Samaj Seva Nidhi v. Assistant Commissioner of Income-tax (Inv.)
[Citation -2015-LL-0407-5]

Citation 2015-LL-0407-5
Appellant Name Samaj Seva Nidhi
Respondent Name Assistant Commissioner of Income-tax (Inv.)
Court HIGH COURT OF HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
Relevant Act Income-tax
Date of Order 07/04/2015
Judgment View Judgment
Keyword Tags substantial question of law • exemption under section 11 • sufficient compliance • accumulated income • fresh evidence • medical relief • deed of trust
Bot Summary: Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that there is nothing illegal on the part of the assessee in giving notice to the Income-tax Officer in Form No. 10 listing all its objects for the purpose of accumulation of income as provided in section 11(2) of the Income-tax Act, 1961, which requires specification of the purposes 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in cancelling the order of the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961, holding that the assessment of the Income-tax Officer allowing accumulation of the income under section 11(2) of the Income-tax Act, for all the objects for which the trust was created and not for any specific objects, was neither erroneous nor prejudicial to the interests of the Revenue In the said case, the Income-tax Officer allowed the exemption under section 11 of the Act by relying on the notice given by the assessee under section 11(2) of the Act. The Tribunal held that since a plurality of charitable purposes is not ruled out under the scheme of the Act, no objection could possibly be taken to the assessee's listing out all the objects of the trust in Form No. 10. The said section was considered by the High Court of Delhi in CIT v. Hotel and Restaurant Association 2003 261 ITR 190 and it was held as follows: It is true that specification of certain purpose or purposes is needed for accumulations of the trust's income under section 11(2) of the Act. At the same time the purpose or purposes to be specified cannot be beyond the objects of the trust. Plurality of the purposes for accumulation is not precluded but it depends on the precise purpose for which the accumulation is intended. In the case before us, the required information was furnished through Form No. 10 along with the return and subsequently on March 10, 1997, the assessee submitted another letter to the Assessing Officer intimating the specific purpose for which the said amount was sought to be utilised by indicating that they want to utilise the amount for the objects mentioned in clause 3(a) of the trust deed.


JUDGMENT judgment of court was delivered by A. Ramalingeswara Rao J.-This appeal was filed under section 260A of Income-tax Act, 1961 (for short, "the Act"), against order in I. T. A. No. 133/V/1997 passed by Income-tax Appellate Tribunal, Visakhapatnam, on March 5, 2003. In this appeal filed by assessee, substantial question of law that arises for our consideration is as follows: "Whether, on facts and in circumstances of case, order of Income-tax Appellate Tribunal, Visakhapatnam, was perverse in reversing order passed by Commissioner of Income-tax (Appeals) so far as disallowing benefit of accumulation by assessee of amount of Rs. 3,00,000 under section 11(2) of Act?" assessee is trust formed for charitable purposes by deed of trust dated November 17, 1995. objects of trust were mentioned in clause 3 of deed of trust and they include upliftment of weaker sections of society, advancement of Bharatiya Samskriti, running schools and colleges, providing medical relief, rendering help to people affected by natural calamities, etc. It was registered under section 12A of Act. It filed its return of income for assessment year 1996-97 on September 25, 1996, declaring nil income. return was processed and taken up for scrutiny and notices under sections 142(1) and 143(2) of Act were issued. Pursuant to said notices, secretary of trust appeared before Assessing Officer and produced books of account for verification. assessee has accumulated amount of Rs. 3,00,000 and enclosed Form No. 10 to return of income and also enclosed copy of resolution depositing said amount with Indian Overseas Bank for period of three years for future utilisation. Thereafter, by another letter dated March 10, 1997, president of trust requested that said amount may be allowed for purpose of utilising fund for welfare of Scheduled Castes, Scheduled Tribes, Vanvasis, socially and economically weaker sections of society as mentioned in clause 3(a) of trust deed. He also expressed his willingness to file revised Form No. 10 for consideration and acceptance. Assessing Officer passed order on March 12, 1997, disallowing benefit of accumulation under section 11(2) of Act for amount of Rs. 3,00,000 and demanded tax at Rs. 1,27,676. Against said order, assessee preferred appeal before Commissioner of Income-tax (Appeals), Vijayawada, who, by his order dated August 29, 1997, allowed appeal by placing reliance on DIT (Exemption) v. Trustees of Singhania Charitable Trust [1993] 199 ITR 819 (Cal). Challenging said order of appellate authority, Revenue preferred appeal before Income-tax Appellate Tribunal, Visakhapatnam, in I. T. A. No. 133/V/1997. Tribunal, by its order dated March 5, 2003, reversed order of Commissioner of Income-tax (Appeals) dated August 29, 1997, and allowed appeal preferred by Revenue holding as follows: "In view of latest position of law as has been held by apex court in case of Nagpur Hotel Owners' Association, although there is no specific time limit in statue for passing on notification/ information to Assessing Officer regarding purpose of accumulation, yet assessee has to pass information before assessment is completed. Even holding such view of matter and without taking resort to case law, strictly by Assessing Officer information passed on to Assessing Officer on March 10, 1997, information was not sufficient and it was just stating that 'for future utilisation towards object of trust'. It is not specific and in absence of such specific object, only compliance with object of trust will not amount compliance with specific purpose as has been contemplated under section 11(2) of Income-tax Act. Therefore, order passed by Commissioner of Income-tax (Appeals) suffers from serious infirmity and has to be rejected. Holding such view of matter, we cancel order of Commissioner of Income-tax (Appeals) and appeal filed by Revenue is hereby allowed." Against said order of Tribunal, present appeal was preferred by assessee. Learned counsel for appellant submitted that explanatory letter was submitted to Assessing Officer on March 10, 1997, well before completion of assessment by Assessing Officer and as per ratio laid down in CIT v. Nagpur Hotel Owners' Association [2001] 247 ITR 201 (SC), and, hence, Assessing Officer should have taken same into consideration as sufficient compliance with section 11(2) of Act. She also submitted that though Tribunal has taken note of explanation dated March 10, 1997, it has not gone into contents of said explanation but merely quoted from order of Assessing Officer and, hence, order of Tribunal is incorrect in law. Learned counsel appearing for Revenue, on other hand, submitted, by placing reliance on rule 17 of Income-tax Rules read with section 139 of Act that assessee should have filed required information by September 30, 1996, but submitted information only on March 10, 1997, and, hence, could not be taken into consideration. But he fairly submitted that explanation in letter dated March 10, 1997, is in sufficient compliance with section 11(2) of Act. Section 11(2) of Act reads as follows: "Where eighty-five per cent. of income referred to in clause (a) or clause (b) of sub-section (1) read with Explanation to that subsection is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in total income of previous year of person in receipt of income, provided following conditions are complied with, namely:- (a) such, person specifies, by notice in writing given to Assessing Officer in prescribed manner, purpose for which income is being accumulated or set apart and period for which income is to be accumulated or set apart, which shall in no case exceed ten years; (b) money so accumulated or set apart is invested or deposited in forms or modes specified in sub-section (5)..." perusal of above provision makes it clear that assessee should supply information in Form No.10 and indicate purposes for which accumulated funds were meant to be utilised. said provision came up for consideration in Trustees of Singhania Charitable Trust (supra). High Court of Calcutta was considering following questions of law when they were referred to it under section 256(1) of Act for assessment year 1984-85 (page 820 of 199 ITR): "1. Whether, on facts and in circumstances of case, Tribunal is justified in law in holding that there is nothing illegal on part of assessee in giving notice to Income-tax Officer in Form No. 10 listing all its objects for purpose of accumulation of income as provided in section 11(2) of Income-tax Act, 1961, which requires specification of purposes? 2. Whether, on facts and in circumstances of case, Tribunal is justified in cancelling order of Commissioner of Income-tax under section 263 of Income-tax Act, 1961, holding that assessment of Income-tax Officer allowing accumulation of income under section 11(2) of Income-tax Act, for all objects for which trust was created and not for any specific objects, was neither erroneous nor prejudicial to interests of Revenue?" In said case, Income-tax Officer allowed exemption under section 11 of Act by relying on notice given by assessee under section 11(2) of Act. Commissioner of Income-tax, by invoking powers vested in him under section 263 of Act called for and examined assessment records of assessee. After notice to assessee and response, he set aside order of assessment and ordered for de novo enquiry. assessee preferred appeal to Tribunal. Tribunal held that since plurality of charitable purposes is not ruled out under scheme of Act, no objection could possibly be taken to assessee's listing out all objects of trust in Form No. 10. matter was taken by Revenue to High Court. It was contended that one purpose is interlinked with other and, therefore, mention of all purposes does not make any difference and satisfies requirement of sub-section (2) of section 11. said contention of assessee was not accepted holding that said contention would render requirement of specification of purpose for accumulation in that sub-section redundant. It was held that purposes to be specified cannot, under any circumstances, tread beyond objects clause of trust and Legislature could not have thought of need of specification of purpose if it did not could not have thought of need of specification of purpose if it did not have in mind particularity of purpose or purposes falling within ambit of objects clause of trust deed. Accordingly, it answered question No. 2 in negative and declined to answer question No. 1. It remanded matter to Tribunal to allow assessee to adduce fresh evidence whether in form of any resolution or otherwise showing that specific purpose for which trust requires accumulation of income exists and observed that said evidence should be considered by Tribunal. said section was considered by High Court of Delhi in CIT v. Hotel and Restaurant Association [2003] 261 ITR 190 (Delhi) and it was held as follows (page 192): "It is true that specification of certain purpose or purposes is needed for accumulations of trust's income under section 11(2) of Act. At same time purpose or purposes to be specified cannot be beyond objects of trust. Plurality of purposes for accumulation is not precluded but it depends on precise purpose for which accumulation is intended. In present case, both appellate authorities below have recorded concurrent finding that income was sought to be accumulated by assessee to achieve object for which assessee was incorporated. It is not case of Revenue that any of objects of assessee-company were not for charitable purpose. aforementioned finding by Tribunal is essentially finding of fact giving rise to no question of law." In another case before Delhi High Court in DIT v. Mitsui and Co. Environmental Trust [2008] 303 ITR 111 (Delhi) above issue was considered and aforementioned decision of Calcutta High Court was also noticed. Following earlier judgment in Hotel and Restaurant Association (supra) High Court reiterated its view. Supreme Court also had occasion to consider section 11 of Act in Nagpur Hotel Owners' Association (supra), wherein issue related to time period within which information should be furnished to assessing authority. Supreme Court categorically held that intimation required under section 11 of Act has to be furnished before assessing authority before he completes concerned assessment. In case before us, required information was furnished through Form No. 10 along with return and subsequently on March 10, 1997, assessee submitted another letter to Assessing Officer intimating specific purpose for which said amount was sought to be utilised by indicating that they want to utilise amount for objects mentioned in clause 3(a) of trust deed. Unlike facts mentioned in aforementioned case before Calcutta High Court, in instant case, assessee specifically mentioned purpose for which accumulated income was sought to be utilised. Learned counsel for Revenue also fairly submitted that said intimation is sufficient compliance within meaning of section 11(2) of Act. But his opposition is only with regard to furnishing of required information on March 10, 1997, as he submits that it ought to have been furnished by September 30, 1996, last date for filing of return. It is admitted fact that said information was furnished before completion of assessment. In view of ratio laid down by Supreme Court in Nagpur Hotel Owners' Association (supra) and acceptance of date of information by assessee as March 10, 1997, viz., before date of completion of assessment by Tribunal, we do not think that objection raised by learned Counsel for Revenue has any substance. In view of above, we answer substantial question of law in favour of assessee and against Revenue, and, accordingly, allow appeal. miscellaneous petitions, if any, stand disposed of. No costs. *** Samaj Seva Nidhi v. Assistant Commissioner of Income-tax (Inv.)
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