NANDLAL TOLANI CHARITABLE TRUST, MUMBAI V. ITO (E)2(1), MUMBAI

ITA 106/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9939 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 08-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Capital asset; Charitable institution; Retrospective amendment; Benefit of exemption; Revised return
• Section: 12A; 250; 11

Judgement Text

1 ITA 106/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI SANDEEP GOSAIN (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) ITA NO 106/MUM/2016 (ASSESSMENT YEAR : 2012-13) NANDLAL TOLANI CHARITABLE TRUST, 10-A, BHKHTAWAR, NARIMAN POINT, MUMBAI 400 021 PAN : AAATN0043Q VS ITO (E)-2(1), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI RAJIV KHANDELWAL RESPONDENT BY SHRI SUMAN KUMAR DATE OF HEARING 02-01-2019 DATE OF PRONOUNCEMENT 29-03-2019 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A) -1, MUMBAI DATED 27-10-2015 AND IT PERTA INS TO AY 2012- 13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED A.O. AS WELL AS LEARNED CIT(A) HAVE ERRED IN NOT ALLOWING DEDUCTION OF 30% ALLOWABLE AS STANDARD DEDUCTION AMOUNTING TO RS.76,04,8497- U7S.24(A) OF THE INCOME-TAX ACT, 196 1 OVERLOOKING THAT IF TAX IS CHARGEABLE TO ASSESSEE TRUST, THE SA ME HAS TO BE CHARGED ON TOTAL INCOME COMPUTED AS PER THE PROVISIONS OF T HE ACT AND ERRED IN OVERLOOKING THAT THERE IS NO PROVISION IN THE ACT AS NOT TO 2 ITA 106/MUM/2016 ALLOW STANDARD DEDUCTION U/S.24(A) IF THE INCOME IS COMPUTED IN THE CASE OF A CHARITABLE TRUST GRANTING EXEMPTION U/SL 1 OF THE ACT ON THE PORTION OF INCOME UTILIZED FOR OBJECTS OF THE TRUST . 2. THE LEARNED A.O. AS WELL AS LEARNED CIT(A) HAVE ERRED IN NOT FOLLOWING THE PRINCIPLES SETTLED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD. 368 ITR 5 31 (BOM) (PAGE 544) WHICH IS BINDING ON DEPARTMENT IN MUMBAI AS LA W OF THE LAND WHEREIN IT IS HELD THAT INCOME CHARGEABLE TO TAX HA S TO BE COMPUTED U/S.L4 OF THE ACT AND THEREFORE INCOME FROM PROPERT Y HAS TO BE COMPUTED ALLOWING DEDUCTION U/S.24(A) OF THE ACT IN THE CASE OF ALL ASSESSES INCLUDING CHARITABLE TRUSTS. 3. THE LEARNED A.O. AS WELL AS LEARNED CIT(A) HAVE ERRED IN NOT FOLLOWING JUDGEMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (EXEMPTION) VS. JASUBHAI FOU NDATION (2015) 374 ITR 315 WHEREIN IT IS HELD THAT INCOME WHICH IS NOT TO BE INCLUDED IN TOTAL INCOME AS PER THE PROVISIONS OF ACT CANNOT BE INCLUDED IN TAXABLE INCOME OF THE TRUST ENTITLED TO EXEMPTION O F CERTAIN INCOME U7S,10 AND U/S.LL OF THE ACT AND THEREFORE 30% OF I NCOME EXCLUDED FROM INCOME FROM PROPERTY U/S.24(A) OF THE ACT CANN OT BE CHARGED TO TAX IN THE CASE OF CHARITABLE TRUST FOR COMPUTING T AXABLE INCOME OF CHARITABLE TRUST. 4. THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THE GROUND RAISED BEFORE HIM VIDE GROUND NO.L 1 OF THE DETAILED GROUN DS OF APPEAL AND GROUND NO.4 OF THE CONCISE GROUNDS WHEREIN THE APPE LLANT CLAIMED THAT WHILE COMPUTING CAPITAL GAIN INCLUDED IN TOTAL INCO ME DEDUCTION SHOULD BE ALLOWED U7S.11(LA) FOR AMOUNT UTILIZED IN PURCHASING ANOTHER CAPITAL ASSETS AND THEREFORE AMOUNT OF RS.4 9,22,3167- ON ACCOUNT CAPITAL GAINS INCLUDED IN INCOME & EXPENDIT URE ACCOUNT SHOULD BE ALLOWED AS DEDUCTION FROM TOTAL INCOME AS THE APPELLANT HAS UTILIZED THE SAME IN PURCHASE OF ANOTHER CAPITA L ASSET DURING THE YEAR. 5. THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING DED UCTION OF RS.13,00,6357- INCURRED AS EXPENDITURE FOR REPAIRS AND MAINTENANCE AS SHOWN IN INCOME AND EXPENDITURE ACCOUNT AND CLAI MED AS DEDUCTION VIDE GROUND NO.5 OF CONCISE GROUNDS OF AP PEAL. 6.THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING T HAT APPELLANT HAS MADE AN APPLICATION U/S.L 1(2) OF THE ACT FOR ACCUM ULATION OF INCOME FOR THE YEAR AND THEREFORE FULL AMOUNT OF INCOME RE MAINING AFTER DEDUCTION U/S.L 1(1 )(A) AND 11(1 A) SHOULD BE ALLO WED AS ACCUMULATED U/S 11(2) INSTEAD OF ALLOWING SUM OF RS.2,10,00,000 /- IN ASSESSMENT ORDER AS PER FORM 10 FILED OVERLOOKING THAT IF TAXA BLE INCOME IS INCREASED DUE TO DISALLOWANCE THEN FULL DEDUCTION S HOULD BE ALLOWED ON ACCOUNT ON ACCOUNT OF SURPLUS U/S 11(2). 3 ITA 106/MUM/2016 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E TRUST IS A CHARITABLE TRUST REGISTERED WITH CHARITY COMMISSION ER AS WELL AS WITH COMMISSIONER OF INCOME-TAX U/S 12A OF INCOME-TAX AC T, 1961. THE ASSESSEE TRUST IS EARMARKING AND SPENDING FUNDS FOR MAINTENANCE OF COLLEGE AT ANDHERI, MUMBAI AS WELL AS FACILITIES AT THE MARITIME ENGINEERING COLLEGE AT INDURI, PUNE. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR AY 2012-13 ON 28-09-2012 DECLARING TOTAL INCOME AT NIL AFTER CLAIMING EXEMPTION U/S 11 OF THE INCOME-TAX A CT, 1961. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND DURING THE COURS E OF ASSESSMENT, THE AO NOTICED THAT THE ASSESSEE HAS COMPUTED INCOME RE CEIVED FROM PROPERTY HELD UNDER TRUST UNDER THE NORMAL PROVISIO NS OF THE ACT, INSTEAD OF COMMERCIAL PRINCIPLES IN RESPECT OF INC OME FROM HOUSE PROPERTY. THEREFORE, CALLED UPON THE ASSESSEE TO EXPLAIN US TO WHY STANDARD DEDUCTION CLAIMED U/S 24(A) OF THE I.T. AC T AT 30% OF RS.76,04,849/- IN RESPECT OF RENTAL INCOME DERIVED FROM PROPERTY SHALL NOT BE DISALLOWED. THE AO AFTER CONSIDERING SUBMISS IONS OF THE ASSESSEE AND ALSO BY FOLLOWING THE DECISION OF ITAT , MUMBAI BENCH IN ASSESSEES OWN CASE FOR EARLIER YEAR IN ITA NOS. 69 70 & 199/MUM/2011 IT SHALL OUR STANDARD DEDUCTION CLAIMED U/S 24(A) O F THE ACT AND RECOMPUTED INCOME AVAILABLE FOR APPLICATION U/S 11 OF THE I.T. ACT, 4 ITA 106/MUM/2016 1961. FINALLY, THE AO AS DETERMINED TOTAL INCOME OF THE ASSESSEE AT RS.63,81,840/- AFTER CONSIDERING ACCUMULATION OF IN COME U/S 11(2) OF THE I.T. ACT FOR RS.2.10 CRORE AS PER FORM 10 FILED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE ASSESSEE HAS CONTESTE D DISALLOWANCE OF DEDUCTION U/S 24(A) OF THE I.T. ACT ON THE GROUND T HAT INCOME OF A TRUST CLAIMING EXEMPTION U/S 11 SHALL BE COMPUTED IN ACCO RDANCE WITH PROVISIONS OF THE ACT, AS APPLICABLE TO OTHER ASSES SEES. THEREFORE, THERE IS NO ERROR IN THE COMPUTATION OF INCOME ARRIVED AT BY THE ASSESSEE IN RESPECT OF RENTAL INCOME AFTER CLAIMING STANDARD DE DUCTION U/S 24(A) OF THE ACT. THE ASSESSEE FURTHER CONTENDED THAT WHILE DETERMINING THE INCOME, THE AO HAS NOT ALLOWED ACTUAL REPAIRS AND M AINTENANCE EXPENSES INCURRED BY THE ASSESSEE IN RESPECT OF PRO PERTY FROM WHICH RENTAL INCOME HAS BEEN DERIVED. THEREFORE, EVEN IF INCOME IS COMPUTED UNDER NORMAL COMMERCIAL PRINCIPLES, EXPENDITURE INC URRED TOWARDS REPAIRS AND MAINTENANCE SHALL BE ALLOWED AS APPLICA TION OF INCOME BEFORE ARRIVING AT INCOME OF THE ASSESSEE. THE ASSE SSEE ALSO MADE AN ALTERNATIVE CLAIM INASMUCH AS, IF THE DISALLOWANCE IS NECESSARY IN RESPECT OF DEDUCTION CLAIMED U/S 24(A), AN AMOUNT E QUAL TO DEDUCTION 5 ITA 106/MUM/2016 CLAIMED U/S 24(A) MAY BE ALLOWED TO CARRY FORWARD A ND UTILIZED FOR THE OBJECTS OF THE TRUST AS PER THE PROVISIONS OF SECTI ON 11(2) OF THE ACT. 4. THE LD. CIT(A) AFTER CONSIDERING THE RELEVANT SU BMISSIONS OF THE ASSESSEE AND ALSO BY FOLLOWING THE DECISION OF ITAT , IN ASSESSEES OWN CASE FOR AY 2004-05 HELD THAT DEDUCTION U/S 24(A) O F THE ACT AGAINST RENTAL INCOME IN NOT IN ACCORDANCE WITH THE SCHEME OF TAXATION PROVIDED FOR COMPUTATION OF INCOME IN RESPECT OF TR UST/INSTITUTION CLAIMING EXEMPTION U/S 11 OF THE INCOME TAX ACT. AC CORDINGLY, HE REJECTED THE GROUND TAKEN BY THE ASSESSEE AND AFFIR MED THE FINDINGS OF AO. INSOFAR AS ALTERNATIVE GROUND TAKEN BY THE ASSE SSEE REGARDING DEDUCTION TOWARDS ACTUAL EXPENDITURE INCURRED ON RE PAIRS AND MAINTENANCE FOR ACCUMULATION OF INCOME, THE CIT(A) HELD THAT ON PERUSAL OF ASSESSMENT ORDER IT IS NOTICED THAT THE ISSUE WAS NOT RAISED DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR DED UCTION HAS BEEN CLAIMED IN THE COMPUTATION OF INCOME. ACCORDINGLY, SAME DOES NOT ARISE FROM THE FINDINGS OF THE AO THEREFORE, THERE IS NO MERIT IN THE ALTERNATIVE ARGUMENT TAKEN BY THE ASSESSEE. WITH TH ESE FINDINGS, THE LD. CIT(A) DISMISSED APPEAL FILED BY THE ASSESSEE. AGGRIEVED BY THE CIT(A)S ORDE, THE ASSESSEE IS IN APPEAL BEFORE US. 6 ITA 106/MUM/2016 4. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUNDS 1 TO 3 IS DEDUCTIBILITY OF STANDARD DEDUCTION AMOUNT ING TO RS.76,04,849 CLAIMED U/S 24(A) OF THE ACT, IN RESPECT OF RENTAL INCOME DERIVED FROM PROPERTY AND CONSEQUENT DEDUCTION ON ACTUAL EXPENDI TURE INCURRED TOWARDS REPAIRS AND MAINTENANCE OF THE PROPERTY. T HE LD.AR FOR THE ASSESSEE, ALTHOUGH ADMITTED THE FACT THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL FOR EARLIER YE ARS, ARGUED THAT PRINCIPLES SETTLED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES LTD VS CIT 368 ITR 531 (BOM ) WHICH IS BINDING ON DEPARTMENT AS LAW OF THE LAND WHEREIN IT IS HELD THAT INCOME CHARGEABLE TO TAX HAS TO BE COMPUTED UNDER THE PRO VISIONS OF THE ACT, AND THEREFORE, INCOME FROM PROPERTY HAS TO BE COMPU TED ALLOWING DEDUCTION U/S 24(A) OF THE ACT, IN THE CASE OF ALL ASSESSEES INCLUDING CHARITABLE TRUST. THE LD.AR FURTHER SUBMITTED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT (EXEMPTION) VS JASABA I FOUNDATION 374 ITR 315 (BOM) HELD THAT INCOME WHICH IS NOT INCLUDED IN TOTAL INCOME AS PER THE PROVISIONS OF THE ACT, CANNOT BE INCLUDED IN TA XABLE INCOME OF THE TRUST ENTITLED TO EXEMPTION OF CERTAIN INCOME U/S 1 0 AND SECTION 11 OF THE ACT AND, THEREFORE, 30% OF INCOME EXCLUDED FROM INCOME FROM 7 ITA 106/MUM/2016 PROPERTY U/S 24(A) OF THE ACT, CANNOT BE CHARGED TO TAX IN THE CASE OF CHARITABLE TRUST FOR COMPUTING TAXABLE INCOME. 5. THE LD.DR, ON THE OTHER HAND, SUBMITTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF ITAT FOR EA RLIER YEARS, WHERE THE TRIBUNAL, AFTER CONSIDERING RELEVANT FACTS HELD THA T STANDARD DEDUCTION ON RENTAL INCOME @30% U/S 24(A) OF THE I.T. ACT, 19 61 CANNOT BE ALLOWED WHILE COMPUTING INCOME OF A TRUST / INSTITU TION CLAIMING EXEMPTION U/S 11 OF THE INCOME-TAX ACT, 1961. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIE S BELOW. WE FIND THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL, I.E. DEDUCTIBILITY OF DEDUCTION U/S 24(A) AGAINST RENTAL INCOME IN CASE O F A TRUST / INSTITUTION CLAIMING BENEFIT OF EXEMPTION U/S 11 IS A RECURRING ISSUE IN ASSESSEES CASE FOR EARLIER PERIOD. THE CO-ORDINATE BENCH OF ITAT, MUMBAI BENCH B IN ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO .200/MUM/2011 HAD CONSIDERED SIMILAR ISSUE IN THE LIGHT OF PROVIS IONS OF SECTION 24(A) AND ALSO SECTION 11 OF THE INCOME-TAX ACT, 1961, AN D HELD THAT INCOME OF A TRUST / INSTITUTION SHALL BE COMPUTED UNDER NO RMAL COMMERCIAL PRINCIPLES WITHOUT RESORTING TO COMPUTATION MECHANI SM AS PROVIDED UNDER RESPECTIVE HEAD OF INCOME WHILE DETERMINING I NCOME AVAILABLE 8 ITA 106/MUM/2016 FOR APPLICATION U/S 11 OF THE ACT. THE RELEVANT OB SERVATIONS OF THE TRIBUNAL ARE AS UNDER:- 8. WE HAVE HEARD THE RIVAL PARTIES AND GONE THROUG H THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE TRIBUNAL O RDER DATED 30.09.2013 IN ITA NOS.6970 & 199/MUM/2011 & ITA NO. LLLL/MUM/2011 FOR ASSESSMENT YEAR 2004-05, WE FIND THAT ON IDENTI CAL ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY OBSERVING AS UNDER: 3.2 THE FIRST ISSUE ARISING IN THE INSTANT APPEAL S IS THE VALIDITY IN LAW OF THE ASSESSEE'S CLAIM TOWARD REPAIRS AND MAIN TENANCE U/S. 24 OF THE ACT IN COMPUTING THE INCOME FROM HOUSE PR OPERTY LET OUT ASSESSE, AND TOWARD WHICH IT HAS (SUBS EQUENTLY) A SINGLE PRECISE GROUND. THE CLAIM IS, BY ALL COUNTS, WITHOU T MERIT. THIS IS FOR THE SIMPLE REASON THAT THE INCOME OF A CHARITABLE TRUST OR INSTITUTION, SUBJECT TO ITS APPLICATIO N FOR CHARITABLE PURPOSES, FOR WHICH IT HAS BEEN IN FACT FORMED (PE R ITS CONSTITUTING CHARTER) IS EXEMPT FROM TAX UNDER CHAPTER III (SS.1 0 TO 138) OF THE ACT THE SAID INCOME DOES NOT FORM PART OF THE TOTA L INCOME OF THE ENTITY TO WHICH IT ARISES OR ACCRUES OR IS RECEIVED BY. IT IS ONLY THE INCOME FORMING PART OF THE TOTAL INCOME U/S. 2(45) OF THE ACT, WHICH IS TO BE CLASSIFIED UNDER THE VARIOUS HEADS O F THE INCOME U/S. 14 AND, ACCORDINGLY, SUBJECT TO THE COMPU TATION PROVISIONS OF CHAPTER IV (SS. 14 TO 59)OF THE ACT. THE EXPENDI TURE INCURRED IN EARNING THE SAME IS, LIKEWISE, AND ONLY UNDERSTANDA BLY, NOT TO BE TAKEN INTO ACCOUNT IN COMPUTING THE TOTAL INCOME UN DER THE ACT, WHICH REPRESENTS TRITE LAW, AND TOWARD WHICH A SEPA RATE SECTION (SEC. 14 A) HAS SINCE BEEN INSERTED BY FINANCE ACT, 2001 WITH RETROSPECTIVE EFFECT FROM 01.04. 1962. THIS ASPECT STANDS ABUNDANTLY CLARIFIED BY THE HON'BLE APEX COU RT IN THE CASE OF CIT VS. HARPRASAD & CO. (P.) LTD. [1975] 99 I TR 118 (SC) T EXPLAINING THAT AN INCOME TO COME WITHIN ITS PURVIE W MUST SATISFY THE DEFINITION OF TOTAL INCOME U/S. 2(15) (OF THE I NCOME-TAX ACT, 1922, WHICH IS PARA MATERIAL WITH SECTION 2(45 ) OF THE ACT), PRESCRIBING TWO CONDITIONS. FIRSTLY, IT MUST COMPRISE THE TOTAL AMOUNT OF INCOME, PROFITS AND GAINS REFERRED TO IN SECTION4(L) AND, TWO, MUST BE COMPUTED IN THE MANNER LAID DOWN UND ER THE ACT. THE CAPITAL GAIN BEING NOT CHARGEABLE U/S.128 OF THE 1922 ACT DURING THE RELEVANT PERIOD, THE SAME WOUL D NOT ENTER THE COMPUTATION MECHANISM OF THE TOTAL INCOME. THIS IS AS THE CAPITAL GAIN OR LOSS (WHICH IS ONLY NEGATIVE INCOME) DID NO T FORM PART OF THE TOTAL INCOME OF THE ASSESSEE WHICH COULD BE BRO UGHT TO CHARGE, SO THAT IT WAS NOT REQUIRED TO BE COMPUTED. REFERENCE IN THIS CONTEXT MAY ALSO BE MADE TO THE FOLLOWING OBSE RVATION BY THE TRIBUNAL IN THE CASE OF PRAVIN SHAH TRUS T VS. DY. CIT(IN ITA NO. 4782/MUM/2010 DATED 05. 07. 201 3): 9 ITA 106/MUM/2016 3.3. THAT IS, AN INCOME EXEMPT U/C. HI OF 'THE AC T, NOT FORMING OF THE TOTAL INCOME, WOULD NOT ENTER THE COMPUTATIO N PROCESS DETERMINE THE QUANTUM OF INCOME UNDER THE RELEVANT HEAD OF EACH OF WHICH HAS ITS OWN COMPUTATION PROVISIONS. ' TO THE SAME EFFECT AND PURPORT ARE ITS OBSERVATIONS IN THE CASE OF LKP SECURITIES LTD.(IN ITA NOS. 638 & W93/MUM/20L2 DATED 17.05.2013): '14 ....... THE INCOME (AND LOSS, WHI CH IS ONLY NEGATIVE INCOME) FAILING UNDER CHAPTER IN OF THE AD D/IU, UI US, EXEMPT FROM THE LEVY OF THE TAX, WOULD NOT FORM PART OF THE COM PUTATION OF THE INCOME UNDER CHAPTER IV OF THE ACT. THAT IN FACT IS A FUNDAMENTAL PREMISE; THE BASIS OF SEC. HA OF THE ACT. THE REVEN UE'S CASE IN THIS REGARD IS UNEXCEPTIONAL, AND WE CONFIRM THE SA ME. ' IN BOTH THE DECISIONS, THE TRIBUNAL RELIED ON THE D ECISION IN THE CASE OF HARPRASAD & CO. (P.) LTD. (SUPRA). THE RELIANCE BY THE ID. CIT(A) ON THE CIRCULAR ISSUED BY THE BOARD (NO. 5P(LXX6) DATED 19.06.1968), EXPLAINING THE POSITION IN THE M ATTER, IS ALSO APPOSITE. IT STANDS EXPLAINED THAT ONLY THE INCOME AS REFLECTED IN THE ACCOUNTS OF THE TRUST/INSTITUTION THAT IS TO BE APPLIED OR DEEMED TO HAVE BEEN APPLIED FOR CHARITABLE PURPOSES, AND W HICH, THEREFORE, HAS TO BE COMPUTED IN THE COMMERCIAL SEN SE. THE SAID CIRCULAR HAS BEEN FOUND BY THE HON'BLE COURTS OF LA W AS REPRESENTING THE CORRECT INTERPRETATION OF THE RELEVANT PROVISIONS AND THE REQUIREMENT OF THE LA W, AS IN THE CASE OF CIT VS. PROGRAMME FOR COMMUNITY ORG ANISATION [1997] 228 ITR 620 (KER), SINCE APPROVED BY THE APE X COURT (REPORTED AT [2001] 248 ITR 1 (SC), TO WHICH (LATTE R) DECISION REFERENCE STANDS ALSO MADE BY THE ID. CIT(A). THIS ASPECT OF THE MATTER, I. E., THE MANNER OF COMPUT ATION OF INCOME OF A CHARITABLE OR RELIGIOUS TRUST/INSTITUTION WHICH HAS TO BE APPLIED FOR THE SAID PURPOSES, HAS BEEN A SUBJECT MATTER OF A NUMBER OF DECISIONS, AS BY THE HON'BLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) [2003] 264 ITR 110 (BOM). THIS IS EVEN OTHER WISE PATENT INASMUCH AS A TRUST COULD ONLY APPLY THE INCOME AS AVAILABLE WITH IT, I.E., AS ARRIVED AT FOLLOWING THE ACCEPTED PR INCIPLES OF COMMERCIAL ACCOUNTING. THE COMPUTATION PROVISIONS O F THE ACT DO NOT COME INTO PLAY, SO THAT THE SAID COMPUTATION OF THE WOULD BE DE HORS THE SAME. THIS WOULD OF COURSE BE SUBJECT TO THE SPECIFIC PROVISIONS OF THE ACT, SO THAT WHERE SPECIFICALLY P ROVIDE FOR, THE INCOME WOULD BE COMPUTED IN THE MANNER AS P ROVIDED; FOR EXAMPLE SS. 11(4) AND 11(4A) SPECIFICALLY PROVIDE F OR THE COMPUTATION OF INCOME OF A BUSINESS T/I(/FORMING PA RT OF THE PROPERTY HELD UNDER TRUST BY CHARITABLE TRUST/INSTI TUTION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, EVEN AS POINTED OUT BY THE HON'BLE COURT IN RAO BAHADUR CALAVALA CUNNAN CH ETTY 10 ITA 106/MUM/2016 CHARITIES (SUPRA). THE SPECIAL BENCH OF THE TRIBUNA L IN SCIENTIFIC ATLANTA INDIA TECHNOLOGY (P.) LTD. VS. ACIT [2010] 2 ITR 66 (TRIB) (CHENNAI) (SB) HELD THAT THE PROFITS OF A UNIT ELIG IBLE FOR DEDUCTION U/S.10A OF THE ACT, I.E., TO THE EXTENT NOT COVERED BY THE DEDUCTION THERE-UNDER, WOULD STAND TO BE TAXED DIRECTLY AND N OT ENTER THE COMPUTATION MECHANISM INASMUCH AS THE SAME DO NOT F ORM PART OF THE GROSS TOTAL INCOME, AS SECTION 10A FALLS UNDER CHAPTER HI OF THE ACT, SO THAT THE PROVISIONS OF CHAPTER VL-A AND, CO NSEQUENTLY, S. 80AD WOULD NOT BE APPLICABLE THERETO. BEFORE PARTING WITH THE MATTER, WE MAY ALSO ADD THA T THE ASSESSEE HAS BEEN ALLOWED AD THE EXPENDITURE ON REPAIRS AND MAINTENANCE AS DEBITED IN ITS ACCOUNTS, I.E., ON ACTUAL BASIS (RS. 11.97 LACS/PB 1 PG. 39), EVEN AS DIRECTED BY THE ID. CIT(A), AND WHICH FACT WAS ALSO CLARIFIED BY US DURING HEARING. ACCORDINGLY, THE AS SESSEE F S GROUND/S FOR THE CLAIM OF THE STANDARD DEDUCTION U/S.24 FAIL . WE DECIDE ACCORDINGLY. FINALLY, THE RELIANCE BY THE ASSESSEE ON THE DECISI ON IN THE CASE OF IAC, MUMBAI VS. SAURASHTRA TRUST [2007] 1061TO 1 (M UM) (SB) IS, UNDER THE CIRCUMSTANCES, MISPLACED. THE SAID DECIS ION IS, FIRSTLY, SANSANY REFERENCE TO ANY PRECEDENTS; NAY, EVEN WITHOUT A DISCUSSION OF THE LAW IN THE MATTER. THIS ASPECT WOULD IN FACT BECOME CLEAR IN VIEW OF THE QUESTIONS REFERRED TO A ND ANSWERED BY TRIBUNAL. AS A READING OF ITS ORDER WOULD SHOW (REF ER PARA 1), ARE NOT DIRECTLY CONNECTED WITH THE ISSUE BEFORE US. DECISI ON, THUS, WOULD BE OF NO ASSISTANCE TO THE ASSESSEE, W/JFFI FVE HAVING EVEN OTHERWISE DECIDED THE MATTER FOLLOWING THE PRECEDENTSIN THE M ATTER, SO THAT THE DECISION IN THE CASE OF OF BARODA V. H.C SHRIVAST AVA[2002] 256 TTR 385 (BOM), ADVOCATING JUDICIAL DISCIPLINE WITH REF ERENCE TO THE DECISION BY THE APEX COURT IN CCE V. DUNL OP INDIA LTD. AIR 1985 SC 330, ONLY SUPPORTS THE SAME. THE DECISI ON IN THE CASE OF AMEEN EDUCATION SOCIETY V. DIT (EXEMPTION) ( IN IT A NO. 575/BANG./2011 DATED 28/9/2012, ALSO AT [2012] 26 T AXMANN.COM 250 (BANG.)) IS AGAIN ONLY IN RESPECT OF THE SPECIF IC PROVISION OF SEC. 11(1 A) OF THE ACT, I.E., QUA CAPITAL GAIN, AND, THUS, NOT APPLICABLE. WE HAVE ALREADY CLARIFIED TH AT OUR DECISION IS BASED ON AND REPRESENTS THE GENERAL POSITION OF LAW, SO THAT IT WOULD BE SUBJECT TO THE SPECIFIC PROVISIONS OF THE ACT, GIVING EXAMPLE OF SS. 11(4) AND 11(4A). IT MAY BE RELEVANT TO STATE THAT THE DECISION BY THE APEX COURT IN HARPRASAD & CO. (P.) LTD. (SUPRA), REFERRED TO EARLIER, IS ALSO IN RESPECT OF CAPITAL GAINS. 9. NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE B Y THE LEARNED AR. IN VIEW OF THIS FACT, WE CONFIRM THE ORDER OF THE CIT( A) DISALLOWING THE CLAIM OF THE ASSESSEE U/S. 24(A) OF THE ACT. THUS, THE GROUND TAKEN BY THE ASSESS FAILS. 11 ITA 106/MUM/2016 7. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH T HE VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW TH AT THERE IS NO ERROR IN THE ORDERS OF AUTHORITIES BELOW AND HENCE, WE ARE I NCLINED TO UPHOLD THE FINDINGS OF LD.CIT(A) AND REJECT GROUND TAKEN BY TH E ASSESSEE. 8. COMING TO THE ISSUE OF ACTUAL REPAIRS AND MAINTE NANCE CLAIMED BY THE ASSESSEE IN THE P&L ACCOUNT. THE ASSESSEE HAS INCURRED ACTUAL REPAIRS AND MAINTENANCE EXPENSES OF RS.13,00,635, AS PER IT S FINANCIAL STATEMENTS. HOWEVER, WHILE ARRIVING AT INCOME AVAI LABLE FOR APPLICATION U/S 11, IT HAS CLAIMED STANDARD DEDUCTION @30% OF G ROSS RENTAL INCOME U/S 24(A) OF INCOME-TAX ACT, 1961. THE AO HAS DISA LLOWED STANDARD DEDUCTION CLAIMED U/S 24(A) OF THE ACT. HOWEVER, E XPENDITURE INCURRED AS PER THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS NOT BE EN ALLOWED WHILE DETERMINING INCOME AVAILABLE FOR APPLICATION. IT I S THE SETTLED POSITION OF LAW THAT ONCE INCOME OF A TRUST / INSTITUTION IS CO MPUTED UNDER THE PROVISIONS OF SECTION 11 OF THE ACT, WHATEVER INCOM E DERIVED FROM THE PROPERTY HELD UNDER TRUST IS TO BE TAKEN INTO ACCOU NT AND AGAINST WHICH ACTUAL EXPENDITURE INCURRED FOR THE OBJECTS OF THE TRUST HAS TO BE CONSIDERED AS APPLICATION OF INCOME. THEREFORE, WH ILE ARRIVING AT INCOME U/S 11, THE AO NEEDS TO ALLOW DEDUCTION TOWARDS ACT UAL REPAIRS AND MAINTENANCE EXPENSES INCURRED FOR RS.13,00,635. TH EREFORE, WE DIRECT 12 ITA 106/MUM/2016 THE AO TO ALLOW DEDUCTION TOWARDS ACTUAL REPAIRS AN D MAINTENANCE EXPENDITURE INCURRED FOR RS.13,00,635 BEFORE ARRIVI NG AT INCOME AVAILABLE FOR ACCUMULATION U/S 11(2) / TAXABLE INCOME OF THE TRUST / INSTITUTION. 9. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N FROM GROUND 4 OF THE APPEAL IS COMPUTATION OF INCOME OF A TRUST IN R ESPECT OF INCOME DERIVED FROM CAPITAL GAIN U/S 11(1)(A) OF THE INCOM E-TAX ACT, 1961. THE FACTUAL MATRIX OF THE IMPUGNED DISPUTE ARE THAT THE ASSESSEE HAS SOLD CERTAIN INVESTMENTS DURING THE YEAR AND COMPUTED LO NG TERM CAPITAL GAIN FROM SALE OF SUCH INVESTMENTS. THE ASSESSEE FURTHE R CLAIMED THAT IT HAS RE- INVESTED SALE CONSIDERATION FROM SALE OF BONDS / DE BENTURE FOR ACQUIRING MUTUAL FUNDS. THEREFORE, WHILE COMPUTING INCOME OF A TRUST / INSTITUTION IN RESPECT OF CAPITAL GAIN, AMOUNT INVESTED FOR PUR CHASE OF NEW CAPITAL ASSET NEEDS TO BE ALLOWED AS DEDUCTION U/S 11(1)(A) OF THE ACT. 10. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIAL AVAILABLE ON RECORD, WE FIND THAT THE ISSUE RAISED BY THE ASSESS EE IN RESPECT OF DEDUCTION TOWARDS RE-PURCHASE OF MUTUAL FUNDS PURCH ASED OUT OF SALE CONSIDERATION RECEIVED FROM SALE OF INVESTMENTS U/S 11(1)(A) IS EITHER NOT DISCUSSED BY THE AO IN HIS ASSESSMENT ORDER NOR EMA NATING FROM THE RECORDS FURNISHED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES. ALTHOUGH, THE ASSESSEE HAS DISCLOSED PROFIT ON SALE OF INVEST MENTS IN THE P&L 13 ITA 106/MUM/2016 ACCOUNT, OTHER FACTS WITH REGARD TO THE RE-INVESTME NT ON SALE CONSIDERATION FOR PURCHASE OF MUTUAL FUNDS IS NOT C LEAR. FURTHER, THE ASSESSEE NEITHER MADE ANY CLAIM IN THE RETURN OF IN COME FILED FOR THE YEAR NOR SOUGHT TO INCLUDE SUCH CLAIM BY WAY OF REVISED RETURN OR REVISED STATEMENT OF TOTAL INCOME BEFORE THE AO. WHEN THER E IS NO CLAIM WITH REGARD TO DEDUCTION TOWARDS RE-INVESTMENT U/S 11(1) (A) OF THE ACT, BEFORE THE AO AND ALSO THE FACTS WITH REGARD TO THE ISSUE IS NOT PLACED AT THE TIME OF ASSESSMENT PROCEEDINGS, THE LD.CIT(A) HAD NO OPT ION BUT TO PROCEED ON THE BASIS OF MATERIALS BROUGHT OUT BY THE AO DURING ASSESSMENT PROCEEDINGS. ACCORDINGLY, WE FIND NO INFIRMITY IN THE FINDING RECORDED BY THE LD.CIT(A) IN DISMISSING GROUND TAKEN BY THE ASS ESSEE REGARDING DEDUCTION TOWARDS CAPITAL GAIN INCOME DERIVED FROM SALE OF INVESTMENTS U/S 11(1)(A) OF THE ACT. 11. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND 6 OF ASSESSEES APPEAL IS ACCUMULATION OF INCOME U/S 11( 2) OF THE INCOME-TAX ACT, 1961. THE ASSESSEE HAS ACCUMULATED A SUM OF R S.2.10 CRORES U/S 11(2) OF THE ACT, IN RESPECT OF INCOME AVAILABLE FO R APPLICATION FOR WHICH NECESSARY FORM 10 ALONGWITH OTHER DETAILS INCLUDING COPY OF RESOLUTION HAS BEEN FILED BEFORE THE AO. THE AO WHILE COMPLETING ASSESSMENT, HAS ALLOWED AMOUNT OF INCOME ACCUMULATED U/S 11(2), AS PER FORM 10 FILED BY 14 ITA 106/MUM/2016 THE ASSESSEE FOR RS.2.10 CRORES. THE ASSESSEE NOW CLAIMS FOR ACCUMULATION OF INCOME U/S 11(2) OF THE ACT FOR RS.2,73,81,840 A S AGAINST EARLIER ACCUMULATED INCOME OF RS,.2.10 CRORES. THE ASSESSE E HAS FILED NECESSARY REVISED FORM 10 ALONGWITH COPY OF RESOLUTION PASSED BY THE BOARD OF TRUSTEES ON 16-08-2018. ACCORDING TO THE ASSESSEE, THE TRUST HAS ACCUMULATED AN ADDITIONAL AMOUNT OF RS.63,81,840 FO R ACQUISITION OF LAND, BUILDING, AND STRUCTURE FOR EDUCATIONAL ACTIVITIES AND THE SAME TO BE UTILISED IN THE NEXT FIVE FINANCIAL YEARS COMMENCIN G FROM 01-04-2019. IN THIS REGARD, THE LD.AR FOR THE ASSESSEE RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS MAYUR FOUN DATION (2005) 274 ITR 562 (GUJ). 12. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATER IAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS FILED FORM NO.10 ALONGWI TH RETURN OF INCOME FILED FOR THE YEAR AND ACCUMULATED A SUM OF RS.210 LAKHS FOR THE OBJECTS OF THE TRUST TO BE UTILISED IN NEXT FIVE FINANCIAL YEA RS. IT IS ALSO AN ADMITTED FACT THAT THE AO HAS ALLOWED ACCUMULATION OF INCOME U/S 11(2) AS PER THE DETAILS FILED BY THE ASSESSEE ALONGWITH FORM 10. N OW, THE ASSESSEE HAS REVISED ITS CLAIM AND FILED A REVISED FORM 10 ALONG WITH COPY OF BOARD RESOLUTION VIDE ITS FROM 10 DATED 07-09-2018. WE F IND THAT THE ASSESSEE 15 ITA 106/MUM/2016 HAS PASSED A RESOLUTION TO ACCUMULATE ADDITIONAL IN COME OF RS.63,81,840 FOR ACQUISITION OF LAND, BUILDING, STRUCTURE FOR ED UCATIONAL ACTIVITIES IN ADDITIONAL TO EARLIER ACCUMULATED INCOME OF RS.210 LAKHS VIDE ITS RESOLUTION DATED 20-09-2012. THE REASON FOR FILING REVISED FORM, ALONGWITH BOARD RESOLUTION IS TO OVERCOME TAXABLE INCOME COMP UTED BY THE AO ON ACCOUNT OF DISALLOWANCE OF STANDARD DEDUCTION CLAIM ED U/S 24(A) OF THE INCOME-TAX ACT, 1961 IN RESPECT OF RENTAL INCOME FR OM HOUSE PROPERTY. NO DOUBT, THE ASSESSEE CAN ACCUMULATE EXCESS INCOME FO R SUBSEQUENT PERIOD TO BE USED FOR THE OBJECTS OF THE TRUST BY FILING N ECESSARY FORM 10 ALONGWITH RETURN OF INCOME. SUCH ACCUMULATION OF I NCOME IS FURTHER FOLLOWED BY OTHER FORMALITIES INCLUDING INVESTMENT OF ACCUMULATED FUNDS IN THE FORMS AND MODES SPECIFIED U/S 11(5) OF THE A CT. IN THIS CASE, INITIALLY THE ASSESSEE HAS ACCUMULATED A SUM OF RS.210 LAKHS AND SUCH ACCUMULATION HAS BEEN ALLOWED BY THE AO. THE SUBSE QUENT ACCUMULATION OF THE REMAINING INCOME HAS BEEN MADE AFTER A GAP O F SIX YEARS, THAT TOO, AFTER EXHAUSTING ALL OPTIONS OPEN TO THE ASSESSEE T O CHALLENGE DISALLOWANCE OF STANDARD DEDUCTION MADE BY THE AO U /S 24(A) OF THE INCOME-TAX ACT, 1961. ALTHOUGH, THERE IS NO BAR UN DER THE ACT TO FILE A REVISED FORM 10 FOR ACCUMULATION OF INCOME TO SUBSE QUENT PERIOD U/S 11(2), BUT SUCH ACCUMULATION CANNOT BE STRETCH TO A PERIOD OF SIX YEARS, 16 ITA 106/MUM/2016 THAT TOO, TO OVERCOME TAXABLE INCOME COMPUTED BY TH E AO BY DISALLOWING STANDARD DEDUCTION CLAIMED U/S 24(A) OF THE ACT. T HE BENEFIT OF ACCUMULATION OF INCOME U/S 11(2) HAS BEEN PROVIDED TO TRUSTS / INSTITUTIONS CLAIMING EXEMPTION CONSIDERING THE FAC T THAT WHERE IT IS NOT POSSIBLE TO UTILISE THE AMOUNT OF INCOME WITHIN THE FINANCIAL YEAR DUE TO VARIOUS REASONS INCLUDING NON RECEIPT OF INCOME FOR THAT YEAR, ALTHOUGH INCOME IS COMPUTED UNDER MERCANTILE PRINCIPLES AND FOR PAUCITY OF TIME, AFTER FULFILLING CERTAIN CONDITIONS. THEREFORE, SU CH BENEFIT CANNOT BE USED TO OVERTURN TAXABLE INCOME COMPUTED BY THE AO, MORE PARTICULARLY, AFTER AVAILING ALL POSSIBLE OPTIONS TO THE ASSESSEE BEFOR E THE APPELLATE AUTHORITIES. WHILE PROVIDING THE BENEFIT OF ACCUMU LATION, THE LEGISLATURE WOULD NOT HAVE INTENDED TO GIVE THE BENEFIT OF ACCU MULATION TO TRUST WHERE THE AO HAS COMPUTED TAXABLE INCOME OF THE TRU ST IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. THEREFORE, IF WE A NALYSE THE LEGISLATIVE INTEND BEHIND ENACTMENT OF PROVISIONS OF SECTION 11 (2), IT IS VERY CLEAR THAT THE TRUST / INSTITUTIONS ARE ALLOWED TO ACCUMULATE INCOME FOR SPECIFIED PURPOSES WHICH NEEDS TO BE SPECIFIED IN THE RESOLUT ION PASSED BY THE TRUST. UNLESS, THE TRUST SPECIFIES THE PURPOSE FOR WHICH THE INCOME IS ACCUMULATED, THEN THE BENEFIT CANNOT BE ALLOWED. I N THIS CASE, THE ASSESSEE HAS TRIED TO USE THE BENEFIT OF ACCUMULATI ON AFTER EXHAUSTING ALL 17 ITA 106/MUM/2016 POSSIBLE OPTIONS AVAILABLE TO IT TO CONTEST THE ISS UE OF DEDUCTION U/S 24(A). FURTHER, NO DOUBT, THE HONBLE GUJARAT HIGH COURT H AS CONSIDERED REVISED FORM 10 FILED BY THE ASSESSEE ACCUMULATING ADDITION AL INCOME AFTER A GAP OF SIX YEARS, BUT ON PERUSAL OF THE RATIO RENDERED BY THE HONBLE GUJARAT HIGH COURT, WE FIND THAT IN THAT CASE, THERE WAS NO DISPUTE WITH REGARD TO AVAILABILITY OF FUNDS FOR ACCUMULATION U/S 11(2) AN D INVESTMENT OF SUCH FUNDS IN THE INVESTMENTS SPECIFIED U/S 11(5) OF THE INCOME-TAX ACT, BECAUSE, THE DISPUTED ISSUE IN THAT CASE IS TAXABIL ITY OF CORPUS DONATION RECEIVED BY THE ASASESSEE UNDER THE PROVISIONS OF S ECTION 11 OF THE ACT. IN THIS CASE, THE FACTS WITH REGARD TO THE AVAILABILIT Y OF FUNDS FOR MAKING INVESTMENTS ARE UNDER DISPUTE. THE ASSESSEE FAILED TO FILE ANY DETAILS WITH REGARD TO THE AVAILABILITY OF FUNDS FOR MAKING INVE STMENTS IN THE MODES SPECIFIED U/S 11(5) OF THE INCOME-TAX ACT, 1961. T HEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MERIT IN THE ARGUM ENT OF THE ASSESSEE THAT IT HAS ACCUMULATED INCOME U/S 11(2) OF THE ACT , FOR THE PURPOSE OF OBJECT OF THE TRUST IN COMPLIANCE WITH PROVISIONS O F SECTION 11(5) OF THE INCOME-TAX ACT, 1961. THEREFORE, WE REJECT THE GRO UND TAKEN BY THE ASSESSEE. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DIMISSED. 18 ITA 106/MUM/2016 ORDER PRONOUNCED IN THE OPEN COURT ON 29-03- 2019. SD/- SD/- (SANDEEP GOSAIN) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 29 TH MARCH, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI