V.Ramakrishna Charitable Trust, CHENNAI V. DDIT, CHENNAI

ITA 92/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90344 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-04-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 13-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Charitable institution
• Section: 12; 11; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.92/MDS/2015 ( / ASSESSMENT YEAR : 2011-2012 ) M/S. V. RAMAKRISHNA CHARITABLE TRUST, NO.2, DR. P.V. CHERIAN CRESCENT RAMAKRISHNA BUILDINGS, EGMORE, CHENNAI 600 008. [PAN:AAATV 0025C] ( %& /APPELLANT) VS THE DEPUTY DIRECTOR OF INCOME TAX, (EXEMPTIONS)-II, CHENNAI 600 034. ( !'%& /RESPONDENT) / APPELLANT BY : SHRI. R. VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. /DATE OF HEARING : 16.04.2015 /DATE OF PRONOUNCEMENT : 15.05.2015 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VII, CHENN AI, DATED 03.11.21014 FOR THE ASSESSMENT YEAR 2011-2012. I.T.A.NO.92/MDS/2015. :- 2 -: 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANC ES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) ERR ED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER TREAT ING THE AMOUNT ACCUMULATED UNDER EXPLANATION 2 TO SEC 11(1) OF THE ACT AMOUNTING TO 1,59,08,870/- AS INCOME OF THE APPELLANT. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE ACCUMULATED OR SET APART INCOME AS PER EXPLANATION (2) TO SEC 11(1) SHALL BE DEEMED TO BE INCOME APPLIED FOR SUCH PURPOSE AND EXEMPT FROM TAX ONLY IF THE CONDITIONS STIPULATED IN SEC 11(2) OF T HE ACT ARE COMPLIED WITH. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS CARRIED FORWARD THE SURPLUS INCOME ONLY FOR APPLICATION AS REQUIRED UNDER EXPLANATION TO SEC.11(1) OF THE ACT AND HENCE FILING OF APPLICATION IN THE PRESCRIBED FORM AS PER SECTION 11(2) IS NOT NECESSARY. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE DIFFERENCE BETWEEN THE PROV ISIONS OF SEC 11(1) AND SEC. 11(2) OF THE AT AND THEREBY ERRONEOUSLY DENYING THE ACCUMULATION PROPERLY APPLI ED BY THE ASSESSEE. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS DULY INV ESTED THE SURPLUS FUNDS STRICTLY AS PER REQUIREMENT OF SE C 11(5) OF THE ACT. 7. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT FOLLOWING THE RATIO LAID DOWN IN THE FOLLOWI NG DECISIONS: (I) CIT VS. G.R. GOVINDARAJULU & SONS CHARITIES 144 TAXMAN 300 (MAD). (II) ADDL CIT VS. ALN RAO CHARITABLE TRUST 216 ITR 697 (SC). (III) CIT VS. TRUSTEES OF BHAT FAMILY RESEARCH FOUNDATION 195 ITR 5332 (BOM). I.T.A.NO.92/MDS/2015. :- 3 -: 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A PUBLIC CHARITABLE TRUST RUNNING A POLYTECHNIC COLLE GE SINCE 1976. THE TRUST WAS REGISTERED U/S.12A(A) OF THE INCOME TAX A CT, 1961 VIDE ORDER IN C.NO.2217 DATED 30.09.1976. THE ASSESSEE TRUST FILED ITS RETURN FOR THE ASSESSMENT YEAR 2011-12 ON 30.09.201 1 ADMITTING NIL INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND NOT ICE U/S.143(2) OF THE ACT WAS ISSUED ACCORDINGLY. AFTER SCRUTINIZING THE DETAILS FILED AND DISCUSSING THE CASE WITH THE AUTHORISED REPRESE NTATIVE, THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 2 4.03.2014 DETERMINING THE TOTAL INCOME AT E1,59,08,870/-. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FO UND THAT A SUM OF E1,78,22,598/- WAS SET APART AS PER CLAUSE (2) O F EXPLANATION TO SEC. 11(1) OF THE ACT. A SHOW CAUSE NOTICE WAS ISS UED TO THE TRUST PROPOSING TO TREAT THE ABOVE SUM OF E1,78,22,598/- AS PER PROVISION OF SEC 11(1)(A) OF THE ACT. IN RESPONSE, THE AUTHO RISED REPRESENTATIVE STATED THAT THE TRUST FOLLOWS ACCRUA L BASIS OF ACCOUNTING AND ALSO THE TRUST GOT CONSIDERABLE RECE IVABLES TOWARDS FEES, INTEREST, ETC AT THE YEAR END. IN VIEW OF TH E UNSPENT INCOME THE OPTION PROVIDED UNDER EXPLANATION (2) TO SEC.11 (1) OF THE ACT HAS BEEN EXERCISED TO CARRY OVER THE UNSPENT INCOME INCLUDING THE I.T.A.NO.92/MDS/2015. :- 4 -: RECEIVABLES TOWARDS SPENDING IN THE SUBSEQUENT ASSE SSMENT YEAR OR DURING THE YEAR OF RECEIPT. THE OPTION LETTER HAS BEEN DULY FILED ALONGWITH IT RETURN AT THE TIME OF FILING OF RETURN OF INCOME. FURTHER, THE TRUST SPEND THE AMOUNT ACCUMULATED IN THE IMMED IATE SUBSEQUENT YEAR I.E. IN THE F.Y. 2011-12. NOT CONV INCED WITH THE REPLY, THE ASSESSING OFFICER FOUND THAT THE ASSESSE E CLAIMED THE SURPLUS AS PER CLAUSE (2) OF EXPLANATION TO SEC. 1 1(1) OF THE ACT WITHOUT ASSIGNING ANY REASONS. ANY OTHER REASON ME ANS, THE ASSESSEE SHOULD HAVE SPECIFIED THE REASONS FOR UNAP PLIED INCOME TO BE SET APART IN THE NEST YEAR. THE ASSESSEE EVEN I N THE EARLIER YEARS ALSO HAS NOT APPLIED ITS INCOME TO THE EXTENT OF 85 % AS SPECIFIED IN THE ACT. FURTHER, THE ASSESSEE HAS NOT FURNISHED F ORM NO.10 FOR ACCUMULATION U/S.11(2) OF THE ACT. THE ASSESSEE HA S CARRIED OVER THE SURPLUS AS SPECIFIED U/S.11(5) OF THE ACT. IN VIEW OF THE ABOVE, THE SHORTFALL IN APPLICATION OF INCOME TO THE EXTEN T OF E1,59,08,870/- (E1,78,22,598 E19,13,728) WAS BROUGHT TO TAX. AGA INST THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED T HAT A PERUSAL OF FORM NO.10B FILED ALONG WITH THE RETURN REVEALS THAT A SUM OF E3,91,54,093/- ONLY WAS APPLIED TO CHARITABL E PURPOSE DURING I.T.A.NO.92/MDS/2015. :- 5 -: THE ASSESSMENT YEAR 2011-12 BY THE ASSESSEE AGAINST THE AMOUNT OF E5,69,76,691/- TO BE SPEND/APPLIED DURING THE ASSES SMENT YEAR 2011-12. THE SUM OF E5,69,76,691/- TO BE APPLIED D URING ASSESSMENT YEAR 2011-12 CONSISTED OF E4,74,80,952/- PERTAINING TO ASSESSMENT YEAR 2011-12 AND E94,95,739/- RELATES T O ASSESSMENT YEAR 2009-10 AS PER THE UTILIZATION STATEMENT FURNI SHED BY THE ASSESSEE. THE UNSPENT AMOUNT WORKED OUT BY THE ASS ESSEE WAS E1,78,22,598/-. THE SUM OF E1,78,22,598/- WAS SOUGH T TO BE ACCUMULATED UNDER CLAUSE(2) OF EXPLANATION TO SEC. 11(1) OF THE ACT. FOR THIS PURPOSE, LETTER OF RESOLUTION DATED 15.09. 2011 AND LETTER OF OPTION DATED 27.09.2011 WERE ENCLOSED WITH THE RETU RN OF INCOME. IN THIS CASE, THE ASSESSEE INVOKES EXPLANATION (2) TO SEC.11(1) OF THE ACT FOR ACCUMULATING E1,78,22,598/- BY FILING LETT ER OF OPTION AND LETTER OF RESOLUTION ALONGWITH THE RETURN OF INCOME . IT IS PERTINENT TO OBSERVE THAT THE SUM TO BE SPENT/APPLIED INCLUDES E 94,95,739/- BEING UNSPENT AMOUNT FOR THE YEAR 2009-10 FOR WHICH NO DETAILS WERE FURNISHED IN THE RETURN OF INCOME, EITHER BEFO RE THE ASSESSING OFFICER OR BEFORE THE UNDERSIGNED, ETC., SUB-SECTI ON (2) OF SECTION 11 OF THE ACT IS INVOKED WHERE 85% OF THE INCOME RE FERRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) READ WI TH EXPLANATION TO THAT SUB-SECTION IS NOT APPLIED TO CHARITABLE PURPO SE DURING THE I.T.A.NO.92/MDS/2015. :- 6 -: PREVIOUS YEAR BUT ACCUMULATED. FOR SUCH ACCUMULATIO N THE ASSESSEE HAS TO FULFILL THE FOLLOWING TWO CONDITIONS:- 01. SUCH PERSON SPECIFIES, BY NOTICE IN WRITING GIVEN TO THE ASSESSING OFFICER IN THE PRESCRIBED MANNER, TH E PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED O R SET APART, WHICH SHALL IN NO CASE EXCEED TEN YEARS. 02. THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SUB- SECTION(5). FURTHER, HE OBSERVED THAT CONSIDERING THE VIEW THAT EVEN FOR CLAUSE (2) OF SUB-SECTION 11(1) OF THE ACT, THE CONDITIONS STIPULATED U/S.11(2) OF THE ACT APPLY WHICH IS CRYSTAL CLEAR FROM THE WORDING OF SECTION 11(2) OF THE ACT. MERE RESOLUTION AND LETTE R OF OPTION WITHOUT THE PURPOSE ARE NOT ENOUGH TO ACCUMULATE OR SET APA RT THE INCOME. THE ACCUMULATED OR SET APART INCOME AS PER EXPLANAT ION (2) TO SECTION 11(1) OF THE ACT SHALL BE DEEMED TO BE INCO ME APPLIED TO SUCH PURPOSES AND HENCE EXEMPT FROM TAX IF THE STAT EMENT FOR THE YEAR ENDED 31.03.2012 FURNISHED BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS IS IRRELEVANT AS SECTION 11( 2) OF THE ACT WAS NOT COMPLIED WITH BY THE ASSESSEE WHICH IS MANDATOR Y. THE CASE LAW RELIED ON BY THE ASSESSEE ARE DISTINGUISHABLE F ROM THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. HENCE, HE DECLI NED TO INTERFERE WITH THE ORDER OF THE ASSESSING OFFICER. THE INCOM E BROUGHT TO TAX BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER FO R THE ASSESSMENT I.T.A.NO.92/MDS/2015. :- 7 -: YEAR 2011-2012 IS CONFIRMED. AGAINST THIS, THE ASS ESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE QUESTION TO BE CONSIDERED IS WHETHER 1 5% OF ACCUMULATION OF INCOME UNDER SECTION 11(1)(A) OF TH E ACT IS A FLAT DEDUCTION AVAILABLE TO THE ASSESSEE OR FOR THAT PUR POSE, WHETHER FILING OF FORM NO.10 ALONG WITH THE RETURN OF INCOM E AND FULFILLING OTHER FORMALITIES ARE A PRE-CONDITION OR NOT. PROVI SIONS OF SEC.11(1) (A) READS AS UNDER:- 11.(1)(A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY OR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN IN DIA ; AND, WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART F OR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTEN T TO WHICH INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY. (B) TO (D) XXX EXPLANATION.- FOR THE PURPOSES OF CLAUSES (A) AND ( B),- (1) IN COMPUTING THE FIFTEEN PER CENT OF INCOME WHI CH MAY BE ACCUMULATED OR SET APART, ANY SUCH VOLUNTARY CONTRI BUTIONS AS ARE REFERRED TO IN SECTION 12 SHALL BE DEEMED TO BE PART OF THE INCOME; (2) IF, IN THE PREVIOUS YEAR, THE INCOME APPLIED T O CHARITABLE OR RELIGIOUS PURPOSES IN INDIA FALLS SHORT OF EIGHTY F IVE PER CENT OF THE INCOME DERIVED DURING THAT YEAR FROM PROPERTY H ELD UNDER TRUST, OR, AS THE CASE MAY BE, HELD UNDER TRUST IN PART, BY ANY AMOUNT (I) FOR THE REASON THAT THE WHOLE OR ANY PART OF THE INCOME HAS NOT BEEN RECEIVED DURING THAT YEAR, OR I.T.A.NO.92/MDS/2015. :- 8 -: (II) FOR ANY OTHER REASON, THEN- (A) IN THE CASE REFERRED TO IN SUB-CLAUSE (I), SO MUCH OF THE INCOME APPLIED TO SUCH PURPOSES IN INDIA DURING THE PREVIOUS YEAR IN WHICH THE INCOME IS RECEIVED OR DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING AS DOES NOT EXCEED THE SAID AMOUNT, AND (B) IN THE CASE REFERRED TO IN SUB-CLAUSE (II), SO MUCH OF THE INCOME APPLIED TO SUCH PURPOSES IN INDIA DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED AS DOES NOT EXCEED THE SAID AMOUNT. MAY, AT THE OPTION OF THE PERSON IN RECEIPT OF THE INCOME (SUCH OPTION TO BE EXERCISED IN WRITING BEFORE THE EXPIRY OF THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 FOR FU RNISHING THE RETURN OF INCOME) BE DEEMED TO BE INCOME APPLIED TO SUCH PURPOSES DURING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DE RIVED; AND THE INCOME SO DEEMED TO HAVE BEEN APPLIED SHALL NOT BE TAKEN INTO ACCOUNT IN CALCULATING THE AMOUNT OF INCOME APPLIED TO SUCH PURPOSES, IN THE CASE REFERRED TO IN SUB-CLAUSE (I) , DURING THE PREVIOUS YEAR IN WHICH THE INCOME IS RECEIVED OR DU RING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING, AS THE CASE MAY BE, AND , IN THE CASE REFERRED TO IN SUB-CLAUSE (II), DURING THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE PREVIOUS YEAR IN WHICH THE INCOME WAS DERIVED. 6. THE OTHER RELEVANT PROVISION GOVERNING THE IS SUE IS PROVISIONS OF SEC.11(2) WHICH READ AS UNDER:- I.T.A.NO.92/MDS/2015. :- 9 -: 11(2) WHERE EIGHTY-FIVE PER CENT OF THE INCOME REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECT ION (1) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NO T APPLIED, OR IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING TH E PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART, EITH ER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOSES IN INDIA, SUCH INCOME SO ACCUMULATED OR SET APART SHAL L NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, PROVIDED TH E FOLLOWING CONDITIONS ARE COMPLIED WITH, NAMELY:- (A) SUCH PERSON SPECIFIES, BY NOTICE IN WRITING GIVEN TO THE ASSESSING OFFICER 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 INVESTED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5): PROVIDED THAT IN COMPUTING THE PERIOD OF TEN YEARS REFERRED TO IN CLAUSE (A), THE PERIOD DURING WHICH THE INCOM E COULD NOT BE APPLIED FOR THE PURPOSE FOR WHICH IT IS SO ACCUMULATED OR SET APART, DUE TO AN ORDER OR INJUNC TION OF ANY COURT, SHALL BE EXCLUDED. ON A PLAIN READING OF ABOVE SECTION, WE FIND THAT F OLLOWING INCOME OF A CHARITABLE OR RELIGIOUS TRUST SHALL NOT BE INCLUDED IN THE TOTAL INCOME - (1) TO THE EXTENT OF INCOME (A) APPLIED; (B) DEEMED TO BE APPLIED FOR THE OBJECT OF THE TR UST; AND (C) ACCUMULATION OF INCOME NOT EXCEEDING 15%; I.T.A.NO.92/MDS/2015. :- 10 -: ( 2) EXEMPTION OF BALANCE INCOME OF INCOME (AFTER INC OME APPLIED, DEEMED TO BE APPLIED AND ACCUMULATION NOT EXCEEDING 15%). 7. SECTION 11(1)(A) OF THE ACT AND CONSIDERING THE PRO CEDURE LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF ADDL. C.I.T VS. A.L.N.RAO CHARITABLE TRUST (SC) 216 ITR 69 , WE FIND THAT FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE TRUST IN RECEIPT OF THE INCOME.:- 1) THE INCOME APPLIED FOR CHARITABLE OR RELIGIOUS PURP OSES IN INDIA PLUS 2) THE INCOME WHICH IS ACCUMULATED OR SET APART FOR AP PLICATION TO SUCH PURPOSES IN INDIA NOT EXCEEDING FIFTEEN PE R CENT OF THE INCOME. 8. THUS, IT IS CLEAR THAT INCOME EARNED BY THE T RUST DURING THE PREVIOUS YEAR ARE GIVEN EXEMPTION FROM INCOME-TAX T O THE EXTENT OF THAT PART OF THE INCOME WHICH IS ACTUALLY SPENT FOR CHARITABLE OR RELIGIOUS PURPOSES PLUS ACCUMULATED INCOME NOT EXCE EDING 15% OF THE INCOME. CLAUSE (A) OF SECTION 11(1) OF THE ACT PERMITS AUTOMATIC ACCUMULATION OF INCOME UP TO 15% WITHOUT ANY PRE- CONDITION SET. ONCE THE OPERATION OF SEC.11(1)(A) E XHAUSTED, THEN FOLLOWS SUB-SECTION (2) OF SECTION 11 OF THE ACT, W HICH DEALS WITH THE QUESTION OF INVESTMENT OF THE BALANCE OF ACCUMU LATED INCOME OVER AND ABOVE 15% ACCUMULATED INCOME WHICH HAS STI LL NOT QUALIFIED FOR EXEMPTION UNDER CLAUSE (A) OF SUB-SEC TION 11(1) OF THE I.T.A.NO.92/MDS/2015. :- 11 -: ACT. THAT BALANCE ACCUMULATED INCOME CAN ALSO QUALI FY FOR EXEMPTION FROM INCOME-TAX MEANING THEREBY THE CEILI NG OR THE LIMIT OF EXEMPTION OF ACCUMULATED INCOME FROM INCOME-TAX AS IMPOSED BY CLAUSE (A) OF SUB-SECTION (1) OF SECTION 11 WOUL D GET LIFTED IF THE ADDITIONAL ACCUMULATED INCOME BEYOND 15% AS THE CAS E MAY BE, IS INVESTED AS LAID DOWN BY SECTION 11(2) AFTER FOLLOW ING THE PROCEDURE LAID DOWN THEREIN. THEREFORE, SUB-SECTION (2) WILL OPERATE FOR THE ENTIRE BALANCE OF THE PREVIOUS YEAR WHICH HAS NOT GOT THE BENEFIT OF TAX EXEMPTION UNDER CLAUSE (A) O F SUB-SECTION (1) OF SECTION-11 OF THE ACT. IT HAS TO BE KEPT IN VIEW THAT OUT OF THE ACCUMULATED INCOME OF THE PREVIOUS YEAR, 15% OF THE TOTAL INCOME IS GIVEN EXEMPTION FROM INCOME-TAX BY CLAUSE (A) OF SUB SECTION (1) OF SECTION 11 ITSELF. THAT EXEMPTION IS UNFETTERED AND NOT SUBJECT TO ANY CONDITIONS. SECTION 11(2) DOES NOT OPERATE TO W HITTLE DOWN OR TO CUT ACROSS THE EXEMPTION PROVISION CONTAINED IN SECTION 11(1)(A) SO FAR AS SUCH ACCUMULATED INCOME DOES NOT EXCEED 1 5% OF THE INCOME ACCUMULATED IN THE PREVIOUS YEAR. IT HAS ALS O TO BE APPRECIATED THAT SUB-SECTION (2) OF SECTION 11 DOES NOT CONTAIN ANY NON OBSTANTE CLAUSE LIKE NOTWITHSTANDING THE PROVI SIONS OF SUB- SECTION (1). CONSEQUENTLY IT MUST BE HELD THAT AFT ER SECTION11(1)(A) HAS HAD ITS FULL FORCE AND IF STILL ANY ACCUMULATED I.T.A.NO.92/MDS/2015. :- 12 -: INCOME OF THE PREVIOUS YEAR IS LEFT TO BE DEALT WIT H AND TO BE CONSIDERED FOR THE PURPOSE OF INCOME-TAX EXEMPTION, SUB-SECTION (2) OF SECTION 11 CAN BE PRESSED INTO SERVICE AND I F IT IS COMPLIED WITH, THEN SUCH ADDITIONAL ACCUMULATED INCOME BEYON D 15% WILL ALSO BE ELIGIBLE FOR EXEMPTION FROM INCOME-TAX ON C OMPLIANCE WITH THE CONDITIONS LAID DOWN BY SUB-SECTION (2) OF SECT ION-11 OF THE ACT. 9 . A CHARITABLE OR RELIGIOUS TRUST HAVE TO APPLY 8 5% OF INCOME FOR THE OBJECT OF THE TRUST SO AS TO QUALIFY FOR EXEMPT ION U/S 11 OF THE ACT. INCOME NOT EXCEEDING 15% OF INCOME IS ALLOWED TO BE ACCUMULATED UNDER THIS SECTION 11(1)(A) OF THE ACT. THIS ACCUMULATION IS AUTOMATIC AND DOES NOT CALL FOR ANY STATUTORY STIPULATION. EXPLANATION TO SECTION 11(1) PROVIDES DEEMED APPLICATION OF THE INCOME. THE SAID EXPLANATION DEA LS WITH A SITUATION WHERE INCOME APPLIED TO CHARITABLE OR REL IGIOUS PURPOSE FALLS SHORT OF 85% OF THE INCOME FOR THE REASON THA T THE INCOME WAS NOT RECEIVED DURING THAT YEAR OR FOR ANY OTHER REASON, THE TRUST HAVE TO EXERCISE IN WRITING FOR ACCUMULATION IN ACC ORDANCE WITH EXPLANATION TO SECTION 11(1) OF THE ACT. IT IS PERT INENT TO MENTION THAT FILING OF FORM 10 U/S 11(2) OF THE ACT AND EXE RCISING IN WRITING I.T.A.NO.92/MDS/2015. :- 13 -: BEFORE THE EXPIRY OF THE TIME ALLOWED UNDER SUB SEC TION (1) OF SECTION 139 WHILE FURNISHING THE RETURN OF INCOME E XPLANATION TO SECTION 11(1) OF THE ACT IS DIFFERENT. FOR EXERCISI NG IN WRITING IT IS NOT REQUIRED TO FILE ANY PRESCRIBED FORM. IT COULD BE ON SIMPLY APPLICATION OR IT COULD BE EXERCISED BY PASSING ACC OUNTING ENTRIES IN THE BOOKS OF ACCOUNT, FINANCIAL STATEMENTS AND OTHE R DOCUMENTS FILED ALONG WITH THE RETURN OF INCOME. IF, COMBINED LY, 85% OF INCOME INCLUDING INCOME APPLIED, DEEMED TO BE APPLI ED AND ACCUMULATION NOT EXCEEDING 15% ARE LESS THAN 85% ST ILL THE TRUST IS ELIGIBLE FOR EXEMPTION FROM INCOME U/S 11(2) OF THE ACT. IN OTHER WORDS, IT CAN BE SAID THAT A CHARTABLE OR RELIGIOUS TRUST CAN CLAIM EXEMPTION FROM INCOME EVEN NO INCOME IS APPLIED FOR THE OBJECT OF THE TRUST DURING THE YEAR, THE REMAINING 85% OF THE INCOME WILL BE ALLOWED EXEMPTION U/S 11(2) OF THE ACT PROVIDED THE STATUTORY REQUIREMENTS FOR FILING FORM 10 AND INVESTING THE A MOUNT IN SPECIFIED SECURITIES ARE FULFILLED BY THE ASSESSEE. 10 . IN THE LIGHT OF ABOVE DISCUSSION, WE ARE OF THE CON SIDERED VIEW THAT AS PER SECTION 11(1)(A) THE ASSESSEE IS ENTITL ED FOR FLAT DEDUCTION WITHOUT ANY CONDITION OR FORMALITY OF FIL ING FORM NO.10, IF INCOME IS ACCUMULATED OR SET APART FOR APPLICATION OF THE OBJECTS OF I.T.A.NO.92/MDS/2015. :- 14 -: THE TRUST IN INDIA TO THE EXTEND TO WHICH THE INCOM E SO ACCUMULATED OR SET APART DOES NOT EXCEED 15% OF THE INCOME. 11. WITH REGARD TO ALLOWANCE OF DEDUCTION OVER AND ABOV E 15% OF THE INCOME, FOR WHICH THE ASSESSEE IS TO SATISFY TH E CONDITIONS LAID DOWN IN SECTION 11(2) OF THE ACT. AS PER THE DISCUS SION MADE ABOVE, THE REQUIREMENT OF SECTION 11(2) IS THAT IF SUCH INCOME IS ACCUMULATED OR SET APART, THEN SUCH INCOME SHALL NO T BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR IF SUCH PERSO N SPECIFIES BY NOTICE IN WRITING GIVEN TO THE ASSESSING OFFICER IN PRESCRIBED MANNER, THE PURPOSE FOR WHICH THE INCOME IS BEING A CCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART, WHICH SHALL, IN NO CASE EXCEED 10 YEA RS. THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITE D IN THE FORMS OR MODES SPECIFIED IN SUB SECTION (5) OF SECTION 11 OF THE ACT. A REGARDS THE CONDITION IN RESPECT OF FURNISHING OF P RESCRIBED FORM 10 WE HAVE GIVEN THE FINDING THAT FORM NO.10 SUBMITTED BEFORE THE COMPLETION OF THE ASSESSMENT IS REQUIRED TO BE CONS IDERED IF THE CONDITION AS LAID DOWN IN SECTION 11(2)(A) IS SATIS FIED. HOWEVER, AS REGARD THE CONDITION (B) OF SECTION 11(2) THAT THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED I N THE FORM OR MODE SPECIFIED IN SUB SECTION (5) OF SECTION 11 IS SUBJECT TO I.T.A.NO.92/MDS/2015. :- 15 -: VERIFICATION. WE, THEREFORE, THINK PROPER TO SEND T HIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO V ERIFY THE SAID CONDITION OF CLAUSE (B) OF SECTION 11(2) OF THE ACT AS TO WHETHER THE ASSESSEE HAS MADE INVESTMENT IN THE PRESCRIBED SECU RITIES OR NOT. ACCORDINGLY, THE ASSESSING OFFICER WILL DECIDE THIS ISSUE AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE AN D THE ISSUE IN DISPUTE IS REMITTED TO ASSESSING OFFICER FOR FRESH CONSIDERATION. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.92/MDS/2015 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 15TH DAY OF MAY, 2 015, AT CHENNAI. SD/- SD/- ( ! ) (CHALLA NAGENDRA PRASAD) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:15.05.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF.