AI Insights
The case involves the Trans Thane Creek Waste Management Association, a charitable organization, which appealed against the order of the Assessing Officer that restricted the accumulation of income under section 11(1)(a) of the Income Tax Act, 1961, to net income instead of gross receipts. The Assessing Officer's rectification order was based on a perceived mistake in the initial assessment, which allowed accumulation on gross receipts. The Ld. CIT(A) reversed this decision, supporting the assessee's view, which was then upheld by the Tribunal. The main legal contention was whether the accumulation limit of 15% under section 11(1)(a) should be applied to gross receipts or net income.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 123426 (ITAT-NA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 month(s) 21 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-07-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
Mumbai
Next Hearing Date
16-07-2023
Assessment Year
2012-2013
Appeal Filed On
03-05-2023
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 1559/MUM/2023 Assessment Year: 2012-13 Dy. CIT (Exemption)-2(1), Room No. 608, 6 th floor, MTNL Building, Cumballa Hill, Mumbai-400026. Vs. Trans Thane Creek Waste Management Association, P-128, Next to L & T Infotech Ltd., Shill Mahape Road, Navi Mumbai-400701. PAN NO. AADCT 4375 R Appellant Respondent Assessee by : None Revenue by : Mr. Prakash D. Choughule, DR Date of Hearing : 17/07/2023 Date of pronouncement : 25/07/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is preferred against order dated 09.03.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds: “1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in allowing the accumulation at 15% of gross receipts instead of net income.” 2. Briefly stated facts of the case are that the assessee was engaged in the business of Environmental protection fill etc. In the assessment completed u/s 143(3) of the Income Act, 1961 (in short ‘the Act’) dated 20.03.2015, the total income was determined at Nil. Subsequently, the Assessing Officer issued show cause notice proposing to rectify the assessment order passed u/s 143(3) of the Act was allowed accumulation u/s 11(1) of the Act on gross receipt instead of net income which income by Rs.1,71,17,333/ however, the Ld. Assessing Officer in his order u dated 04.09.2019 restricted the accumulation of income u/s 11(1) of the Act on net income. On further appeal, the Ld. CIT(A) allowed relief to the assessee observing as under: “5. Decision 1. The assessee has raised six grounds of Ground Nos. 1, 4, 5 and 6 are general in nature and no specific adiudication is called for. Hence, the same are dismissed. 2. Ground No. 2 & 3 relates to disallowance of accumulation u/s 11(1)(a). After carefully considering the e-submission filed of the order of the assessing officer. The appellant is registered as a company under section 25 of the Companies Act. 1956 as per the Certificate of incorporation granted on 0 also registered as a ch section 12A of the Income Tax Act. The main objects of the appellant as per Memorandum of Association areas under: Trans Thane Creek Waste Management ITA No. Briefly stated facts of the case are that the assessee was engaged in the business of Environmental protection n the assessment completed u/s 143(3) of the Income rt ‘the Act’) dated 20.03.2015, the total income was t Nil. Subsequently, the Assessing Officer issued show cause notice proposing to rectify the assessment order u/s 143(3) of the Act, on the ground that the was allowed accumulation u/s 11(1) of the Act on gross receipt instead of net income which resulted in under assessment of income by Rs.1,71,17,333/-. The assessee objected for rectification, however, the Ld. Assessing Officer in his order u/s 154 of the Act dated 04.09.2019 restricted the accumulation of income u/s 11(1) of the Act on net income. On further appeal, the Ld. CIT(A) allowed relief to the assessee observing as under: “5. Decision 1. The assessee has raised six grounds of Ground Nos. 1, 4, 5 and 6 are general in nature and no specific adiudication is called for. Hence, the same are dismissed. 2. Ground No. 2 & 3 relates to disallowance of accumulation u/s 11(1)(a). After carefully considering submission filed by appellant and upon perusal of the order of the assessing officer. The appellant is registered as a company under section 25 of the Companies Act. 1956 as per the Certificate of incorporation granted on 0-11-1998. The appellant is also registered as a charitable institution under section 12A of the Income Tax Act. The main objects of the appellant as per Memorandum of Association areas under: Trans Thane Creek Waste Management Association. 2 ITA No. 1559/Mum/2023 Briefly stated facts of the case are that the assessee was engaged in the business of Environmental protection through land n the assessment completed u/s 143(3) of the Income-tax rt ‘the Act’) dated 20.03.2015, the total income was t Nil. Subsequently, the Assessing Officer issued show cause notice proposing to rectify the assessment order , which was on the ground that the assessee trust was allowed accumulation u/s 11(1) of the Act on gross receipt under assessment of . The assessee objected for rectification, /s 154 of the Act dated 04.09.2019 restricted the accumulation of income u/s 11(1) of the Act on net income. On further appeal, the Ld. CIT(A) allowed 1. The assessee has raised six grounds of appeal. Ground Nos. 1, 4, 5 and 6 are general in nature and no specific adiudication is called for. Hence, the same 2. Ground No. 2 & 3 relates to disallowance of accumulation u/s 11(1)(a). After carefully considering by appellant and upon perusal of the order of the assessing officer. The appellant is registered as a company under section 25 of the Companies Act. 1956 as per the Certificate of 1998. The appellant is aritable institution under The main objects of the appellant as per Memorandum a)To constitute and maintain an organization for treatment of Industrial solid wastes generated in the area of ope b)To act as an advisor for the process and treatment of pollution such as Air Pollution, Water Pollution, Waste Water Pollution, Sewage, Industrial Hazardous Solid Wastes, Chemicals, Gases Effluents from Industries and all other kinds of environment income was claimed exempt under section 11, being a registered charitable organization. However, the assessing officer passed the rectification order us 154 of IT Act stating that there was a mistake apparent from record in t assessment order and restricted accumulation of 15 percent u/s 11(1)(a) to Rs. 15814824 as against Rs. 31990443/ u/s 143(3) of the IT Act. As per Section 11(1) of the IT Act, the existing provisions related to, two kinds of accumulation are possible: 1. Accumulation upto 15% of income under section 11(1). Such accumulations are not subject to application within a maximum permissible period of 5 years. In by a charitable organisa charitable purposes in the year in which the income was accrued. This 15% accumulation is an indefinite accumulation and the organisation does not have to apply it for charitable purposes in subsequent years. It can be retained 2. Accumulation beyond 15% of income under section 11(2). Such accumulations are subject to application within a maximum permissible period of 5 years. In other words income in excess of 15% cannot be retained by a char the income is not spent in the current year then the assessee is permitted to spend it within the next 5 years. Further, the appellant submitted that the accumulation is with respect to the income of the appellant and n The receipts of Rs. Trans Thane Creek Waste Management ITA No. a)To constitute and maintain an organization for treatment of Industrial solid wastes generated in the area of operation b)To act as an advisor for the process and treatment of pollution such as Air Pollution, Water Pollution, Waste Water Pollution, Sewage, Industrial Hazardous Solid Wastes, Chemicals, Gases Effluents from Industries and all other kinds of environmental pollution. Accordingly such income was claimed exempt under section 11, being a registered charitable organization. However, the assessing officer passed the rectification order us 154 of IT Act stating that there was a mistake apparent from record in t assessment order and restricted accumulation of 15 percent u/s 11(1)(a) to Rs. 15814824 as against Rs. 31990443/- allowed in the assessment order u/s 143(3) of the IT Act. As per Section 11(1) of the IT Act, the existing provisions related to, two kinds of accumulation are possible: 1. Accumulation upto 15% of income under section 11(1). Such accumulations are not subject to application within a maximum permissible period of 5 -other words, 15% of income can be retained by a charitable organisation without applying it for charitable purposes in the year in which the income was accrued. This 15% accumulation is an indefinite accumulation and the organisation does not have to apply it for charitable purposes in subsequent years. It can be retained as a part of its corpus of capital. 2. Accumulation beyond 15% of income under section 11(2). Such accumulations are subject to application within a maximum permissible period of 5 years. In other words income in excess of 15% cannot be retained by a charitable or religious organisation. If the income is not spent in the current year then the assessee is permitted to spend it within the next 5 Further, the appellant submitted that the accumulation is with respect to the income of the appellant and not receipts net of application of income. The receipts of Rs. 21,32,69,612/- is the income for Trans Thane Creek Waste Management Association. 3 ITA No. 1559/Mum/2023 a)To constitute and maintain an organization for treatment of Industrial solid wastes generated in b)To act as an advisor for the process and treatment of pollution such as Air Pollution, Water Pollution, Waste Water Pollution, Sewage, Industrial Hazardous Solid Wastes, Chemicals, Gases Effluents from Industries and all other kinds al pollution. Accordingly such income was claimed exempt under section 11, being a registered charitable organization. However, the assessing officer passed the rectification order us 154 of IT Act stating that there was a mistake apparent from record in the assessment order and restricted accumulation of 15 percent u/s 11(1)(a) to Rs. 15814824 as against allowed in the assessment order u/s 143(3) of the IT Act. As per Section 11(1) of the IT Act, the existing provisions related to, two kinds 1. Accumulation upto 15% of income under section 11(1). Such accumulations are not subject to application within a maximum permissible period of 5 other words, 15% of income can be retained tion without applying it for charitable purposes in the year in which the income was accrued. This 15% accumulation is an indefinite accumulation and the organisation does not have to apply it for charitable purposes in subsequent years. as a part of its corpus of capital. 2. Accumulation beyond 15% of income under section 11(2). Such accumulations are subject to application within a maximum permissible period of 5 years. In other words income in excess of 15% cannot be itable or religious organisation. If the income is not spent in the current year then the assessee is permitted to spend it within the next 5 Further, the appellant submitted that the accumulation is with respect to the income of the ot receipts net of application of income. is the income for the purposes of accumulation of as per section From the reading of section 11 (1), it is clear that the benefit of accumulation of calculated with reference to the total receipts of the charitable institution and not with reference to income after reducing the amount applied. Therefore, the appellant has rightly calculated the accumulation amount of Rs. 3,19,90,442 being 15% of Rs. 21,32,69,612 as per the provisions of section 11(1). Accordingly, I have relied on the decision of Mumbai Special Bench in the case of Sai Sonabai Hiri Trust Vs. ITO on 22 September 2014 in the favour of assesse. Hence, the A is directed to delete the addit addition and allow the accumulation at 15% of gross receipts. Ground No. 2 & 3 of appeal are allowed. 3. Despite notifying, before us assessee and therefore appeal was heard ex after hearing arguments of the Ld. Departmental Representative (DR). 4. We find that under the provisions of section 11(1) of the Act the accumulation of the income @ 15% has been permitted on income received from the property to be considered for the purpose of the accumulation of income. provisions of the Act are clear and there is no ambiguity in said provisos. For ready reference said provisions are reproduced as under: “11. (1) Subject to the provisions of 60 to 63 in the total income of the previous year o in receipt of the income Trans Thane Creek Waste Management ITA No. the purposes of accumulation of as per section From the reading of section 11 (1), it is clear that the benefit of accumulation of 15% of income should be calculated with reference to the total receipts of the charitable institution and not with reference to income after reducing the amount applied. Therefore, the appellant has rightly calculated the accumulation amount of Rs. 3,19,90,442 being 15% of Rs. 1,32,69,612 as per the provisions of section 11(1). Accordingly, I have relied on the decision of Mumbai Special Bench in the case of Sai Sonabai Hiri Trust Vs. ITO on 22 September 2014 in the favour of assesse. Hence, the A is directed to delete the addit addition and allow the accumulation at 15% of gross receipts. Ground No. 2 & 3 of appeal are allowed. notifying, before us none attended on behalf of the fore appeal was heard ex-parte qua the assessee guments of the Ld. Departmental Representative We find that under the provisions of section 11(1) of the Act the accumulation of the income @ 15% has been permitted on income received from the property, which means gross receipt ed for the purpose of the accumulation of income. provisions of the Act are clear and there is no ambiguity in said provisos. For ready reference said provisions are reproduced as (1) Subject to the provisions of sections 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income— Trans Thane Creek Waste Management Association. 4 ITA No. 1559/Mum/2023 the purposes of accumulation of as per section 11(1). From the reading of section 11 (1), it is clear that the 15% of income should be calculated with reference to the total receipts of the charitable institution and not with reference to income after reducing the amount applied. Therefore, the appellant has rightly calculated the accumulation amount of Rs. 3,19,90,442 being 15% of Rs. 1,32,69,612 as per the provisions of section 11(1). Accordingly, I have relied on the decision of Mumbai Special Bench in the case of Sai Sonabai Hiri Trust Vs. ITO on 22 September 2014 in the favour of assesse. Hence, the A is directed to delete the addition the addition and allow the accumulation at 15% of gross receipts. Ground No. 2 & 3 of appeal are allowed.” none attended on behalf of the parte qua the assessee guments of the Ld. Departmental Representative We find that under the provisions of section 11(1) of the Act the accumulation of the income @ 15% has been permitted on which means gross receipt has ed for the purpose of the accumulation of income. Th provisions of the Act are clear and there is no ambiguity in said provisos. For ready reference said provisions are reproduced as sections , the following income shall not be included f the person (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or se purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; (b) income derived from property held under trust in part only for suc created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent not in excess of fifteen per cent of the income from such property; (c) income derived from property held under trust (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which suc outside India: Provided has directed in either case that it shall not be included in the total income of the person in receipt of such income; (d) income in the form of made with a specific direction that they shall form part of the corpus of the trust or institution. the condition that such voluntary contributions are invested or deposited in one or more of the forms or Trans Thane Creek Waste Management ITA No. income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per cent of the income from such property; income derived from property held under trust created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India: that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.[subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or Trans Thane Creek Waste Management Association. 5 ITA No. 1559/Mum/2023 income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is t apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per income derived from property held under trust in h purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in to which the income so set apart is not in excess of fifteen per cent of the income from income derived from property held under trust— created on or after the 1st day of April, 1952, promote international welfare in which India is interested, to the extent to which such income is applied to for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to h income is applied to such purposes that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such voluntary contributions made with a specific direction that they shall form [subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified specifically for such corpus]” 4.1 In view of the provisions of the Act, we don’t find any the order of the Ld. CIT(A) on the issue in dispute which has been passed as per the provisions of the Act and therefore, we accordingly, we uphold the same. The sole ground raised by the Revenue is accordingly dismissed. 5. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on 25 Sd/ (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 25/07/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Trans Thane Creek Waste Management ITA No. modes specified in sub-section (5) maintained specifically for such corpus]” 4.1 In view of the provisions of the Act, we don’t find any the order of the Ld. CIT(A) on the issue in dispute which has been passed as per the provisions of the Act and therefore, we uphold the same. The sole ground raised by the Revenue is accordingly dismissed. In the result, the appeal filed by the Revenue is dismissed. nounced in the open Court on 25/07/2023. Sd/- Sd/ KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Trans Thane Creek Waste Management Association. 6 ITA No. 1559/Mum/2023 section (5) maintained 4.1 In view of the provisions of the Act, we don’t find any error in the order of the Ld. CIT(A) on the issue in dispute which has been passed as per the provisions of the Act and therefore, we uphold the same. The sole ground raised by the In the result, the appeal filed by the Revenue is dismissed. /07/2023. Sd/- AKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai
Other Referred Cases
Sai Sonabai Hiri Trust Vs. ITO
Laws Referred To
Income Tax Act, 1961
1:1 Consultation on Startup Fundraising
₹5000
1:1 Consultation on Startup Compliance
₹1
1:1 Consultation on Business Valuations
₹1
CRM Implementation Plan
₹0
Rectification Letter - Application for rectification of mistake under Section 154 of I.T. Act
Mehul₹0
Why Lacoste Won a 20-Year Trademark Battle Against Crocodile ?
Team Counselvise - March 10, 2026
Why Meesho got ₹1,500 Crore Tax Demand ?
Team Counselvise - March 09, 2026
When Global Talent Meets GST: The Huawei Secondment Ruling explained
Team Counselvise - March 09, 2026