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Under section 11(2), if a charitable institutions desires to accumulate more than 25 per cent. of its income the accumulation can be done subject to the following conditions:_

a) To notify the Income-tax Officer in Form No. 10. the purposes for which the accumulation is proposed;
b) To invest the amount so accumulated in any Government security as specified in section 11(2)(b).

The accumulated income in the ultimate should be applied by such institution for the purpose for which the income was accumulated. Any failure in this regard would mean withdrawal of exemption under Income tax Act.

The Madras High Court in their ruling dated 30.11.1999 in the case of Commissioner of Income-tax Vs. M.Ct. Muthiah Chettiar Family Trust (245ITR400) held that the very requirement in filling up Form No. 10 for seeking an approval for accumulation of 75% income for longer duration ( five years now) is that the purposes must have some individuality and mere repetition of the objects of the trust would not meet the requirements of section 11(2) of the Act. In this case it was seen that the assessee-trust had merely repeated its objects when it filed the necessary Form No. 10. However the Income-tax Officer, on the basis of Form No. 10 furnished by the assessee, allowed its income to be accumulated for a period of ten years and then it was noticed that it was too late to question the purposes and the Revenue thus conceded that it could not now challenge the validity of Form No. 10.

Following the view taken by the Calcutta High Court in Director of I. T. (Exemption) v. Trustees of Singhania Charitable Trust [1993] 199 ITR 819 the Madras High Court held that it is not enough for the trustees to repeat the objects of the trust, but must specify a particular purpose for which the income is being accumulated.

The Delhi Bench of the Tribunal in the case of S. Singh Charitable Trust v. ADIT (251ITR47) in a dissenting judgment held that mere repetition of few objects from the object list is even sufficient for the purpose of notice in Form No. 10. In so holding the Bench distinguished the Calcutta High Court decision in Director of I. T. (Exemption) v. Trustees of Singhania Charitable Trust [1993] 199 ITR 819 on mere technical reasons without appreciating the underground thinking behind the same. By a majority decision the Bench held that it is not necessary to specify the particular purpose in Form No. 10 due to practical reasons.

In this case the assessee failed altogether in making application of its accumulated income for unavoidable reasons to the satisfaction of the Bench which gave a new lease of life (and prolonged litigation of course) to the assessee and the fortunate part had been the failure of the department to consider the application of the assessee altogether in the preceding years. The Bench thus directed the assessing officer to so reconsider the application for accumulation again.

Fortunately or unfortunately the Bench did not even consider the Madras High Court ruling which also considered the Calcutta High Court decision and concurred with the same. Even after two High Courts have held similarly the Delhi Bench prompted to take a decision in total disregard is a bit disturbing since such decisions lead to futile litigation. In the present day it is desired to have consensus among Courts and the Benches of the Tribunal at least in the matter of procedural provisions and their applications.

Also it is highly desired of the revenue authorities to dispose of the assesses applications etc. in a reasonable time in the common interest of both the revenue and the assessee.

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