. Envisions [20151 378 ITR 483/232 Taxman 164/58 taxmann.com 184, stated that as long as the objects of the trust are charitable in character and as long as the purpose or purposes mentioned in Form No.by 10 are for achieving the objects of the Trust, merely because the details are not furnished, the assessee cannot be denied benefit of the exemption under section 11(2). [Para 171
ITA No.1248/Bang/2024 Sasken Foundation, Bangalore Page 5 of 5 Thus, the Tribunal was right in allowing the claim of the assessee under section 11(2). Hence, the question is answered in the affirmative in favour of the assessee and against the revenue. [Para 22]”.
3.2 Same view was taken in the following cases also: 1. CIT vs. Hotel & Restaurant Association (2003) 132 Taxman 76 (Delhi). 2. Bharat Kalyan Pratisthan Vs. DIT (E) (2007) 160 Taxman 216 (Delhi) 3. DIT(E) Vs. Daulat Ram Education Society (2006) 156 Taxman 399 (Delhi) 4. DIT (E) Vs. Envisions (2015) 58 taxmann.com 184 (Karnataka)
3.3 In view of the above, we allow the grounds taken by the assessee. Other grounds are consequential, which do not require any adjudication. 4. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 13th Aug, 2024
Sd/- Sd/- (Chandra Poojari) (Keshav Dubey) Accountant Member Judicial Member
Bangalore, Dated 13th Aug, 2024. VG/SPS Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order
Asst. Registrar, ITAT, Bangalore.