M/s National Council for Teachers Education Wing- II, New Delhi v. DDIT (E), New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI BEFORE SHRI G.D. AGGRAWAL VICE PRESIDENT AND SHRI RAJPAL YADAV JUDICIAL MEMBER I.T.A NO. 2040/DEL/2011 ASSTT. YEAR : 2005-06 M/S. NATIONAL COUNCIL FOR TEACHER EDUCATION WING-II HANS BHAWAN 1- BHADURSHAH ZAFAR MARG NEW DELHI. VS. DDIT(E) INV. CIRCLE-II NEW DELHI (APPELLANT) (RESPONDENT) AND I.T.A NO. 3293/DEL/2011 ASSTT. YEAR : 2005-06 ADIT(E) INV. CIRCLE-II NEW DELHI VS. M/S. NATIONAL COUNCIL FOR TEACHER EDUCATION WING-II HANS BHAWAN 1- BHADURSHAH ZAFAR MARG NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI N.K.S. CHAUHAN CA & SHRI VIR CHAND YADAV ADVOCATE RESPONDENT BY: SHRI RAJ TANDON CIT (DR) ORDER PER RAJPAL YADAV : JM ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 2 THE ASSESSEE AND REVENUE ARE IN CROSS APPEALS AGAIN ST THE ORDER OF LD. CIT(A) DATED 10.2.2011 PASSED FOR ASSTT. YEA R 2005-06. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE READ AS UNDE R :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE BENEFITS OF EXEMPTION U/S 11 OF THE I.T. ACT CLAIMED BY THE ASSESSEE AS THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SECTION 11(2) OF THE I.T. ACT 1961. 2. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES. THEY ARE DESC RIPTIVE AND ARGUMENTATIVE IN NATURE. IN BRIEF THE GRIEVANCE OF ASSESSEE ALSO REVOLVES AROUND A SINGLE ISSUE WHICH IS INTERCONNEC TED WITH THE GROUNDS OF APPEAL TAKEN BY THE REVENUE. THE GRIEVANCE OF TH E ASSESSEE IS THAT LD. CIT(A) HAS ERRED IN NOT APPROVING THE ACCUMULAT ION OF SURPLUS FUND ABOVE 15% FOR THE PURPOSE OF FUTURE UTILISATION AS PROVIDED IN SECTION 11(2) OF THE INCOME TAX ACT. 3. WE TAKE BOTH THESE APPEALS TOGETHER. THE BRIEF F ACTS ARE THAT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 31 ST OCTOBER 2005 DECLARING NIL INCOME. IT HAS FILED AUDIT REPORT DATED 28.10.2 005 IN FORM NO. 10B ALONGWITH THE RETURN. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 3 ASSESSMENT AND NOTICE U/S 143 (2) WAS ISSUED AND S ERVED. IN RESPONSE TO THE NOTICE SHRI ASHWANI SHARMA CHARTERED ACCOU NTANT APPEARED BEFORE THE AO FROM TIME TO TIME AND FILED REQUISITE DETAILS . THE ASSESSEE I.E. NATIONAL COUNCIL FOR TEACHERS EDUCATI ON (NCTE) HAS BEEN ESTABLISHED AS A STATUTORY BODY UNDER THE MINISTRY OF HUMAN RESOURCE DEVELOPMENT AND UNDER AN ACT OF PARLIAMENT WITH THE ASSENT OF THE PRESIDENT OF INDIA ON 29 TH DECEMBER 1993 CALLED THE NATIONAL COUNCIL FOR TEACHERS EDUCATION ACT 1993 (NO. 73 OF 1993). I T HAS CLAIMED EXEMPTION U/S 11 OF THE INCOME TAX ACT. THE AO HAS OBSERVED THAT ON PERUSAL OF INCOME AND RECEIPTS EXPENDITURE ACCOUNT IT IS NOTICED THAT ASSESSEE RECEIVED GRANT IN AID FROM THE GOVERNMENT OTHER SOURCES FEE FROM RECOGNISED INSTITUTIONS AND MISCELLANEOUS OTHE R RECEIPTS AMOUNTING TO RS. 12 32 36 398/-. IT HAS CLAIMED DEDUCTION ON ACCOUNT OF VALUE OF ASSETS CAPITALISED AT RS. 71 99 443/- FROM THE GRAN T IN AID DIRECTLY. THE AO FURTHER FOUND THAT ACCOUNTS OF THE ASSESSEE ARE AUDITED BY A CHARTERED ACCOUNTANT AND THE REPORT HAS BEEN FURNIS HED IN FORM NO. 10B. ACCORDING TO THE ANNEXURE ANNEXED WITH THE FOR M NO. 10B THE ASSESSEE HAS CLAIMED DEDUCTION U/S 11(2) OF THE INC OME TAX ACT AMOUNTING TO RS. 4 33 97 893/-. THE AO HAS TAKEN CO GNIGENCE OF SECTION 11 (2) OF THE INCOME TAX ACT AND OBSERVED THAT AS PER THE SECTION IF AN ASSESSEE WANTS TO ACCUMULATE SURPLUS FUND FOR FUTURE UTILITY ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 4 FOR CHARITABLE PURPOSES THEN SUCH ASSESSEE HAS TO INFORM IN WRITING TO THE AO IN THE PRESCRIBED MANNER. THE PURPOSE FOR WH ICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR W HICH THE INCOME IS TO BE ACCUMULATED OR SET APART WHICH SHALL IN NO CASE COULD EXCEED 10 YEARS. THE MONEY SO ACCUMULATED OR SET APART IS TO BE INVESTED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SUB SE CTION 5 OF SECTION 11. THE ASSESSEE FAILED TO SUBMIT FORM NO. 10 EXHIBITIN G THESE DETAILS. THEREFORE AO OBSERVED THAT ASSESSEE CANNOT ACCUMUL ATE THE SURPLUS OVER EXPENDITURE FOR FUTURE UTILISATION. THE AO FUR THER OBSERVED THAT SINCE ASSESSEE FAILED TO COMPLY WITH THE CONDITIONS PROVIDED IN SECTION 11(2). THEREFORE IT IS NOT ENTITLED FOR THE BENEFI T OF SECTION 11. HE ACCORDINGLY ASSESSED THE INCOME OF ASSESSEE AT RS. 12 31 16 398/- AFTER GIVING A DEDUCTION OF RS. 1 20 000/- TOWARDS EXPENDITURE ATTRIBUTABLE FOR COLLECTING SUCH GRANTS. 4. DISSATISFIED WITH THE ACTION OF AO ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE LD. CIT(A). IT HAS RAISED MANIFOLD SU BMISSIONS BEFORE THE LD. FIRST APPELLATE AUTHORITY. LD. CIT(A) HAS REPR ODUCED THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE WHICH ARE NOT IN COHERENCE. FROM PERUSAL OF THE ORDERS OF THE LD. CIT(A) IT REVEALE D THAT ASSESSEE HAS TAKEN EVEN CONTRADICTORY STANDS. HOWEVER WE ARE NO T CONCERNED WITH ALL ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 5 THOSE DETAILS. LD. FIRST APPELLATE AUTHORITY HAS OB SERVED THAT THE DISALLOWANCE FOR THE PURPOSE OF ACCUMULATION IS TO BE RESTRICTED FOR THE AMOUNT OVER AND ABOVE OF 15% OF THE LIMIT. IN OTHER WORDS THE TOTAL RECEIPTS CANNOT BE TREATED AS INCOME OF THE ASSESSE E. 5. IN THE GROUNDS OF APPEAL ASSESSEE HAS PLEADED T HAT LD. COMMISSIONER HAS FAILED TO APPRECIATE THE FACTS THA T THE ASSESSEE IS A CHARITABLE ORGANISATION WHICH IS GOVERNED BY THE A PPLICABLE LAWS OF THE GOVERNMENT. IT HAS BEEN ASSESSED TO INCOME AS A CHA RITABLE ORGANISATION AT NIL TAXABLE INCOME FOR MANY YEARS B EFORE AND AFTER THE PRESENT ASSTT. YEAR. THE STATUS OF THE ASSESSEE SHO ULD REMAIN THE SAME FOR THE PURPOSE OF THE INCOME TAX ASSESSMENT. IT SH OULD HAVE BEEN ASSESSED AT NIL INCOME. IT FURTHER PLEADED THAT LD. COMMISSIONER HAS IGNORED THE FACT THAT ASSESSEE HAS CHARITABLE OBJEC TS TO IMPART TEACHER EDUCATION TO PREPARE TEACHERS IN THE COUNTRY WITH A N OBJECT THAT THESE TEACHERS WILL BUILD A DEDICATED NATION IN FUTURE. T HE ACCUMULATION OF SURPLUS AS CARRIED BY THE ASSESSEE WAS UTILISED WIT H THE NEXT 5 YEARS FOR CONSTRUCTION OF BUILDING OF THE COUNCIL. THE PROCES S OF FILING OF FORM NO. 10 WAS DELAYED BECAUSE OF CERTAIN REASONS AND AS PE R THE LAW THE DELAY IS GENERALLY CONDONED BY THE LD. CIT(A) IF THE CHAR ITABLE OBJECT OF THE COUNCIL IS KEPT IN TACT. LD. COUNSEL FOR THE ASSE SSEE WHILE IMPUGNING ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 6 THE ORDER OF LD. CIT(A) SUBMITTED THAT ASSESSEE HAS FILED FORM 10 ON 16.3.2009. ITS COGNIZENCE OUGHT TO HAVE BEEN TAKEN BY THE LD. CIT(A). HE FURTHER SUBMITTED THAT LD. CIT(A) OUGHT TO HAVE GIVEN THE BENEFIT AFTER CONDONING THE DELAY IN SUBMISSION OF SUCH FOR M. ON THE OTHER HAND LD. DR SUBMITTED THAT THERE IS NO LIMITATION PROVIDED IN SECTION 11 FOR SUBMISSION OF SUCH FORM BUT THE LIMITATION HAS BEEN PROVIDED UNDER RULE 17 OF THE INCOME TAX RULE 1962. THE HONBLE SU PRME COURT HAD AN OCCASION TO EXAMINE THIS ASPECT IN THE CASE OF C IT VS. NAGPUR HOTEL OWNERS ASSOCIATION REPORTED IN 247 ITR 201. THE HON BLE COURT HAS HELD THAT IF SUCH FORM HAS BEEN GIVEN BEFORE THE CO MPLETION OF ASSTT. ORDER THEN COGNIZENCE OF SUCH FORM CAN BE TAKEN AND IF CONDITIONS ARE SATISFIED ASSESSEE CAN BE PERMITTED TO ACCUMULATE S URPLUS FUND FOR FUTURE UTILISATION. IN THE PRESENT CASE ASSESSMENT ORDER WAS COMPLETED ON 20.12.2007 AND ASSESSEE HAS APPLIED ON 16.3.2009 . LD. CIT (A) HAS MADE A REFERENCE TO THE DECISION OF HONBLE SUPREME COURT. HE TOOK US THROUGH PAGE NO. 11 OF THE LD. CIT(A)S ORDER WHERE OBSERVATION OF THE HONBLE COURT HAS BEEN REPRODUCED. WITH REGARD TO T HE APPEAL OF REVENUE HE RELIED UPON THE ORDER OF AO. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. SECTION 11 (2) HAS A DIRECT B EARING ON THE ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 7 CONTROVERSY. THEREFORE IT IS IMPERATIVE UPON US TO TAKE NOTE OF THIS SECTION. WHERE EIGHTY FIVE PERCENT OF THE INCOME REFERRED T O IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APPLIED OR IS NOT DEEMED TO HAVE BEEN APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEAR BUT IS A CCUMULATED OR SET APART EITHER IN WHOLE OF IN PART FOR APPLICATION TO SUCH PURPOSES IN INDIA SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE IN CLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF TH E INCOME PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH NAMELY A) SUCH PERSON SPECIFIES BY NOTICE IN WRITING GIVE N TO THE ASSESSING OFFICER IN THE PRESCRIBED MANNER THE PUR POSE 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 IN INVESTED O R DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5). 7. A BARE PERUSAL OF THIS CLAUSE WOULD REVEAL THAT WHERE 85% OF THE INCOME REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF S UB SECTION 1 READ WITH THE EXPLANATION TO THAT SUB SECTION IS NOT APPLIED OR IS NOT TO HAVE BEEN DEEMED TO APPLY TO CHARITABLE OR RELIGIOUS PURPOSE IN INDIA DURING THE PREVIOUS YEAR BUT ASSESSEE WANTS TO ACCUMULATE OR S ET APART EITHER IN WHOLE OR IN PART FOR THE APPLICATION OF SUCH INCOME TO SUCH CHARITABLE OBJECTS IN INDIA IN FUTURE YEARS THEN SUCH INCOME S O ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF INCOME PROVIDED THE ASSESSEE WOULD FULFIL THE CONDITIONS AVAILABLE IN CLAUSE (A) & (B) OF THIS SE CTION. IN OTHER WORDS IF AN ASSESSEE WHOSE INCOME IS TO BE ASSESSED U/S 11 12 IT FAILED TO APPLY ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 8 85% OF ITS INCOME ON CHARITABLE PURPOSE BUT WANTS TO ACCUMULATE OR SET APART THAT INCOME FOR FUTURE YEARS APPLICATION THEN SUCH INCOME WOULD NOT BE TAXABLE IN THE YEAR OF RECEIPT. THE ASSESSEE HAS TO FULFIL CERTAIN CONDITIONS. AS PER CLAUSE (A) OF 11 (2) THE ASSESS EE HAS TO GIVE SPECIFICALLY IN WRITING TO THE AO IN THE PRESCRIBED FORM THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART. THE REASONS FOR THIS WOULD BE THAT IN FUTURE YEARS SUCH INCOME SHALL BE USED FOR THOSE SPECIFIED PURPOSES. THE ASSESSEE HAS TO DISCLOSE TH E PERIOD ALSO. IN ANY CONDITION IT WOULD NOT EXCEED 10 YEARS. THE AMOUNT SO ACCUMULATED OR SET APART HAS TO BE DEPOSITED IN THE SPECIFIED MODE S. 8. THE ASSESSEE FAILED TO COMPLY WITH THE CONDITION S ENUMERATED IN SECTION 11(2). IT HAS NOT FILED FORM NO. 10 BEFORE THE COMPLETION OF ASSTT. ORDER. IT HAS FILED FORM NO.10 ON 16.3.2009 BEFORE DIRECTOR OF INCOME TAX EXEMPTION FOR CONDONATION OF DELAY FOR FILING F ORM NO. 10. THIS SITUATION WAS CONSIDERED BY THE HONBLE SUPREME COU RT IN THE CASE OF NAGPUR HOTEL OWNERS ASSOCIATION. THE HONBLE COURT HAS SPECIFICALLY OBSERVED THAT IF SUCH FORM IS FILED BEFORE COMPLETI ON OF ASSTT. ORDER THEN ITS COGNIZENCE CAN BE TAKEN. HOWEVER ANY CLAIM FOR GIVING THE BENEFIT OF SECTION 11 ON THE BASIS OF INFORMATION SUPPLIED SUB SEQUENT TO THE COMPLETION OF ASSESSMENT WOULD MEAN THAT ASSTT. ORD ER WILL HAVE TO BE ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 9 REOPENED. ACCORDING TO THE HONBLE COURT THE ACT D OES NOT CONTEMPLATE SUCH REOPENING OF THE ASSESSMENT AND THEREFORE AS SESSEE WILL NOT BE ENTITLED FOR BENEFIT OF ACCUMULATION U/S 11 (2). TH E ASSESSEE IN ITS GROUND OF APPEAL HAS TAKEN NUMBER OF PLEAS THAT IT IS A CHARITABLE ORGANISATION WHICH IS GOVERNED BY THE APPLICABLE L AWS. THERE IS NO DISPUTE QUA SUCH STATUS THE DISPUTE IS THAT EVEN I N THE CASE OF CHARITABLE INSTITUTION IF SUCH AN ASSESSEE FAILED TO UTILISE 8 5% OF THE INCOME FOR FULFILMENT OF ITS OBJECTS AND WANTS TO ACCUMULATE S UCH INCOME FOR THE UTILISATION OF ITS OBJECTS IN FUTURE YEARS THEN IT HAS TO COMPLY WITH THE PROCEDURE PROVIDED IN SECTION11(2)OF THE INCOME TAX ACT. NO EXPLANATION IS DISCERNABLE AS TO WHY ASSESSEE FAILE D TO COMPLY WITH THIS REQUIREMENT. WHEN AO HAD ISSUED A SHOW CAUSE NOTICE AND CONFRONTED THE ASSESSEE FOR NON-FULFILMENT OF THIS REQUIREMENT ATLEAST ASSESSEE OUGHT TO HAVE APPLIED UNDER FORM NO. 10 FOR PERMISS ION TO ACCUMULATE AS PROVIDED IN SECTION 11(2). THE ASSESSEE HAS PLEA DED THAT AS PER THE LAW THE DELAY IS BEING GENERALLY CONDONED. BUT ONE HAS TO PROVIDE THE REASONS FOR SUCH A DELAY AND APPLY FOR CONDONATION OF DELAY IN A REASONABLE TIME NOT AFTER CONCLUSION OF THE PROCEED INGS. LD. CIT(A) HAS MADE A REFERENCE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. NAGPUR HOTEL OWNERS ASSOCIATION 247 ITR 201. IT IS WORTH TO ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 10 REFER THE OBSERVATION OF HONBLE COURT IN PARAGRAPH NO. 6 WHICH READ AS UNDER :- 6. IT IS ABUNDANTLY CLEAR FROM THE WORDINGS OF SUB-SE CTION (2) OF SECTION 11 THAT IT IS MANDATORY FOR THE PERSON CLAIMING THE BENEFIT OF SECTION 11 TO INTIMATE TO THE ASSESSING AUTHORITY THE PARTICULARS REQUIRED UN DER RULE 17 IN FORM NO. 10 OF THE ACT. IF DURING THE ASSESSMENT PROCEEDINGS TH E ASSESSING OFFICER DOES NOT HAVE THE NECESSARY INFORMATION QUESTION OF EXC LUDING SUCH INCOME FROM ASSESSMENT DOES NOT ARISE AT ALL. AS A MATTER OF FA CT THIS BENEFIT OF EXCLUDING THIS PARTICULAR PART OF THE INCOME FROM THE NET OF TAXATION ARISES FROM SECTION 11 AND IS SUBJECTED TO THE CONDITIONS SPECIFIED THE REIN. THEREFORE IT IS NECESSARY THAT THE ASSESSING AUTHORITY MUST HAVE TH IS INFORMATION AT THE TIME IT COMPLETES THE ASSESSMENT. IN THE ABSENCE OF ANY SUCH INFORMATION IT WILL NOT BE POSSIBLE FOR THE ASSESSING AUTHORITY TO GIVE THE ASSESSEE THE BENEFIT OF SUCH EXCLUSION AND ONCE THE ASSESSMENT IS SO COMPLE TED IN OUR OPINION IT WOULD BE FUTILE TO FIND FAULT WITH THE ASSESSING AU THORITY FOR HAVING INCLUDED SUCH INCOME IN THE ASSESSABLE INCOME OF THE ASSESSE E. THEREFORE EVEN ASSUMING THAT THERE IS NO VALID LIMITATION PRESCRIB ED UNDER THE ACT AND THE RULES EVEN THEN IN OUR OPINION IT IS REASONABLE TO PRESUME THAT THE INTIMATION REQUIRED UNDER SECTION 11 HAS TO BE FURN ISHED BEFORE THE ASSESSING AUTHORITY COMPLETES THE CONCERNED ASSESSMENT BECAUS E SUCH REQUIREMENT IS MANDATORY AND WITHOUT THE PARTICULARS OF THIS INCOM E THE ASSESSING AUTHORITY CANNOT ENTERTAIN THE CLAIM OF THE ASSESSEE UNDER SE CTION 11 THEREFORE COMPLIANCE OF THE REQUIREMENT OF THE ACT WILL HAVE TO BE ANY TIME BEFORE THE ASSESSMENT PROCEEDINGS. FURTHER ANY CLAIM FOR GIVI NG THE BENEFIT OF SECTION 11 ON THE BASIS OF INFORMATION SUPPLIED SUBSEQUENT TO THE COMPLETION OF ASSESSMENT WOULD MEAN THAT THE ASSESSMENT ORDER WIL L HAVE TO BE REOPENED. IN OUR OPINION THE ACT DOES NOT CONTEMPLATE SUCH R EOPENING OF THE ASSESSMENT. IN THE CASE AT HAND IT IS EVIDENT FROM THE RECORDS OF THE CASE THAT THE RESPONDENT DID NOT FURNISH THE REQUIRED INFORMA TION TILL AFTER THE ASSESSMENTS FOR THE RELEVANT YEARS WERE COMPLETED. IN THE LIGHT OF THE ABOVE WE ARE OF THE OPINION THAT THE STAND OF THE REVENUE THAT THE HIGH COURT ERRED IN ANSWERING THE FIRST QUESTION IN FAVOUR OF THE AS SESSEE IS CORRECT AND WE REVERSE THAT FINDING AND ANSWER THE SAID QUESTION I N THE NEGATIVE AND AGAINST THE ASSESSEE. IN VIEW OF OUR ANSWER TO THE FIRST QU ESTION WE AGREE WITH MR. VERMA THAT IT IS NOT NECESSARY TO ANSWER THE SECOND QUESTION ON THE FACTS OF THE CASE. 9. AS FAR AS THE APPEAL OF REVENUE IS CONCERNED LD . CIT(A) HAS OBSERVED THAT AO HAS ERRED IN APPRECIATING THE PROV ISIONS OF SECTION 11(1) AND 11(2). ACCORDING TO THE LD. CIT(A) THERE ARE TWO TYPES OF PERMISSIBLE ACCUMULATION. THERE IS ACCUMULATION OF 15% OF THE INCOME ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 11 U/S 11(1) AND SUCH ACCUMULATION ARE NOT SUBJECT TO APPLICATION WITHIN THE PERMISSIBLE PERIOD OF 5 YEARS. THIS 15% ACCUMULATIO N IS POSSIBLE FOR INDEFINITE PERIOD . HOWEVER THE SECOND TYPE OF ACC UMULATION IS BEYOND 15% IS COVERED BY THE PROVISIONS U/S SECTION 11 (2) . SUCH ACCUMULATIONS ARE PERMISSIBLE FOR A MAXIMUM PERIOD OF 10 YEARS. T HE LD. CIT(A) HAS HELD THAT DISALLOWANCE OF ACCUMULATION IS UPHELD BU T SUCH DISALLOWANCE WILL BE APPLICABLE ONLY TO THOSE RECEIPTS WHICH ARE OVER AND ABOVE 15% OF THE LIMIT. IN OTHER WORDS IF ANY SURPLUS FUNDS WAS AVAILABLE WITH THE ASSESSEE WHICH WAS NOT UTILISED FOR THE PURPOSE OF FULFILMENT OF ITS OBJECT THEN ITS ACCUMULATION WILL NOT BE AVAILABLE TO THE ASSESSEE UNDER 11(2) FOR THE REASON THAT IT FAILED TO APPLY TO THE AO IN FORM NO. 10 AND IT FAILED TO COMPLY WITH CONDITIONS OF SECTION 11(2). BUT 15% OF THE TOTAL RECEIPT UPON WHICH THERE IS NO RESTRICTIONS OF YEARS FOR AC CUMULATION THAT BENEFIT HAS BEEN GIVEN TO THE ASSESSEE. WE HAVE NOTICED SE CTION 11(2) OF THE INCOME TAX ACT IN THE PRECEDING PARAGRAPH OF THIS O RDER IT TALKS ABOUT 85% OF THE RECEIPT REMAINS TO BE UTILISED BY THE AS SESSEE TOWARDS FULFILMENT OF ITS CHARITABLE OBJECTS AND WHICH CAN BE ACCUMULATED FOR FUTURE UTILISATION. THEREFORE WE ARE OF THE VIEW T HAT LD. CIT(A) HAS RIGHTLY HELD THAT DISALLOWANCE OF ACCUMULATION WILL NOT B E APPLICABLE ON THE REMAINING 15%. AFTER TAKING INTO CONSIDERATION THE ORDER OF LD. CIT(A) ON THIS POINT WE DO NOT SEE ANY REASON TO INTERFERE I N IT. IN VIEW OF THE ITA NO. 2040/DEL/11 AND ITA NO. 3293/DEL/11 ASSTT. YEARS 2005-06 12 ABOVE DISCUSSION WE DO NOT FIND ANY MERIT IN BOTH THE APPEALS. THEY ARE REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER 2011. SD/- SD/- [G.D. AGGRAWAL] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER DATED: 18.11.2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES