DIRECTOR OF INCOME TAX Vs. NBIE WELFARE SOCIETY

JUDGEMENT

(1.) This appeal by the revenue pertains to assessment year 1996-97 and was admitted for hearing by order dated 6th November, 2006 on the following substantial question of law:-

(2.) The respondent society claiming itself to be a charitable institution had filed return of income for the assessment year 1996-97 declaring nil taxable income. Respondent also filed Form No. 10 along with its return as required by section 11(2) of the Act. During the course of assessment proceedings, the assessing officer, after going through the return and Form No. 10, noticed that respondent assessee had accumulated Rs.27,54,839/- for the description/purpose "further utilization". The said purpose/description, it was observed was not a specific one, accordingly, the respondent assessee was asked to explain why the accumulation under Section 11(2) of the Act should not be disallowed. Respondent assessee vide its letter dated 22.02.1999 submitted their explanation that the accumulation was done for the aims and objectives of the society.

(3.) The Commissioner of Income Tax (Appeals) upheld the view of the Assessing Officer and rejected the contention of the assessee that the expression "further utilization" was in the context of objects of the charity i.e. as per the objectives for which the respondent society was formed. He observed that the accumulation or setting apart income in the context of objectives alone would not meet the statutory requirements under Section 11 (2) of the Act. The purpose for which it had been accumulated should be definite and specified.