INCOME TAX ACT, 1961

Section 11(1)(a)

Charitable trust - Application of income under section 11(1)(a) - Computation of quantum of 15% of income derived -

Assessee submitted that while computing the amount of accumulation as permitted under section 11(1)(a) being 15% of the income of the trust, only the income derived by the assessee-trust has to be taken into account and not the actual receipt of income during the year under consideration. AO held that the provisions of section 11(1) stipulates that certain income shall not be included in the total income of the previous year of the person in receipt of income and therefore, the receipt of income during the year is relevant for computing the relaxation of 15% as provided under section 11(1)(a). Held: AO had given much stress on the term 'receipt' as appearing in section 11(1). The said term 'receipt' of income is only in the context of the person who is in receipt of income, and not in the context of income derived from the property held under the trust. Hence, the computation of quantum of 15% of the income derived should be on the basis of the income as declared by the assessee, which is considered for all other purposes. A different meaning of income derived from property can be given for the purpose of calculating the relaxation of accumulation or set apart equivalent to 15% of such income. Hence, the adjustment made while processing the return of income was not in accordance with the provisions of section 11(1) and the same was liable to be deleted.

REFERRED :

FAVOUR : In favour of assessee.

A.Y. : 2013-14

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