PRAYAGDHAM TRUST, MUMBAI V. CIT(E), MUMBAI

ITA 3348/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0455 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 09-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS S MISHRA
• Assessee Lawyers: YOGESH A THARAR
• Keywords: Capital asset; Business income; General deduction; Depreciation; Charitable institution; Opportunity of being heard; Prejudicial to interest; Tax effect; Revenue expenditure; Capital expenditure
• Section: 143(3); 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI AMARJIT SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3348 / MUM/20 16 ASSESSMENT YEAR: 2011 - 12 SHRI PRAYAGDHAM TRUST VS. CIT(E) 301 - B DEV DARSHAN MAHIM MUMBAI MUMBAI 400016 PAN NO. AAATP0079L (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. YOGESH A. THAR,AR REVENUE BY: MRS. S. MISHRA DATE OF HEARING : 11/05 /2017 DATE OF PRONOUNCEMENT: 07/08/2017 ORDER PER N.K. PRADHAN, AM . THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2011 - 12 . THE APPEAL IS DIRECTED AGAINST THE ORDER U/S 263 OF THE I NCOME TAX ACT, 1961 (THE ACT) PASSED BY THE COMMISSIONER OF INCOME TAX (CIT) EXEMPTIONS, MUMBAI. 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER : I. THE LD. COMMISSIONER OF INCOME TAX ERRED IN SETTING ASIDE THE ASSESSMENT ORDER PASSED BY THE ITO AS BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BY PASSING ORDER U/S 263 OF THE INCOME TAX ACT 1961. II. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT: (A) THE ASSESSMEN T COMPLETED BY THE ITO WAS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE. (B) THAT FOR PASSING AN ORDER U/S 263 THE TWIN CONDITIONS OF THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE OUGHT TO HAVE BEEN SATISFIED. ITA NO. 3348 /MUM/201 6 2 III. THE R ESPONDENT PRAYS THAT THE ORDER PASSED U/S 263 OF THE ACT BE SET ASIDE AS BEING BAD IN LAW, AUTHORITIES BELOW INITIO VOID AND BE QUASHED. 3. BRIEFLY STATED, THE CIT HAVING VERIFIED THE RECORD FOUND THAT (I ) THE LONG TERM CAPITAL GAIN (LTCG) OF RS.2,08,87,315/ - WAS ALLOWED BY THE ASSESSING OFFICER (AO) AS EXEMPTION U/S 11 (1A) AND (II) THE ASSESSEE - TRUST HA D ALSO CLAIMED CAPITAL EXPENDITURE OF RS.4,03,69,243/ - AND THE SAME WAS ALLOWED. THE CIT OBSERVED THA T THE CAPITAL EXPENDITURE WAS NOT REDUCED BY THE CAPITAL GAINS AND THEREFORE, EXCESS EXEMPTION U/S 11 WAS ALLOWED BY THE AO. THE ASSESSEE SUBMITTED BEFORE THE CIT THAT EVEN IF THE ADJUSTMENT OF RS.2,08,87,315/ - IS MADE, THE ASSESSED INCOME WOULD STILL BE IN DEFICIT AND WITHOUT DEFICIT BEING CARRIED FORWARD, THE TAXABLE INCOME WOULD BE NIL. THEREFORE, IT WAS SUBMITTED THAT THERE WAS NO REQUIREMENT TO REVIEW THE ASSESSMENT ORDER PASSED. THE CIT DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AS THE AO HAD CLEARLY ERRED IN NOT REDUCING THE CAPITAL GAINS FROM THE CAPITAL EXPENDITURE CLAIMED BY THE ASSESSEE DURING T HE YEAR. THE CIT HAS OBSERVED THAT THE AO ALLOWED RELIEF OF CAPITAL EXPENDITURE TO THE ASSESSEE WITHOUT MAKING PROPER VERIFICATION OF THE ASPECTS RELATED TO THE CLAIM. THUS AS PER THE CIT , THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO BE INTEREST OF THE R EVENUE. ACCORDINGLY , THE CIT SET ASIDE THE ORDER AND DIRECTED THE AO TO PASS A FRESH ORDER AFTER EXAMINING THE ASPECTS RELATING TO THE ABOVE ISSUE AND GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE REFERS TO THE ADDITIONAL GROUND OF APPEAL FILED AND SUBMITS THAT THERE IS NO BAR ON CLAIMING THE APPLICATION OF CAPITAL GAINS TOWAR DS CAPITAL EXPENDITURE ITA NO. 3348 /MUM/201 6 3 OR ANY OTHER EXPENDITURE IN SO FAR AS IT RELATES TO THE CHARITABLE PURPOSES. THEREFORE, HE SUBMITS THAT WITHOUT PREJUDICE TO ITS 1 ST , 2 ND , 3 RD GROUND OF APPEAL CHALLENGING THE JURISDICTION U/S 263, THE CLAIM OF THE ASSESSEE U/S 11(1A)/11(1) DESERVES TO BE ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES. IT IS SUBMITTED BY HIM THAT THE ADDITIONAL GROUND OF APPEAL IS A LEGAL PLEA AND DOES NOT REQUIRE ANY INVESTIGATION OF NEW FACTS AS ALSO THAT THE GROUND IS IN SUPPORT OF THE ORDER OF THE LD. CIT(A) IN VIEW OF RULE 27 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. THEREFORE, IT IS SUBMITTED BY HIM THAT THE ADDITIONAL GROUND OF APPEAL B E ADMITTED. 4.1 HAVING GONE THROUGH THE ISSUE, WE FIND THAT THE ADDITIONAL GROUND IS A LEGAL ONE AND WE ADMIT THE SAME FOR ADJUDICATION. 4.2 THE LD. COUNSEL SUBMITS THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE EARNED LTCG OF RS.2,08,87,315/ - AND IT ALSO INCURRED CAPITAL EXPENDITURE OF RS.4,03,69,243/ - . THE CIT INITIATED PROCEEDINGS U/S 263 ON THE GROUND THAT THE AO DID NOT REDUCE THE EXTENT OF EXEMPTION U/S 11(1A) BY REDUCING THE CAPITAL GAINS OF RS.2,08,87,315/ - AND THEREFORE, THERE WAS AN EXCESS CLAIM. THE LD. COUNSEL SUBMITS THAT IN ORDER TO EXERCISE POWERS U/S 263, THE ORDER PASSED BY THE AO MUST BE BOTH (I) ERRONEOUS AND (II) PREJUDICIAL INTEREST OF THE R EVENUE. ABSENCE OF ANYONE OF THE PREREQUISITE WOULD TAKE AWAY THE JURISDICTION U/S 263. RE LIANCE IS PLACED BY HIM ON THE DECISION IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (243 ITR 83) (SC), CIT VS. MAX INDIA LTD. (295 ITR 282) (SC), CIT VS. GREEWORLD CORPORATION (314 ITR 81) (SC) AND CIT VS. GABRIEL INDIA LTD. (203 ITR 108) (BOM HC) . 4.3 THE LD. COUNSEL FURTHER SUBMITS THAT A PERUSAL OF THE COMPUTATION TABLE WOULD INDICATE THAT THE TOTAL INCOME ASSESSED STOOD AT NIL AFTER CONSIDERING THE EXEMPTION U/S 11(1A) OF ITA NO. 3348 /MUM/201 6 4 RS.2,08,87,315/ - AND THEREAFTER, ALLOWING THE APPLICATION OF INCOME IN TH E FORM OF CAPITAL EXPENDITURE OF RS.4,03,69,243/ - . ASSUMING WITHOUT ADMITTING THAT EVEN THE ORDER OF CIT P ASSED U/S 263 IS UPHELD AND THE ALLEGED EXCESS EXEMPTION IS DENIED TO THE ASSESSEE, STILL, IN THAT EVENT ALSO THE RESULTANT TOTAL INCOME STANDS AT RS. NIL. AS THERE WAS NO LOSS OF THE REVENUE, THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) WAS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE. RELIANCE IS PLACED BY HIM ON THE DECISION IN THE CASE OF AL AMEEN EDUCATIONAL SOCIETY VS. DIT (E) (139 ITD 245 ). 4.4 THE LD. COUNSEL ALSO SUBMITS THAT THE CIT HAS MIXED UP THE ISSUES VIZ. INCURRING CAPITAL EXPENDITURE AND SETTING OFF AGAINST THE LTCG. THE CIT IGNORED THE FACT THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD MADE SUFFICIENT INVESTMENT IN FIXED DEPOSITS (FDS) WHICH WOULD TAKE CARE OF THE LTCG EARNED DURING THE YEAR. THE FDS AS ON 31.03.2010 STOOD AT RS.24,05,34,786/ - WHEREAS AS ON 31.03.2011, THE SAME STOOD AT RS.35,96,54,914/ - I.E. MORE THAN APPROXIMATELY RS. 11 CRORES WAS INVESTED IN FDS. THE LD. COUNSEL REFERS TO THE CBDT INSTRUCTION NO. 883 DATED 24.09.1975 WHEREIN IT HAS BEEN CATEGORICALLY MENTIONED THAT INVESTMENT IN FDS WITH A BANK WOULD BE REGARDED AS UTILIZATION OF THE NET CONSIDERATION FOR ACQUISITION OF ANOTHER CAPITAL ASSETS WI THIN THE MEANING OF SECTION 11(1A). ALSO IN THE CASE OF CIT VS. HINDUSTAN WELFARE TRUST 206 ITR 138 (CAL), IT HAS BEEN HELD BY THE HONBLE CALCUTTA HIGH COURT THAT FDS WITH BANKS QUALIFY AS CAPITAL ASSET FOR THE PURPOSE OF EXEMPTION U/S 11(1A) AND EVEN DEPOSITS FOR A DURATION OF LESS THAN 6 MONTHS WOULD QUALIFY FOR THE AFORESAID PURPOSE OF CLAIMING EXEMPTION U/S 11(1A) OF THE ACT. ITA NO. 3348 /MUM/201 6 5 THUS THE LD. COUNSEL OF THE ASSESS EE SUBMITS THAT IN VIEW OF THE ABOVE PROPOSITIONS, THE ORDER U/S 143(3) PASSED BY THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THEREFORE, THE ORDER PASSED BY THE CIT U/S 263 BE QUASHED. 5. PER CONTRA THE LD. DR SUBMITS THA T THE AO HAS WRONGLY COMPUTED THE INCOME OF THE ASSESSEE - TRUST AS UNDER: RS. RS. 1. INCOME FROM HOUSE PROPERTY ACTUAL RENT RECEIVED LESS: 30% DEDUCTION NOT ALLOWED AS DISCUSSED IN PARA NO. 4 3,07,786/ - 3,07,786/ - 2. INCOME FROM OTHER SOURCES AS PER STATEMENT OF TOTAL INCOME LESS: DEPRECIATION NOT ALLOWED (AS DISCUSSED IN PARA 5) 19,69,15,628/ - 19,69,15,628/ - 3. INCOME FROM CAPITAL GAIN LONG TERM CAPITAL GAIN LESS: EXEMPT U/S 11(1A) 2,08,87,315/ - 2,08,87,315/ - NIL 19,72,23,414/ - LESS: 1. CORPUS DONATIONS 2. EXPENDITURE AS PER INCOME & EXPENDITURE ACCOUNT 3. CAPITAL EXPENDITURE RESTRICTED TO THE INCOME AVAILABLE OF RS.19,72,23,414/ - 12,50,84,401/ - 7,73,26,182/ - 4,03,69,243/ - 24,27,79,826/ - 19,72,23,414/ - TOTAL INCOME NIL THE LD. DR SUBMITS THAT THE RIGHT WAY FOR SHOWING THE INCOME IN APPLICATION SHOULD HAVE BEEN FIRST THE ADJUSTMENT OF CAPITAL GAINS AGAINST THE CAPITAL EXPENDITURE AND THEREAFTER, IF ANY EXCESS CAPITAL EXPENDITURE WAS THERE, THE SAME SHOULD HAVE BEEN ADJUSTED AGAINST ITA NO. 3348 /MUM/201 6 6 THE OTHER INCOME OF THE YEAR. THE LD. DR THUS SUBMITS THAT THE CORRECT WAY FOR COMPUTATION OF INCOME WOULD BE AS UNDER: RS. RS. INCOME FROM HOUSE PROPERTY ACTUAL RENT RECEIVED 3,07,786/ - INCOME FROM OTHER SOURCES 7,18,31,227/ - GROSS INCOME 7,21,39,013/ - LONG TERM CAPITAL GAINS 2,08,87,316/ - LESS: EXEMPT U/S 11(1A) 2,08,87,316/ - 0 LESS: EXPENDITURE ON OBJECTS OF THE TRUST 7,73,26,183/ - ADD: EXPENDITURE ON ADDITIONS TO ASSETS (4,03,69,243 2,08,87,315/ - ) 1,94,81,927/ - 9,68,08,110/ - RESTRICTED TO THE INCOME AVAILABLE 7,21,39,013/ - TOTAL INCOME NIL THE LD. DR THUS SUBMITS THAT SINCE THE DEFICIT TO BE CARRIED FORWARD WAS COMPUTED IN EXCESS, THE ORDER PASSED BY THE AO WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE ASSESSEE CAN CLAIM THE SAME FOR SET OFF IN THE INCOME OF NEXT YEAR. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF (I) CIT VS. VARANASI KHANTA RAO 377 ITR 602 (AP), (II) KANDI FRIENDS EDUCATIONAL TRUST VS. CIT 357 IYR 84 (P&H) AND (III) MUTHOOT CHITTY FUND VS. CIT 72 TAXMANN.COM 160 (KER). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. WE BEGIN WITH THE RELEVANT DECIS IONS RELIED ON BY THE LD. COUNSEL OF THE ASSESSEE. IN THE CASE OF AL AME EN EDUCATIONAL SOCIETY (SUPRA) , THE ASSESSEE A CHARITABLE EDUCATIONAL SOCIETY HAD SOLD A LAND FOR RS.4,00,000/ - AND HAD INVESTED RS.2,78,38,080/ - IN ACQUIRING NEW CAPITAL ASSET AND THUS DECLARED A SUM OF RS.3,41,169/ - ITA NO. 3348 /MUM/201 6 7 BEING TAXABLE LONG TERM CAPITAL GAIN. THE ASSESSEE HAD CLAIMED EXEMP TION UNDER SECTION 11(1A) FOR INVESTING THE PROCEEDS IN THE CAPITAL ASSET TO BE HELD AS CORPUS OF TRUST. THE ASSESSING OFFICER HELD THAT FOR CLAIMING EXEMPTION U/S 11(1A), THE WHOLE OF NET CONSIDERATION HAD TO BE INVESTED IN CAPITAL ASSETS WHEREAS THE ASSE SSEE HAD INVESTED PART OF THE SALE PROCEEDS I.E., RS.2,78,38,080/ - AND THUS NOT ENTITLED FOR EXEMPTION U/S 11(1A) FOR THE ENTIRE CAPITAL GAINS. SO, THE CAPITAL GAINS OF RS.1,03,53,927/ - ONLY WAS EXEMPT AND THE BALANCE OF RS.45,23,430/ - WAS TAXABLE. THE D IRECTOR (EXEMPTION) IN EXERCISE OF POWERS U/S 263 HELD THAT THE AFORESAID COMPUTATION OF CAPITAL GAINS DONE BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE HELD THAT WHEN CAPITAL ASSETS AR E TRANSFERRED BY A CHARITABLE TRUST, THE CAPITAL GAIN ON SUCH SALE HAS TO BE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11(1A) AND NOT UNDER THE NORMAL PROVISIONS OF THE ACT, VIZ. , SECTIONS 45 TO 55A. HE FURTHER HELD THAT THE INVESTMENT OF THE CAPITAL GAIN IN ACQUIRING ANOTHER CAPITAL ASSET BY THE ASSESSEE WAS IN THE EARLIER YEARS AND SUCH INVESTMENT COULD NOT BE SAID TO BE APPLICATION OF INCOME FOR CHARITABLE TRUSTS. IT WAS ONLY INVESTMENTS MADE DURING PERIOD AFTER TRANSFER OF THE CAPITAL ASSE T THAT COULD BE CONSIDERED AS APPLICATION OF INCOME FOR THE PURPOSE OF SECTION 11(1A). THE ISSUE BEFORE THE TRIBUNAL WAS WHETHER INVESTMENT IN CAPITAL ASSETS BY ASSESSEE WOULD BE ELIGIBLE FOR EXEMPTION U/S 11(1A)? THE TRIBUNAL HELD THAT IF THE CAPITA L GAIN IS APPLIED FOR CHARITABLE PURPOSE OF ASSESSEE NOT BY ACQUIRING A NEW ASSET BUT FOR OTHER CHARITABLE PURPOSE, THEN THERE IS NO REASON WHY IT SHOULD NOT BE ITA NO. 3348 /MUM/201 6 8 CONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE ENABLING ASSESSEE TO CLAIM EXEMPTION U/S 11(1). 6.1 WE FIND THAT THE I NSTRUCTION NO. 883 DATED 24.09.1975 REFERRED BY THE LD. COUNSEL CLARIFIES THAT INVESTMENT OF THE NET CONSIDERATION IN FIXED DEPOSIT WITH A BANK FOR A PERIOD OF 6 MONTHS OR ABOVE WOULD BE REGARDED AS UTILIZATION OF THE N ET CONSIDERATION FOR ACQUISITION OF ANOTHER CAPITAL ASSET WITHIN THE MEANING OF SECTION 11(1A). 6.2 NOW WE TURN TO THE RELEVANT DECISION S RELIED ON BY THE LD. DR. IN THE CASE OF KANDI FRIENDS EDUCATIONAL TRUST (SUPRA) IT IS HELD THAT WHERE COMMISSIONER SET ASIDE ASSESSMENT ORDER ON GROUND THAT ASSESSEE - TRUST PAID INTEREST TO FAMILIES OF TRUSTEES IN VIOLATION OF MANDATE OF TRUST DEED AND THERE WERE DISCREPANCIES ON ACCOUNT OF DEPRECIATION CLAIMED, NEW PLEA OF ASSESSEE BEFORE HIGH COURT THAT EVEN IF ALL SUCH ADDITIONS WERE MADE STILL TAX EFFECT WAS NIL, COULD NOT BE ACCEPTED. IN THE CASE OF VARANASI KANTA RAO (SUPRA) RELIED ON BY THE LD. DR , IT IS HELD THAT ONCE THE COMMISSIONER HAS GOT POWER TO POINT OUT ERRORS WHICH HAVE EFFECT ON REVENUE, TRIBUNAL CANNOT SIT AS AN APPELLATE AUTHORITY ON THE SAID ORDER PASSED U/S 263 OF THE ACT. 6.3 WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE CAN BE RESOLVED IF WE KNOW - H OW TO MAKE COMPUTATION OF INCOME OF A TRUST. WE TABULATE IT BELOW: PARTICULARS AMT 1. AMOUNT OF I NCOME OF THE TRUST (BEFORE GIVING THE EXEMPTION UNDER SECTION 11 OF THE ACT) -- 2. GENERAL DEDUCTION/EXEMPTION UNDER SECTION 11 OF THE ACT (15%) OF THE INCOME OF THE TRUST -- 3. NET INCOME OF THE TRUST AVAILABLE FOR APPLICATION (1 - 2) -- ITA NO. 3348 /MUM/201 6 9 4. DETAILS OF THE INCOME APPLIED INCLUDING THE CAPITAL AND REVENUE EXPENDITURE FOR THE CHARITABLE PURPOSES -- 5. BALANCE IF (3 - 4) IS POSITIVE -- 6. CHECK WHETHER ANY INCOME HAS BEEN SET APART FOR FUTURE ? IF YES THEN SHOW IT -- 7. IF STILL THERE IS BALANCE (5 - 6) = TAXABLE INCOME OF THE TRUST -- 6.4 THE SCOPE OF THE WORD INCOME HAS TO BE UNDERSTOOD IN THE CONTEXT OF SECTION 11. THE WORDS INCOME AND TOTAL INCOME HAVE ALTOGETHER DIFFERENT CONNOTATIONS IN THE ACT. THE EXPRESSION INCOME HERE HAS TO BE UNDERSTOOD IN THE COMMERCIAL SENSE AND NOT IN THE SENSE IN WHICH THE INCOME IS ARRIVED AT FOR PURPOSES OF ASSESSMENT TO TAX. IN OTHER WORDS, FROM THE TOTAL RECEIPTS THE EXPENSES NECE SSARY FOR EARNING THAT INCOME HAVE TO BE DEDUCTED. THE NET AMOUNT THAT REMAINS WOULD BE AVAILABLE FOR DISTRIBUTION OR APPLICATION FOR CHARITABLE PURPOSES. IN APPLYING THE INCOME FOR CHARITABLE PURPOSES, EVEN CAPITAL EXPENDITURE MAY BE INCURRED. WHERE THE T RUST DERIVES INCOME FROM HOUSE PROPERTY, INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WORD INCOME SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME, AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THEREOF TOWARDS THE PU RPOSES OF THE TRUST OR OTHERWISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR THE PURPOSES OF THE TRUST OR OTHERWISE. IT SHOULD BE NOTED, IN THIS CONNECTION, THAT THE AMOUNTS SO ADDED BACK WILL BECOME CHARGEABLE TO TAX U NDER SECTION 11(3) TO THE EXTENT THAT THEY REPRESENT OUTGOINGS FOR PURPOSES OTHER THAN THOSE OF THE TRUST. THE AMOUNTS SPENT OR APPLIED FOR THE ITA NO. 3348 /MUM/201 6 10 PURPOSES OF THE TRUST FROM OUT OF THE INCOME COMPUTED IN THE AFORESAID MANNER, SHOULD BE NOT LESS THAN 85% OF TH E LATTER, IF THE TRUST IS TO GET THE FULL BENEFIT OF THE EXEMPTION UNDER SECTION 11(1). TO SUM UP, THE BUSINESS INCOME OF THE TRUST AS DISCLOSED BY THE ACCOUNTS PLUS ITS OTHER INCOME COMPUTED AS ABOVE, WILL BE THE INCOME OF THE TRUST FOR PURPOSES OF SEC TION 11(1). FURTHER, THE TRUST MUST SPEND AT LEAST 85% OF THIS INCOME AND NOT ACCUMULATE MORE THAN 15% THEREOF. THE EXCESS ACCUMULATION, IF ANY, WILL BECOME TAXABLE UNDER SECTION 11(1). 6. 5 IN VIEW OF THE ABOVE, A S THE ORDER PASSED BY THE AO WAS NEITHER ERRONEOUS NOR PREJUDI CIAL TO THE INTEREST OF REVENUE , WE CANCEL THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT. 7. IN THE RESULT, THE APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN C OURT ON 07/08/2017. SD/ - SD/ - ( AMARJIT SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : DATED: 07/08/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI