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Income Tax Appellate Tribunal, ‘C’ BENCH, BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN & SHRI INTURI RAMA RAO
O R D E R
Per INTURI RAMA RAO, AM :
This is an appeal filed by the Revenue directed against the order of the CIT(A)-V, Bangalore, dated 25/02/2014 for the assessment year 2009-10.
Brief facts of the case are that the respondent-assessee is a society registered under the Karnataka Societies Registration Act. The assessee-society was duly approved under the provisions of Page 2 of 7 sec.12A of the IT Act, 1961. The assessee-society was formed for the purpose of pursuing the following charitable activities: (a) To Conduct, Promote or Patronise through instruction and education of public opinion or to assist in promoting or conducting activities for the better understanding and advance ment of age-long Bhar atiya Sa mskriti and philosophy. (b) To promote, conduct or patronise or to assist in promoting or conducting all activities of an educational character for general public benefit and utility. (c) To spread or assist in spreading educational including physical and moral training. (d) To promote or assist in promoting the understanding of history, culture, art, music and literatures of India and conduct or assist in conducting research in these fields and publish results thereof suitably. (e) To undertake and/or assist in undertaking medical facilities to the general public including rural medicare, health-care and propagation of health education among the public, and med ical assistance to the p hysica lly and mentally handicapped including their training, rehabilitation and such other activities connected with health and medical relief." (f) To establish or run or assist in establishing or running libraries and reading rooms, training centres, schools, colleges, museums, research institutions and medical as well as other relief centres, for general public utility. (g) To assists and/or lend the movable or immovable properties and assets of the parishat without profit motive in such institution as are conducive to the achievement of the objects of the Parishat. (h) To conduct or assist in conducting activities of literary, Scientific, cultural and charitable nature conducive to all or any of the aforesaid objects and for the achievement of aforesaid objects. (i) To acquire by lease, purchase, gift, mortgage, licence as beneficiary under any other trust or otherwise lands, properties, machinery etc., from government or semi- governmental authorities, trusts and corporations,
Page 3 of 7 Institutions and societies as well as individuals to sell, alienate, gift, lease, mortgage, manage or in any other legal manner transfer properties belonging to the Rashtrotthana Parishat and also to give to the same or lease or license for the furtherance of the above objects. (j) To receive voluntary donations in cash and kind from individuals or associations for the purpose of carrying out the objects of the Parishat. (k) To support and render financial assistance to charitable and educational causes and institutions, organizations, companies, trusts or societies by means of donations, grants, on such terms and conditions as the Rashtrotthana Parishat deems fit and proper, which in the opinion of the Rashtrotthana Parishat carry out all or any of the objects of' the Rashtrotthana Parishat. (l) To give scholarships, awards, stipends, honorarium to such individuals as have devoted themselves to the various public causes in line with the objects of the Rashtrotthana Parishat. (m) To put up suitable memorials, buildings or other constructions to maintain, alter and equip them suitably with machinery and other things and at its discretion to permit their use on lease or license to institutions or organizations devoted to the above mentioned or similar objects (n) To undertake and carry on and/or to assist in undertaking and carrying on and/or support, financially or otherwise, institutions who have undertaken rural developments activities such as training of rural youth and artisans and imparting of knowledge and skills by arranging various training programmes for taking up self-employment ventures and/or assisting the rural youths and artisans in the use of machines, machine tools and mechanical equipment employed in farming and other agricultural operations, including the servicing and maintenance of such machinery and/or under taking or assisting in undertaking various activities in furtherance of overall development of rural masses in all spheres of life with a view to making them self-reliant. (o) To establish or set up and/or assisting in establishing and setting up rural agricultural farms, dairies and other allied agro-based activities for the purpose of imparting knowledge and training and rural masses. (p) To start/promote charitable trusts for carrying out the Page 4 of 7 objects of the society more effectively. (q) To acquire charitable societies with similar objects through the process of merger or amalgamation by merging societies with Rashtrotthana Parishat. (r) To undertake programmes and projects for advancing the economic, social and cultural interest of the Indian (Bharatiya) society at large and in particular the weaker sections of the society classified as schedule castes and schedule tribes. (s) To undertake projects of Rural Development. To render medical help to the public by starting dispensaries, hospitals, health centres etc. (t) To impart health education to the rural masses and people residing in undeveloped and under-developed areas. (u) To start educational institutions for imparting formal and non- formal education to the public in general and to the rural masses and people residing in under-developed areas in particular.
The assessee-society filed return of income for the assessment year under consideration on 30/07/2009 disclosing a total income of Rs.12,05,47,394/-. During the previous year relevant to assessment year under consideration, respondent- assessee-society also filed an application in Form No.10 for accumulation of unspent amount of Rs.2,50,49,986/-. Against the said return of income, assessment was completed by the AO denying depreciation claim holding that depreciation claim amounts to double deduction. The AO also rejected the claim for set off of excess application of income or Rs.84,41,80,854/- for the preceding year against current year’s income. Further the AO had not allowed accumulation of income for future years on the Page 5 of 7 ground that form No.10 filed does not contain specific purpose for which amount is being accumulated and the amount of accumulation was not mentioned. For this proposition, AO relied on the decision of the Hon’ble Madras High Court in the case of CIT vs. M.CT.Muthaiah Chettiar Family Trust (245 ITR 400).
Being aggrieved, an appeal was filed before the CIT(A) who vide impugned order allowed appeal relating to the claim of depreciation and carry forward of set off of excess application of income over expenditure in earlier years. However, the ground relating to accumulation of surplus within the meaning of sec.11(2) of the Act, was dealt with by the CIT(A) in para.12 as follows:
“12. Having said that, it may be mentioned that the amount of surplus which is required to be accumulated or set apart within the meaning of section 11(2) in the appellant case for AY 2009-10 is only Rs. 7902329/-, considering the brought forward deficit of AY 2008-09, and depreciation allowable. One of the specified objects in Form 10 is to construct the school building of Rashrothana Parishat at various parts of the State and expansion of The existing various building for the furtherance of objectives of the institutions. Although no amount or period is mentioned in the Form 10 against such purpose(s) details of expenses filed for AY 2010-11 shows that an amount of Rs.34182146/- has been spent on construction Of buildings during this year. This indicates that the requirement of section 11(2) has been substantially fulfilled. Further, although one of the purpose mentioned-in the notice in Form 1Disjosupport financial assistance to the charitable institutions of which the objectives are similar to the objectives of our institutions, in clear violation of section 11(3A) of the Income Tax Act, the appellant has not credited or paid any such income to any such other trust or institution, in breach of the condition of accumulation or Page 6 of 7 setting apart of income u/s 11(2). Therefore, the income of the appellant accumulated u/s 11(2) could not be said to be not eligible to exemption u/s 11. It is held accordingly. ”
Being aggrieved, the revenue is in appeal before us. It was argued before us that because Form 10 does not contain the amount to be accumulated and the purpose for which it is accumulated, cannot disentitle the assessee for accumulation of income. In this connection, he relied on the judgment of the jurisdictional High Court in the case of DIT(Exemptions) vs. Envisions in of 209(IT) dated 13/03/2015. On the other hand, learned Departmental Representative relied on the orders of the lower authorities.
We heard rival submissions and perused material on record. The only issue in the present appeal is whether the deficiency in Form 10 filed for accumulation of income u/s 11(2) will not enable the assessee-society to accumulate income as envisaged u/s 11(2) of the Act. It is undisputed fact that Form 10 was filed before the AO without filing up column relating to amount to be accumulated and the purpose for which it was accumulated. However, on appeal, the CIT(A) rendered a finding that after considering the amount spent on construction of building, there was no violation of provisions of sec.11(2) and further observed that income of the assessee accumulated u/s 11(2) could not be said to be eligible for exemption. The grounds of appeal raised by the revenue only challenge that when Form 10
Page 7 of 7 does not contain the amount of accumulation and the purpose for which the amount was accumulated, the amount is not eligible for accumulation. The CIT(A) had rendered a finding that after considering the amount spent on construction of building there would not be any amount which is not eligible for accumulation u/s 11(2). It implies that the amount spent for charitable purpose is not less than 85% of the income during the previous year relevant to assessment year. Hence, question of filing Form 10 does not arise. Since the revenue has not controverted the finding given by the CIT(A), this ground of appeal does not survive.
In the result, the appeal filed by the revenue is dismissed.