V.K.SINGHAL, J. - (1.) THE Income -tax Appellate Tribunal has referred the following question of law arising out of its order dated February 17, 1981, in respect of the assessment years 1974 -75, 1975 -76 and 1976 -77 under Section 256 of the Income -tax Act, 1961 : 'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner directing the Income -tax Officer to allow exemption in respect of accumulation as claimed under Section 11(2) of the Income -tax Act, 1961, read with Rule 17 of the Income -tax Rules, 1962 ?'
(2.) THE brief facts of the case are that the assessee has been registered as a charitable institution with the Commissioner of Income -tax under Section 12A(a) of the Income -tax Act, 1961. It derives income from the services rendered to Dargah Khawaja of Ajmer and then applies the same for charitable purposes. The assessee has not furnished the returns of income for the years 1974 -75 and 1975 -76 on the ground that it had no taxable income. The Income -tax Officer issued notices under Section 148 for the years 1974 -75 and 1975 -76 and under Section 139(2) for the year 1976 -77. The assessee filed the returns and claimed that the sum of Rs. 90,000, Rs. 10,000 and Rs. 60,000, respectively, set apart and accumulated for application for charitable purposes for the above years as per the resolutions dated July 2, 1977, September 2, 1977, and June 6, 1976, respectively, were not liable to be taxed. The Income -tax Officer negatived the claim on the ground that in accordance with the provisions of Rule 17 accumulation for the purpose of capital expenditure was not permissible. The resolution was as under : 'It is hereby resolved that a sum of Rs. 90,000 (ninety thousand) which is available at the end of the year be set apart for eight years to accumulate sufficient funds for carrying out the objects of the trust. The said sum be deposited with the bank in which the trust has its account.' The Income -tax Officer was of the opinion that in accordance with the Income -tax Rules, the application for accumulation should have been furnished to the Income -tax Officer before the expiry of six months commencing from the end of the relevant previous year or before June 30 immediately following such previous year, whichever is later. The intimation should have been given for accumulation up to September 30, 1974, which has also not been submitted by the assessee in time. The purposes for accumulation are the same for which the trust has been created, viz., to help poor widows and to give scholarships to students. The amount was disallowed and it was held that the assessee was not entitled to accumulate the said sums under Section 11(2) of the Income -tax Act.
(3.) IN the appeal before the Appellate Assistant Commissioner of Income -tax it was contended that the provisions of Rule 17 imposing a time -limit for submission of the application were ultra vires the rule -making authority and reliance was placed on the decisions in M. Ct. Muthiah Chettiar Family Trust v. Fourth ITO : [1972]86ITR282(Mad) ; Second ITO v. M. C. T. Trust : [1976]102ITR138(Mad) and in the case of CIT v. Shri Krishen Chand Charitable Trust .;