Asst.C.I.T., Bangalore V. M/s The Karnataka State Cricket Association, Bangalore

ITA 71/BANG/2015

• Counselvise Citation: 7121114 RSA 2015
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARAHAT HUSSAIN QURESHI
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Capital expenditure
• Section: 143(3); 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER ITA NOS.71 & 72/BANG/2015 ASSESSMENT YEARS : 2008-09 & 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX ( E ), CIRCLE 1, BANGALORE. VS. THE KARNATAKA STATE CRICKET ASSOCIATION, CHINNASWAMY STADIUM, M.G. ROAD, BANGALORE 560 001. PAN: AAATT 2540E APPELLANT RESPONDENT APPELLANT BY : SHRI FARAHAT HUSSAIN QURESHI, CIT(DR ) RESPONDENT BY : SHRI NARENDRA SHARMA, ADVOCATE DATE OF HEARING : 25.05.2015 DATE OF PRONOUNCEMENT : 29.05.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE ARE APPEALS BY THE REVENUE AGAINST THE TWO ORDERS DATED 15.10.2014 OF THE CIT(APPEALS), MYSORE RELATING TO A.Y. 2008-09 & 2009- 10. ITA NOS.71 & 72/BANG/2015 PAGE 2 OF 15 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN ITA NO.17/BANG/2015 IS AS TO WHETHER THE CIT(APPEALS) WAS RIGHT IN DIRE CTING THE AO TO ALLOW DEPRECIATION ON THE CAPITAL ASSETS, DESPITE THE FAC T THAT AT THE TIME WHEN THE CAPITAL ASSETS WERE ACQUIRED, THE SAME WERE TREATED AS APPLICATION OF INCOME IN THOSE YEARS. ACCORDING TO THE REVENUE, A LLOWING CAPITAL EXPENDITURE AT THE TIME OF ACQUISITION OF CAPITAL A SSET AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE AND FURTHER ALLOWING DEPRECIATION ON THE VERY SAME CAPITAL ASSETS WOULD AMOUNT TO CONFERRING DOUB LE DEDUCTION IN RESPECT OF THE SAME EXPENDITURE. ACCORDING TO THE REVENUE, DOING SO WOULD BE CONTRARY TO THE PRINCIPLES LAID DOWN BY TH E HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD., 199 ITR 43 . 3. THE CIT(APPEALS), ON THE ABOVE ISSUE, FOLLOWING THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN CIT V. SOCIETY OF SISTERS OF ST. ANNS, 146 ITR 28 , HELD THAT DEDUCTION CLAIMED BY THE ASSESSEE HAD TO BE ALLOWED. AGGRIEVED BY THE ORDER OF CIT(APPEALS), T HE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. THE ASSESSEE IS A CHARITABLE TRUST. IN THE COUR SE OF ASSESSMENT U/S. 143(3) OF THE ACT FOR AY 2008-09 THE AO NOTICED FRO M THE DETAILS OF DEPRECIATION CLAIMED, THAT THE DEPRECIATION WAS CLA IMED ON ASSETS, THE COST OF ACQUISITION OF THE SAID ASSETS HAD BEEN CLAIMED BY THE ASSESSEE AS CAPITAL EXPENDITURE TOWARDS APPLICATION OF FUNDS TO WARDS THE OBJECTS OF THE TRUST AND ALLOWED AS SUCH. ACCORDING TO THE AO, ALL OWING SUCH A CLAIM ITA NOS.71 & 72/BANG/2015 PAGE 3 OF 15 WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION. ON THE F ACTS OF THE PRESENT CASE, HE WAS OF THE VIEW THAT THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 IT R 43 IS SQUARELY APPLICABLE, WHEREIN IT HAS BEEN CATEGORICA LLY HELD THAT WHEN DEDUCTION U/S 35(2)(IV) IS ALLOWED IN RESPECT OF CA PITAL EXPENDITURE ON SCIENTIFIC RESEARCH, NO DEPRECIATION IS ALLOWABLE U /S 32 ON THE SAME ASSET. 5. THE ASSESSEE POINTED OUT THAT HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF ALL SAINTS CHURCH, 148 ITR 786 (KAR) AND SOCIETY OF SISTERS OF ST. ANN, 146 ITR 28 (KAR) HAS TAKEN THE VIEW THAT WHERE CAPITAL EXPENDITURE ON ACQUISITION OF DEPRECIABLE A SSET IS CONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE, ALLOW ING DEPRECIATION ON THE VERY SAME CAPITAL ASSET WOULD NOT AMOUNT TO DOUBLE ALLOWANCE. THE ASSESSEE ALSO POINTED OUT THAT THE DECISION OF ESCORTS LTD. (SUPRA) WILL NOT BE APPLICABLE AS IT WAS RENDERED ON A DIFFERENT SET OF FACTS. 6. THE AO HOWEVER, HELD THAT ALLOWANCE OF DEPRECIAT ION WHEN THE COST HAS ALREADY BEEN RECOVERED BY WAY OF EXEMPTION AS A PPLICATION OF INCOME AMOUNTS TO DOUBLE DEDUCTION AND DOUBLE BENEFIT ON T HE SAME ASSET. THE AO REFERRED TO THE DECISION OF THE OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF DDIT(E) V. LISSIE MEDICAL INSTITUTIONS, 348 ITR 344 (KER) WHEREIN IT WAS HELD THAT ALLOWING DEPRECIATION OF A DEPRECIABLE ASSET WHEN THE COST OF ACQUISITION OF DEPRECIABLE ASSET WAS AL LOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE AMOUNTS TO DOUBLE DEP RECIATION AND ITA NOS.71 & 72/BANG/2015 PAGE 4 OF 15 THEREFORE DEPRECIATION CANNOT BE ALLOWED. THE AO AL SO DISTINGUISHED THE CASES CITED BY THE ASSESSEE. 7. ON APPEAL BY THE ASSESSEE, THE CIT(A) HELD THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIATION HAS TO BE ALLOWED. AGGRI EVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BE FORE THE TRIBUNAL. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WH O RELIED ON THE ORDER OF AO. WE HAVE CONSIDERED THE ORDER OF THE AO. IDENT ICAL ISSUE CAME UP FOR CONSIDERATION BEFORE ITAT BANGALORE BENCH IN THE CA SE OF DDIT(E) V. CUTCHI MEMON UNION (2013) 60 SOT 260 BANGALORE ITAT , WHEREIN SIMILAR ISSUE HAS BEEN DEALT WITH BY THIS TRIBUNAL. IN THE AFORESAID CASE, THE ASSESSEE CLAIMED DEPRECIATION AND THE AO DENIED DEPRECIATION ON THE GROUND THAT AT THE TIME OF ACQUIRING THE RELEVANT C APITAL ASSET, COST OF ACQUISITION WAS CONSIDERED AS APPLICATION OF INCOME IN THE YEAR OF ITS ACQUISITION. THE AO TOOK THE VIEW THAT ALLOWING DE PRECIATION WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION AND PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN ESCORTS LTD. (SUPRA) . THE CIT(A), HOWEVER, ALLOWED THE CLAIM OF ASSESSEE. ON FURTHER APPEAL BY THE REVENU E, THE TRIBUNAL HELD AS FOLLOWS:- 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTI NG INCOME OF CHARITABLE INSTITUTIONS, THEN THERE IS NO WAY TO PR ESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT IS NOTHI NG BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATIO N, OR OBSOLESCENCE. SINCE INCOME FOR THE PURPOSES OF SECT ION 11(1) HAS ITA NOS.71 & 72/BANG/2015 PAGE 5 OF 15 TO BE COMPUTED IN NORMAL COMMERCIAL MANNER, THE AMO UNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHI LE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN CIT VS. TINY TOTS E DUCATION SOCIETY (2011) 330 ITR 21 (P&H) , FOLLOWING CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) : (2011) 2 38 CTR (P&H) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHA RITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPL IED FOR THE PURPOSE OF CHARITABLE OBJECTS. CLAIM FOR DEPRECIATI ON WILL NOT AMOUNT TO DOUBLE BENEFIT. THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 199 ITR 43 (SC) H AVE BEEN REFERRED TO AND DISTINGUISHED BY THE HONBLE COURT IN THE AFORESAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND OF APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. M ARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H). THE HONBLE P UNJAB & HARYANA HIGH COURT AFTER CONSIDERING SEVERAL DECISI ONS ON THAT ISSUE AND ALSO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA), CAME TO THE CONCLUSIO N THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS ON THE INCOME OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUN DS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SECTION 11 OF THE ACT. THE HONBLE PUNJAB & HARYANA HIGH COURT MADE A REFERENCE TO THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HONBLE SUPREME COURT WAS DEALING WITH A CASE OF TWO DEDUCT IONS UNDER DIFFERENT PROVISIONS OF THE ACT, ONE U/S. 32 FOR DE PRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITURE OF A CAPITAL NA TURE INCURRED ON SCIENTIFIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HONBLE COURT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECI ATION CANNOT BE EQUATED WITH A CLAIM FOR DOUBLE DEDUCTION. THE HON BLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO T HE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR), WHERE IN IT WAS HELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUT ED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DE BITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. I N VIEW OF THE AFORESAID DECISION ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE DOES NOT CALL FOR ANY INTERFERENCE. ITA NOS.71 & 72/BANG/2015 PAGE 6 OF 15 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENU E IS DISMISSED. 9. WE MAY ALSO ADD THAT THE LEGAL POSITION HAS SIN CE BEEN AMENDED BY A PROSPECTIVE AMENDMENT BY THE FINANCE (NO.2) AC T, 2014 W.E.F. 1.4.2015 BY INSERTION OF SUB-SECTION (6) TO SECTION 11 OF THE ACT, WHICH READS AS UNDER:- (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAM E OR ANY OTHER PREVIOUS YEAR. 10. AS ALREADY STATED, THE AFORESAID AMENDMENT IS PROSPECTIVE AND WILL APPLY ONLY FROM A.Y. 2015-16. IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. CONSEQUENTLY THE APPEAL BY THE REVENUE IS DISMISSED . ITA NO.72/BANG/2015 (AY 2009-10) 11. AS FAR AS THIS APPEAL IS CONCERNED, THE FIRST GROUND OF APPEAL IS IDENTICAL TO THE ONLY GROUND OF APPEAL RAISED IN IT A NO.71/BANG/2015. FOR THE REASONS STATED THEREIN WHILE DECIDING SIMILAR G ROUNDS FOR AY 2008-09, WE HOLD THAT THERE IS NO MERIT IN THESE GROUNDS RAI SED BY THE REVENUE. 12. GROUNDS NO. 2 & 3 RAISED BY THE REVENUE ARE AS FOLLOWS:- ITA NOS.71 & 72/BANG/2015 PAGE 7 OF 15 (2) DISALLOWANCE OF ACCUMULATION OF INCOME U/S 11( 2) :- I) THE CIT(A) HAS ERRED IN ALLOWING ACCUMULATION O F INCOME U/S 11(2) WITHOUT CONSIDERING THE FACT THAT THOUGH THE ORIGINAL FORM NO. 10 WAS FILED WITHIN THE DUE DATE BUT SUCH FORM NO. 10 IS NOT VALID AS THE ASSESSEE HAD FAILED TO DECLARE THE SPECIFIC PURPOSES FOR WHICH INCOME WAS ACCUMULATED. II) THE CIT(A) HAS ERRED IN CONSIDERING THE REVISE D FORM NO. 10 DATED 11.01.2012 FILED BY THE ASSESSEE FOR ALLOW ING ACCUMULATION U/S 11(2), BUT WITHOUT APPRECIATING TH E FACT THAT SUCH REVISED FORM NO. 10 WAS FILED AFTER COMPLETING THE SCRUTINY ASSESSMENT BY THE AO U/S 143(3) DATED 09.12.2011 III) THE CIT(A) HAS ERRED IN IGNORING THE SETTLED LEGAL POSITION AS PER THE LAW LAID DOWN BY THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS NAGPUR HOTEL OWNERS ASSOCIATION (24 7 ITR 201) THAT IT IS MANDATORY ON THE PART OF THE ASSESSEE TO FILE THE FORM NO. 10 BEFORE COMPLETING THE SCRUTINY ASSESSMENT BY THE AO FOR THE PURPOSE OF CLAIMING ACCUMULATION OF INCOME U/S 11(2 ). IV) THE CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE FORM NO. 10, INCLUDING REVISED FORM NO. 10, FILED BEYOND THE DUE DATE FOR FILING RETURN OF INCOME U/S 139(1) SHALL NOT BE CONSIDERED AS VALID ONE WITHOUT OBTAINING THE APPROVAL OF CIT/DIT CONCERNED FOR CONDONATION OF SUCH DELAY. 3. DISALLOWANCE OF SET APART /ACCUMULATION OF INCOM E U/S 11(1)(A) I) THE CIT(A) HAS ERRED IN ALLOWING EXEMPTION U/S 1 1(1)(A) @ 15% OF THE INCOME FOR SET APART/ACCUMULATION WITH OUT CONSIDERING THE FACT THAT THE ASSESSEE HAS FAILED T O FULFIL THE CONDITIONS FOR ACCUMULATION OF 85% OF INCOME AS STI PULATED U/S 11(2) READ WITH SECTION 11(3). II) THE CIT(A) HAS ERRED IN NOT CONSIDERING THE BO ARD CIRCULAR ON THIS ISSUE I.E BOARD CIRCULAR NO. 12-(P XX-7 OF 1968) DATED 26.11.1968, ON WHICH THE AO PLACED RELIANCE F OR DISALLOWANCE OF ACCUMULATION /SET APART OF INCOME U /S 11(1)(A), WHEREIN IT IS CLEARLY EXPLAINED THAT IF A TRUST FAI LS TO COMPLY WITH ACCUMULATION PROVISIONS U/S 11(2), THEN THE ENTIRE INCOME ACCUMULATED WOULD BE LIABLE TO ASSESSMENT U/S 11(3) , INCLUDING 15% OF INCOME SET APART OR ACCUMULATED U/S 11(1)(A) , AND, THEREFORE, RENDERED A PERVERSE DECISION. ITA NOS.71 & 72/BANG/2015 PAGE 8 OF 15 III) THE CIT(A) HAS ERRED IN LAW IN HOLDING THAT T HE PROVISIONS OF SUB-SECTION (1) AND (2) OF SECTION 11 OPERATE IN DEPENDENTLY, AND, THEREFORE, DISALLOWANCE OF ACCUMULATION U/S 11 (2) HAS NO EFFECT ON ALLOWANCE OF SET APART/ACCUMULATION U/S 1 1(1)(A). 13. DURING THE YEAR THE ASSESSEE HAD ACCOUNTED A S URPLUS OF RS.19,33,54,169 U/S 11(2) OF THE IT ACT. ON VERIFI CATION OF THE FORM-10 FILED BY THE ASSESSEE, THE AO FOUND THAT THE PURPOSE OF T HE ACCUMULATION WAS SUBMITTED AS UNDER:- (1) STADIUM INFRASTRUCTURE DEVELOPMENT (2) PROMOTION OF CRICKETING ACTIVITIES AND ACCORDING TO THE AO, THE PURPOSE APPEARED TO BE INC ONCLUSIVE SINCE IT ENDED WITH AND. THEREUPON THE ASSESSEE FILED COP Y OF THE RESOLUTION OF THE ASSOCIATION VERIFIED AND IT WAS FOUND THEREIN T HAT THE PURPOSE OF THE ACCUMULATION WAS AS UNDER:- 1) STADIUM INFRASTRUCTURE 2) PROMOTION/ DEVELOPMENT OF CRICKET 14. ACCORDING TO THE AO, THE SPECIFIC PURPOSE OF A CCUMULATION IS WORDED DIFFERENTLY IN FORM 10 AND RESOLUTION. SECON DLY THE SPECIFICATION IN FORM-10 AS INFRASTRUCTURE DEVELOPMENT OR PROMOTI ON/ DEVELOPMENT OF CRICKET OR PROMOTION OF CRICKET ACTIVITIES WAS V ERY GENERAL IN NATURE. HENCE THE AO DISALLOWED THE CLAIM OF THE ASSESSEE F OR ACCUMULATION OF INCOME CLAIMED BY THE ASSESSEE U/S 11(2) OF THE IT ACT FOR AN AMOUNT OF RS. 19,33,54,169 AND BROUGHT THE SAME TO TAX. ITA NOS.71 & 72/BANG/2015 PAGE 9 OF 15 15. THE ASSESSEE HAD ALSO CLAIMED ACCUMULATION OF INCOME U/S 11(1)(A) AT THE RATE OF 15% OF THE GROSS RECEIPTS I .E RS 7,31,25,661/-. THE AO REFERRED TO CBDT IN THE CIRCULAR NO. 12 P,XX-7 D ATED 26/11/1968. CBDT WHEREIN IT HAS BEEN CLARIFIED THAT IF A TRUST FAILS TO APPLY 85% OF ITS INCOME IN THE PREVIOUS YEAR, THEN THE ENTIRE INCOME ACCUMULATED WOULD BE LIABLE TO ASSESSMENT UNDER SEC.11(3). IN OTHER WORD S THE CIRCULAR STATES THAT THE ENTIRE ACCUMULATION AND NOT MERELY THE EXC ESS 15% OF THE INCOME WOULD BE SUBJECT TO TAX. THIS CIRCULAR WAS ISSUED A S AN EXPLANATORY NOTE TO THE CIRCULAR NO. 5P (LXX-6) OF 1968. IT READ AS UND ER:- ATTENTION IS INVITED TO THE BOARDS CIRCULAR NO 5 P (LXX-6) OF 1968, DATED 19/6/1968(TC 235 1620) ON THE ABOVE MEN TIONED SUBJECT. IT HAS BEEN BROUGHT TO THE BOARDS NOTICES THAT PARA 5 OF THE ABOVE CIRCULAR CREATED THE IMPRESSION THAT WHERE A TRUST ACCUMULATES MORE THAN 25% PERCENT WILL BE TAXABLE UNDER SECTION 11(1) OF THE INCOME TAX ACT 1961. IT IS HEREBY CLARIFIED THAT TH E CORRECTED POSITION IN THIS REGARD IS THAT IF A TRUST DESIRES TO ACCUMULATED INCOME IN EXCESS OF THE LIMITS LAID DOWN IN THE SEC . 11(2) OF THE ACT HAVE TO BE FULFILLED IN RESPECT OF THE ENTIRE A CCUMULATION AND NOT MERELY IN RESPECT OF THE ACCUMULATION IN EXCESS OF 25% OF THE INCOME. FURTHER IF THE TRUST DOES NOT COMPLY WITH T HE CONDITIONS LAID DOWN IN SEC 11(2), THE AMOUNT WHICH BECOMES LI ABLE TO ASSESSMENT UNDER SEC. 11(1) OF THE INCOME-TAX ACT 1 961. IN OTHER WORDS, SUCH AN ASSESSEE LOSES THE BENEFIT OF THE AC CUMULATED PERMITTED U/S 11(1). 16. BECAUSE THE ASSESSEES CLAIM FOR ACCUMULATION BASED ON FORM NO.10 WAS REJECTED, AND IN VIEW OF THE CBDT CIRCULA R REFERRED TO ABOVE, THE AO WAS OF THE VIEW THAT EVEN THE ACCUMULATION OF 15 % OF THE INCOME U/S. ITA NOS.71 & 72/BANG/2015 PAGE 10 OF 15 11(1)(A) SHOULD NOT BE ALLOWED AND BROUGHT TO TAX T HE SAID ACCUMULATION ALSO. 17. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) HE LD AS FOLLOWS ON THE AFORESAID TWO DISALLOWANCES:- 9.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT AND PERUSED THE RECORDS AND ALSO THE ORIG INAL FORM NO 10 AND REVISED FORM NO. 10 FILED BY THE APPELLANT D ATED 11.01.2012. THESE FORMS IN MY VIEW SATISFIES THE RE QUIREMENT OF THE LAW AND THE APPELLANT HAS TO BE GIVEN THE BENEF IT. IT IS ALSO RELEVANT TO NOTE THAT THE APPELLANT HAS FOR SEVERAL YEARS FILED SIMILAR FORMS WHICH HAS BEEN ACCEPTED. DURING THE A PPELLATE PROCEEDINGS IT IS BROUGHT TO MY NOTICE BY THE APPEL LANT THAT IT HAS FILED A REVISED FORM NO. 10 DATED 11.01.2012 BEFORE THE A.O. WITH ABUNDANT CAUTION AND REQUESTED TO CONSIDER THE SAME IN THE INTEREST OF JUSTICE. I HAVE GONE THROUGH THE REVISE D FORM NO. 10 FILED BY THE APPELLANT IN WHICH THE APPELLANT HAS E XHAUSTIVELY SPECIFIED FOR THE PURPOSE FOR WHICH THE ACCUMULATIO N OF SURPLUS IS SOUGHT BY IT AND GIVEN A DETAILED LIST OF ACTIVITIE S FOR WHICH THE ACCUMULATION IS SOUGHT UNDER THE OBJECT STADIUM INF RASTRUCTURE THERE ARE ABOUT 16 SPECIFIC PROPOSES AND AS REGARD TO THE OBJECT OF PROMOTION / DEVELOPMENT OF CRICKET THERE ARE ABOUT 9 SPECIFIC PURPOSES THE ACCUMULATION IS SOUGHT AND THE INTENTI ON OF THE APPELLANT IS VERY SPECIFIC IN THE REVISED FORM NO. 10 IS CONCERNED. IT IS SETTLED LAW THAT AN APPLICATION CAN BE MADE A T ANY TIME BEFORE THE COMPLETION OF ASSESSMENT. THERE ARE SEVE RAL INSTANCES WHEN AUDIT REPORT AND CERTIFICATE HAVE BEEN HELD TO BE NOT DIRECTORY AND COULD BE FILED EVEN AT THE APPELLATE STAGE. IT IS WELL SETTLED LAW BY THE DECISION OF THE APEX COURT IN TH E CASE OF CIT VS. KANPUR COAL SYNDICATE, 53 ITR 225 THAT THE POWE RS OF THE APPELLATE AUTHORITY ARE COEXTENSIVE WITH THAT OF TH E ASSESSING AUTHORITY. THE APPELLANT IN THE INSTANT CASE HAS FI LED THE FORM NO 10 AS A MATTER OF ABUNDANT CAUTION BEFORE ME AND TH E SAME IS IN DETAIL AND THE CLAIM OF RS 19,33,54,169 IS TO BE AL LOWED. THE REASONS GIVEN BY THE ASSESSING OFFICER THAT THERE I S AND AFTER THE TWO PURPOSES IN THE RESOLUTION AND NOT IN THE FORM 10 IS NOT OF MUCH SIGNIFICANCE. THE SAME HAS BEEN EXPLAINED AS T YPO ERROR BY THE APPELLANTS. TAKING INTO ACCOUNT THE TOTALITY OF THE SITUATION THE ITA NOS.71 & 72/BANG/2015 PAGE 11 OF 15 ASSESSING AUTHORITY WAS NOT CORRECT IN DENYING THE APPELLANT THE RIGHT TO ACCUMULATE AND THE SAME IS HEREBY GRANTED. 9.6 IT IS ALSO RELEVANT TO FURTHER NOTICE THAT AS SUBMITTED BY THE APPELLANT THE HONBLE DELHI HIGH COURT IN THE FOLLO WING CASES I.E. BHARAT KRISHIK SAMAJ V DDLT [2008] 306 ITR 153 (DEL HI); BHARAT KALYAN PRATISTHAN V DIT (EXEMPTION) [2008] 2 99 ITR 406 (DELHI); DIT V MAMTA HEALTH INSTITUTE [2007] 293 IT R 380 (DELHI); DIT (EXEMPTION) V DAULAT RAM EDUCATION SOC IETY [2005] 278 ITR 260 (DELHI) & CIT V HOTEL & RESTAURA NT ASSOCIATION [2003] 261 ITR 190 (DELHI) HAS HELD THA T THAT PURPOSE MENTIONED IN FORM 10 FOR ACCUMULATION OF IN COME NEED NOT BE SPECIFIC AND WAS HELD THAT ACCUMULATION OF I NCOME UNDER SECTION 11(2) CANNOT BE DENIED EVEN IF PURPOSE/OBJE CTS MENTIONED IN FORM 10 ARE GENERAL. THOUGH THERE ARE DIVERGENT VIEWS ON THE SUBJECT OF VARIOUS COURTS ON THIS ISSUE, CONSIDERIN G THE FACT THAT THE APPELLANT HAVING FILED A REVISED FORM NO. 10 DA TED 11.01.2012 AND KEEPING IN VIEW THE ARGUMENT OF THE APPELLANT THAT WHEN DIVERGENT DECISIONS ARE THEN AND FURTHER IN THE ABSENCE OF DECISION FROM THE HONBLE JURISDICTIONAL HIGH CO URT, I AGREE WITH THE APPELLANT THAT THE DECISIONS MOST FAVOUABL E TO THE APPELLANT SHOULD BE CONSIDERED AND ACCORDINGLY I HE REBY DIRECT THE AO TO ALLOW THE CLAIM OF THE APPELLANT FOR ACCU MULATION UNDER SECTION 11(2) OF AN AMOUNT OF RS.19,33,54,169 AS BE SOUGHT BY THE APPELLANT. THIS GROUND IS ACCORDINGLY ALLOWED. 10.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS A ND ARGUMENTS CANVASSED BY THE APPELLANT AND ALSO THE OBSERVATION S MADE BY THE A.O. IN THE ASSESSMENT ORDER. I FIND STRENGTH IN TH E ARGUMENT OF THE APPELLANT THAT WHAT IS REFERRED TO IN SUB SECTI ON (2) IS 85 % OF THE INCOME REFERRED TO CLAUSE (A) AND (B) OF SUBSEC TION (1) WHICH CLEARLY MEANS THAT 15% IS OUT OF THE AMBIT OF SUB S ECTION 2, THE WORDS EITHER IN WHOLE OR IN PART FURTHER INDICATES THAT THERE IS NO REQUIREMENT IN LAW TO ACCUMULATE THE WHOLE OF THE I NCOME AND ANY APPELLANT CAN IN FACT ACCUMULATE PART OF 85% OF INCOME WHICH IS VERY CLEAR FROM THE LANGUAGE OF THE ACT. W HAT IS TO BE SEEN THE INTENTION OF THE LEGISLATURE THE PROVISION S AS ENVISAGED IN SUB-SECTION (1) OF SECTION 11 IS INDEPENDENT TO THA T OF THE PROVISIONS OF SUB-SECTION (2) TO SECTION 11 OF THE ACT. THE EXPLANATION TO CLAUSES (A) & (B) TO SECTION 11(1) O F THE ACT IS VERY CLEAR AS TO HOW THE COMPUTATION OF L5% OF THE INCOME TO BE ACCUMULATED OF THE INCOME OF THE TRUST AND THERE IS NO SPECIFICATION AS REGARD TO THE FILING OF ANY FORM F OR SUCH ITA NOS.71 & 72/BANG/2015 PAGE 12 OF 15 ACCUMULATION OF L5% OF SURPLUS. WHEREAS, AS PER THE PROVISIONS OF SECTION 11(2) OF THE ACT IS CONCERNED IF ANY INCOME REFERRED TO IN CLAUSE (A) OR (B) OF SUB-SECTION (1) READ WITH EXPL ANATION TO THAT SUB-SECTION IS NOT APPLIED DURING THE PREVIOUS YEAR BUT THE SAME CAN BE ACCUMULATED AND SET APART, EITHER IN WHOLE O R IN PART IN THE FUTURE PERIOD THEN THE APPELLANT AS PER RULE 17 CAN SET APART AND THEREBY IT HAS TO FILE FORM NO. 10 FOR SUCH UNUTILI ZED INCOME WHICH HAS NOT SPENT 85% OF SUCH INCOME. 10.4 FROM THE ABOVE IT IS CLEAR THAT THE SUB-SECTI ONS CONTAINED IN THE PROVISIONS OF SECTION 11 OF THE ACT IS CONCE RNED OPERATE INDEPENDENTLY AND CONSEQUENTLY THE PROVISIONS OF SU B-SECTION (1) AND (2) OF SECTION 11 ARE TO BE WORKED OUT SEPARATE LY. THE A.O. IS NOT CORRECT IN DENYING THE BENEFIT UNDER SECTION 11 (1)(A) OF L5% AMOUNTING TO RS. 7,31,25,661/- OF THE ACT. I HEREBY DIRECT THE A.O. TO ALLOW THE CLAIM OF ACCUMULATION OR SET APART OF 15% OF INCOME OF RS.7,31,25,661/-. IN THE RESULT THIS GRO UND OF APPEAL IS ALLOWED . 18. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE RE VENUE HAS PREFERRED GROUNDS NO.2 & 3 BEFORE THE TRIBUNAL. 19. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNS EL FOR THE ASSESSEE AND THE LD. DR. AS FAR AS THE ISSUE RAISED IN GROU ND NO.2 BY THE REVENUE IS CONCERNED, THIS TRIBUNAL HAD ON OCCASION TO CONS IDER IDENTICAL ISSUE IN THE CASE OF DDIT(E) V. GOKULA EDUCATION FOUNDATION, ITA NO.1091/BANG/2014 BY ORDER DATED 30.12.2014 AND THIS TRIBUNAL HELD AS FOLLOWS:- 7. AS FOR THE SECOND ISSUE, IT IS NECESSARY TO RE PRODUCE SECTION 11(2) OF THE ACT AND RULE 17 WHICH ARE ON A CCUMULATION; WHERE(EIGHTY FIVE) PERCENT OF THE INCOME REFERRE D TO IN CLAUSE(A) OR CLAUSE(B) OF SUB-SECTION (1) REA D ITA NOS.71 & 72/BANG/2015 PAGE 13 OF 15 WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APP LIED, OR IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABL E OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEA R BUT IS ACCUMULATED OR SET APART, EITHER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOSES IN INDIA, SU CH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR O F THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THE FOLLO WING CONDITIONS ARE COMPLIED WITH, NAMELY A) SUCH PERSON SPECIFIES, BY NOTICE IN WRITING GIV EN TO THE AO IN THE PRESCRIBED MANNER, THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART, WHICH SHALL IN NO CASE EXCEED TEN YEARS. B) THE MONEY SO ACCUMULATED OR SET APART IS INVEST ED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SU B- SECTION(5). PROVIDED THAT IN COMPUTING THE PERIOD OF TEN YEARS REFERRED TO IN CLAUSE (A), THE PERIOD DURING WHICH THE INCOME COULD NOT BE APPLIED FOR THE PURPOSE FOR WHI CH IT IS SO ACCUMULATED OR SET APART, DUE TO AN ORDER OR INJUNCTION OF ANY COURT, SHALL BE EXCLUDED; PROVIDED FURTHER THAT IN RESPECT OF ANY INCOME ACCUMULATED OR SET APART ON OR AFTER THE 1 ST DAY OF APRIL,2001, THE PROVISIONS OF THIS SUB-SECTION SHAL L HAVE EFFECT AS IF FOR THE WORDS TEN YEARS AT BOTH THE PLACES WHERE THEY OCCUR, THE WORDS FIVE YEARS HAD BEEN SUBSTITUTED. RULE 17 .. THE NOTICE TO BE GIVEN TO THE AO OR THE PRESCRIBED AUTHORITY UNDER SUB-SECTION(2) OF SECTIO N 11 OR UNDER THE SAID PROVISION AS APPLICABLE UNDER CLAUSE(2) OR CLAUSE(23) OF SECTION 10SHALL B IN FOR M NO.10 AND SHALL BE DELIVERED BEFORE THE EXPIRY O F THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139, FOR FURNISHING THE RETURN OF INCOME. ITA NOS.71 & 72/BANG/2015 PAGE 14 OF 15 THE REQUIREMENT IN THE ACT ARE (I) SPECIFICATION BY NOTICE IN WRITING TO THE AO(II) SUCH SPECIFICATION SHOULD BE IN PRESCRIBED MANNER AND (III) AND SUCH SPECIFICATION SHOULD GIVE THE PURPOSE OF ACCUMULATION. THE TIME LIMIT HAS BEEN MENTIONED IN THE RULES ALONE. THE DELEGATED POWER OF RULE MAKING GIVEN IN SECTION 11(2) IS ONLY FOR PRESCRIBING THE MANNER OF FILING THE APPLICATION. THE POWER DOES NOT INCLUDE FIXATION OF TIME LIMITS. DELEGATED LEGISLATIVE POWERS ARE CIRCUMSCRIBED BY THE STATUTE DELEGATING SUCH POWERS AND TRANSGRESSION THEREOF CAN RENDER TH E RULES BEYOND THE SCOPE OF SUCH DELEGATION. HENCE, WE C ANNOT FAULT THE LEARNED CIT(A) TAKING COGNIZANCE OF THE REVISED FORM NO.10A FILED BY THE ASSESSEE. IN ANY CASE, AS OBSE RVED BY LEARNED CIT(A), HONBLE DELHI HIGH COURT IN THE CAS E OF BHARATH KALYAN PRATISTHAN AS WELL AS BHARAT KRISHAK SAMAJ(S UPRA) HAD HELD THAT DETAILS OF PURPOSE OF ACCUMULATION WAS N OT A REQUIREMENT THAT CAN BE READ INTO SECTION 11(2). REVENUE HAS NOT BEEN ABLE TO BRING BEFORE US ANY DECISION OF HO NBLE JURISDICTIONAL HIGH COURT ON THIS ISSUE, AND THEREF ORE, ASSESSEE HAS TO BE GIVEN THE BENEFIT OF THE DECISION IN ITS FAVOUR, IN PREFERENCE TO THE DECISIONS GOING AGAINST IT. 20. IN VIEW OF THE AFORESAID DECISION, WE DO NOT F IND ANY MERITS IN THE GROUNDS RAISED BY THE REVENUE. 21. AS FAR AS GROUND NO.3 IS CONCERNED, WE ARE OF THE VIEW THAT IN VIEW OF THE ACCEPTANCE OF THE CLAIM FOR ACCUMULATION OF CLAIM BASED ON FORM NO.10 AND IN VIEW OF THE FACT THAT 15% ACCUMULATIO N WAS DISALLOWED BY THE AO ONLY FOR THE REASON OF REJECTION OF ACCUMULATION OF FUNDS BASED ON FORM NO.10, WE ARE OF THE VIEW THAT THE CIT(A) WAS FULLY JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR ACCUMULATION OF 15% OF TH E RECEIPTS. CONSEQUENTLY GROUND NO.2 & 3 RAISED BY THE REVENUE ARE ALSO DISMISSED. ITA NOS.71 & 72/BANG/2015 PAGE 15 OF 15 22. IN THE RESULT, BOTH THE APPEALS BY THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF MAY , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 29 TH MAY , 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.