Commissioner of Income Tax vs National Institute and Financial Management

Adarsh Kumar Goel, J.—The Revenue has preferred this appeal u/s 260A of the Income Tax Act, 1961, (in short, "the Act") against the order of the Income Tax Appellate Tribunal, Delhi Bench "E", New Delhi, in I.T.A. No. 300/Del/2007 for the assessment year 2003-04, proposing to raise the following questions of law:

Whether, on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was right in law in upholding the order of the learned Commissioner of Income Tax (Appeals) in deleting the addition of Rs. 1,05,00,000 made by the Assessing Officer on account of accumulation for building and equipment fund u/s 11(2) of the Income Tax Act, 1961, even though the relevant notice did not meet the conditions as per Section 11(2) of the Income Tax Act, 1961 and prescribed under Rule 17 of the Income Tax Rules to be furnished in Form No. 10 (Action point No. 1(i))?

The assessee is a society registered u/s 12A of the Act and is engaged in the business of imparting professional training to probationers of the Central Accounts and Finance Services. The Assessing Officer rejected the claim for exemption u/s 11 on the ground that the assessee accumulated profits without explanation. However, the Commissioner of Income Tax (Appeals) accepted the plea of the assessee and held that utilisation of accumulation was on the agenda of the governing body. The Tribunal upheld the said view relying upon the judgment of the Delhi High Court in Bharat Kalyan Pratisthan Vs. Director of Income Tax (Exemption), . The Tribunal held that the assessee was entitled to accumulate the income (for objects of the institution).

We find that u/s 11(2) of the Act, the condition for permitting accumulated income not being included in total income is that the assessee should specify the purpose for accumulation and the period of accumulation should not exceed ten years and the money accumulated should be invested in the manner prescribed. The Commissioner of Income Tax held that the purpose had been duly specified, i.e., expenditure on building fund and equipment fund and period was less than 10 years. No fault had been found with the utilisation of accumulation. The Tribunal has upheld the said view.

Learned Counsel for the Revenue is unable to show as to how the question proposed will be a substantial question of law when the assessee had specified the purpose and utilised the amount.

The appeal is, accordingly, dismissed.