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Facts
The assessee, a trust registered under section 12A, filed its return declaring NIL income after claiming exemption under section 11(2). The case was selected for scrutiny as the trust had accumulated income without specifying the purpose, amounting to Rs.2,92,69,800/-. The AO denied the exemptions. Aggrieved, the assessee appealed to the CIT(A).
Held
The CIT(A) allowed the appeal relying on High Court judgments, holding that it was not necessary to mention all objects in Form 10A as the AO could examine them during assessment. The Revenue appealed this order.
Key Issues
Whether the assessee trust is eligible for exemption under section 11(2) when the purpose of accumulation is not clearly specified in Form 10A.
Sections Cited
11(2), 12A
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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI PRAKASH CHAND YADAV
PER SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER :
The present appeal of the Revenue is arising from the order passed by the NFAC, Delhi dated 28/02/2024 in DIN No. ITBA/NFAC/S/250/2023-24/1056993244(1) for the assessment year 2018-19.
Page 2 of 5 2. The Revenue has raised the following grounds of appeal, which are as under:- “1. The order of learned CIT(A) is opposed to facts and circumstances of the case.
2. The learned CIT(A) has erred in holding that the assessee trust is eligible for claiming exemption u./s.l1 & 12 of the Income Tax Act, 1961 even though the purpose of accumulation stated by the assessee in Form 10A to be "for the objective of the Trust", which is vague, general in nature and not specific and does not undertake to set apart to accomplish a concrete or definite purpose involving a heavy outlay; 3.Thc learned CIT(A) has erred in allowing exemption u/s.1l to the assessee-trust by relying on the ratio of the Hon'ble Gujarat Court adjudicated in the case of CITE) vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust reported in [2019, 102 taxmann.com 122] which is distinguishable and not applicable to the Assessce's case;
4. The learned CIT(A) has erred in allowing exemption u/s.11 to the assessee-trust by relying on the ratio adjudicated in the decision of the Apex Court in the case of Arhatic Yoga Ashram Management Trust vs. ITO (ITAT Chennai) reported in (2019) 263 Taxmann.com 247(SC), which is distinguishable and not applicable to the assessee's case;
5. The learned CIT(A) has erred in allowing exemption u/s.11 to the assessee-trust even though the trustees of the assesscc-trust had failed to pass a resolution for specifying the purpose for which the funds were accumulated and set apart;
6. The appellant craves leave to add, alter or amend all or any of the Grounds of Appeal before or at the time of the hearing of the appeal.
7. The order of the learned CIT(A), NFAC may be set-aside and the order of the A.O. may be confirmed.”
Facts of the case are that the assessee is a trust granted registration u/s 12A of the Act by the DI(Exemption) on 22/5/2003. For the impugned assessment year, the assessee filed its return of income on 1/10/2018 declaring NIL income after claiming exemption u/s 11(2) of the Act. The case of the assessee was selected for scrutiny on the basis of AIR information, revealing that the trust has accumulated income without specifying the purpose for .
Page 3 of 5 which the funds have been set apart in Form 10. Accordingly, the AO issued notices to the assessee and sought clarification from the assessee on the accumulated funds of the trust amounting to Rs.2,92,69,800/-. Thereafter, the AO took a view that the assessee has failed to specify the purpose of accumulation in Form 10 and hence, the AO denied the exemptions of Rs.2,92,69,800/- to the assessee.
Aggrieved with the order of the AO, the assessee filed appeal before the ld. CIT(A) and contended that the ld. AO has erred in denying the benefit of section 11(2) of the Act to the assessee. After considering the submissions of the assessee, the ld. CIT(A) relying upon the judgment of Hon’ble Gujarat High Court in the case of CIT(E) Vs. Bochasanwasi Shir Akshar Purushottam Public Charitable Trust [2019], 102 taaxmann.com 122 allowed the appeal of the assessee.
The ld. CIT(A) was of the view that it is not necessary to mention all the objects in form 10A itself because all these things are to be examined by the AO while conducting the assessment proceeding and AO cannot simply brush aside the contentions of the assessee by observing that Form 10A is not categorical vis-à-vis purpose of accumulated funds.
Page 4 of 5 6. Aggrieved with the order of ld. CIT(A), the Revenue has come up appeal before us.
The ld. DR vehemently argued and contended that the CIT(A) failed to comment upon the purpose behind the accumulation of funds & utilization of the same for charitable activities. The ld. DR contented that powers of the CIT(A) are coterminous to that of AO and he can do what AO can do and hence in interest of justice the matter may be restored to the file of AO for fresh examination.
The ld. AR relied upon the orders of CIT(A). However, when the Bench put a question to the AR as to what purpose the funds what accumulated the AR could not be able to respond
We have heard the rival contentions of both the parties and perused the materials available on record. We observe that the authorities below have not embarked upon the issue of purpose for which the funds were accumulated. Both the authorities below failed to examine whether the assessee has set apart the funds for meeting the objects of the assessee trust. In other words both authorities remain silent to the pertinent question involved in this case. Similarly the authorities have not been able to comment upon the utilization of funds of the assessee trust for the purpose of charitable activities. Considering all these facts and circumstances of the case, we deem it appropriate to restore the matter to the file of the AO for denovo examination.
Page 5 of 5 10. In the result, the appeal of the Revenue is allowed for statistical purposes.