We spent most of our donations on our objects in the same year. The officer now says our 15 per cent accumulation is worked out on what was left over after that spending. Is it worked out on the receipts or on the balance?
On the receipts. The Supreme Court dismissed the Revenue's appeal and left standing the Kerala High Court's answer: on the plain language of s.11(1)(a) the accumulation a trust is allowed is a percentage of its income derived from property held under trust, and the donations the trust received are that property. It is not a percentage of what survives after part of the income has been applied. The trust had received Rs 2,57,376 and applied Rs 1,70,369, leaving Rs 87,010. The Court held it could accumulate 25 per cent of Rs 2,57,376 and said it was unclear on what basis the Revenue contended for 25 per cent of Rs 87,010. The percentage is now 15, not 25.
Decided by the Supreme Court (Supreme Court of India; the judges are not named in any source read for this entry.) on 2000-11-28, reported as (2001) 248 ITR 1 (SC); Civil Appeal No. 2655 of 1998, decided 28 November 2000, on appeal from Commissioner of Income-tax v. Programme for Community Organisation [1997] 228 ITR 620 (Ker). It bears on section 11, section 11(1)(a), section 11(1)(d), section 2(45) of the Income Tax Act 1961, in Charitable Trusts & Exemption and Capital Gains Exemptions matters.
This is the arithmetic on which every trust computation in the country starts, and it is the point an assessing officer most often gets wrong in the assessee's disfavour. If the accumulation is taken on the residue, a trust that spends well on its objects is punished for doing so: the more it applies, the smaller its permitted accumulation becomes, and a trust that applies everything gets no accumulation at all. The Supreme Court settled it the other way in four sentences. The practical consequence is that the 15 per cent is available whatever the trust has spent, and it is computed off the top.
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The assessee is a charitable trust. The year is assessment year 1978-79. In that year it received donations and contributions of Rs 2,57,376 and applied Rs 1,70,369 of that sum to its charitable purposes, leaving a balance of Rs 87,010, which is the figure the Income-tax Officer determined as its income. The dispute was purely arithmetical: the exemption for income accumulated or set apart was then capped at 25 per cent, and the question was 25 per cent of what. Twenty-five per cent of the receipts of Rs 2,57,376 is Rs 64,344. Twenty-five per cent of the balance of Rs 87,010 is Rs 21,752. The Revenue contended for the smaller figure. On a reference the Kerala High Court, in a judgment delivered by V.V. Kamat, J. on 25 October 1996 and reported at [1997] 228 ITR 620, held that the word income in s.11(1)(a) means the income of the trust and not total income as defined in s.2(45), that the 25 per cent is therefore taken on the trust's gross receipts, and answered the reference accordingly. The Revenue appealed to the Supreme Court.
The civil appeal was dismissed. On the plain language of the provision a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust; the donations of Rs 2,57,376 the assessee received constitute its property, and it is entitled to accumulate twenty-five per cent out of that sum. The Court recorded that it was unclear on what basis the Revenue contended that the assessee was entitled to accumulate only twenty-five per cent of Rs 87,010, the balance left after application.
The operative part of the judgment is four sentences and the whole of it is the plain language of s.11(1)(a). The sub-section exempts income derived from property held under trust to the extent it is applied to charitable purposes in India, and, where such income is accumulated or set apart for application to those purposes, to the extent the income so accumulated is not in excess of the stated percentage of the income from such property. The percentage is therefore fixed by reference to the income from the property, which for this trust was the donations it received. Nothing in the words makes the percentage a percentage of the residue. The Court did not need to reason further, and did not: it said the Revenue's basis for taking 25 per cent of the post-application balance was unclear and dismissed the appeal. The reasoning it left standing is the Kerala High Court's, which turned on the difference between the word income as used in s.11(1)(a) and the defined expression total income in s.2(45), and which drew on the Supreme Court's earlier treatment of the income of a trust in CIT v. Trustees of H.E.H. the Nizam's Supplemental Religious Endowment Trust [1981] 127 ITR 378.
Having regard to the plain language of the above provision, it is clear that a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust.
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Handle my notice → Ask a CA on WhatsAppOn the receipts. The Supreme Court dismissed the Revenue's appeal and left standing the Kerala High Court's answer: on the plain language of s.11(1)(a) the accumulation a trust is allowed is a percentage of its income derived from property held under trust, and the donations the trust received are that property. It is not a percentage of what survives after part of the income has been applied. The trust had received Rs 2,57,376 and applied Rs 1,70,369, leaving Rs 87,010. The Court held it could accumulate 25 per cent of Rs 2,57,376 and said it was unclear on what basis the Revenue contended for 25 per cent of Rs 87,010. The percentage is now 15, not 25. This was decided by the Supreme Court (Supreme Court of India; the judges are not named in any source read for this entry.) and bears on section 11, section 11(1)(a), section 11(1)(d), section 2(45) of the Income Tax Act 1961. It is reported as (2001) 248 ITR 1 (SC); Civil Appeal No. 2655 of 1998, decided 28 November 2000, on appeal from Commissioner of Income-tax v. Programme for Community Organisation [1997] 228 ITR 620 (Ker). This is the arithmetic on which every trust computation in the country starts, and it is the point an assessing officer most often gets wrong in the assessee's disfavour. If the accumulation is taken on the residue, a trust that spends well on its objects is punished for doing so: the more it applies, the smaller its permitted accumulation becomes, and a trust that applies everything gets no accumulation at all. The Supreme Court settled it the other way in four sentences. The practical consequence is that the 15 per cent is available whatever the trust has spent, and it is computed off the top. If it applies to you, the first step is this: Take the accumulation off the receipts figure, before any application, and show the two numbers side by side on the face of the computation - receipts, amount applied, balance - so the officer can see which base you have used.
The assessee is a charitable trust. The year is assessment year 1978-79. In that year it received donations and contributions of Rs 2,57,376 and applied Rs 1,70,369 of that sum to its charitable purposes, leaving a balance of Rs 87,010, which is the figure the Income-tax Officer determined as its income. The dispute was purely arithmetical: the exemption for income accumulated or set apart was then capped at 25 per cent, and the question was 25 per cent of what. Twenty-five per cent of the receipts of Rs 2,57,376 is Rs 64,344. Twenty-five per cent of the balance of Rs 87,010 is Rs 21,752. The Revenue contended for the smaller figure. On a reference the Kerala High Court, in a judgment delivered by V.V. Kamat, J. on 25 October 1996 and reported at [1997] 228 ITR 620, held that the word income in s.11(1)(a) means the income of the trust and not total income as defined in s.2(45), that the 25 per cent is therefore taken on the trust's gross receipts, and answered the reference accordingly. The Revenue appealed to the Supreme Court. The matter was decided on 2000-11-28 by the Supreme Court (Supreme Court of India; the judges are not named in any source read for this entry.). On those facts the Supreme Court held as follows. The civil appeal was dismissed. On the plain language of the provision a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust; the donations of Rs 2,57,376 the assessee received constitute its property, and it is entitled to accumulate twenty-five per cent out of that sum. The Court recorded that it was unclear on what basis the Revenue contended that the assessee was entitled to accumulate only twenty-five per cent of Rs 87,010, the balance left after application.
The operative part of the judgment is four sentences and the whole of it is the plain language of s.11(1)(a). The sub-section exempts income derived from property held under trust to the extent it is applied to charitable purposes in India, and, where such income is accumulated or set apart for application to those purposes, to the extent the income so accumulated is not in excess of the stated percentage of the income from such property. The percentage is therefore fixed by reference to the income from the property, which for this trust was the donations it received. Nothing in the words makes the percentage a percentage of the residue. The Court did not need to reason further, and did not: it said the Revenue's basis for taking 25 per cent of the post-application balance was unclear and dismissed the appeal. The reasoning it left standing is the Kerala High Court's, which turned on the difference between the word income as used in s.11(1)(a) and the defined expression total income in s.2(45), and which drew on the Supreme Court's earlier treatment of the income of a trust in CIT v. Trustees of H.E.H. the Nizam's Supplemental Religious Endowment Trust [1981] 127 ITR 378. In the words reproduced by the source cited on this page: "Having regard to the plain language of the above provision, it is clear that a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust." The decision followed or applied Commissioner of Income-tax v. Programme for Community Organisation [1997] 228 ITR 620 (Ker) - the judgment appealed from, affirmed; CIT v. Trustees of H.E.H. the Nizam's Supplemental Religious Endowment Trust [1981] 127 ITR 378 - relied on by the High Court below; CIT v. Sthanakvasi Vardhman Vanik Jain Sangh (Gujarat High Court, 18 July 2002) - applied this decision.
It was decided by the Supreme Court on 2000-11-28 and is reported as (2001) 248 ITR 1 (SC); Civil Appeal No. 2655 of 1998, decided 28 November 2000, on appeal from Commissioner of Income-tax v. Programme for Community Organisation [1997] 228 ITR 620 (Ker). Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 11, section 11(1)(a), section 11(1)(d), section 2(45), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The civil appeal was dismissed. On the plain language of the provision a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust; the donations of Rs 2,57,376 the assessee received constitute its property, and it is entitled to accumulate twenty-five per cent out of that sum. The Court recorded that it was unclear on what basis the Revenue contended that the assessee was entitled to accumulate only twenty-five per cent of Rs 87,010, the balance left after application. It arises in Charitable Trusts & Exemption and Capital Gains Exemptions matters, on section 11, section 11(1)(a), section 11(1)(d), section 2(45) of the Income Tax Act 1961, and was decided by Supreme Court of India; the judges are not named in any source read for this entry.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Use 15 per cent. The 25 per cent in this judgment was substituted by fifteen with effect from 1 April 2003, so the ratio of the case survives and the figure in it does not. Keep corpus contributions out of the base. A voluntary contribution made with a specific direction that it shall form part of the corpus is dealt with separately by s.11(1)(d), on the condition that it is invested or deposited in a s.11(5) mode held specifically for the corpus. Do not stretch the case beyond the accumulation limb. It does not decide what the trust may do with the accumulation afterwards, and it says nothing about the separate accumulation machinery in s.11(2). If the officer relies on the definition of total income, point out that the reference decided below turned on exactly that and was answered against him: the word in s.11(1)(a) is income from the property, not total income as defined in s.2(45).
Still good law. The holding stands and the figure in it does not. Section 11(1)(a) now reads fifteen per cent, not twenty-five: the Income Tax Department's own page for the section prints the words as substituted and carries the footnote, in these words, 'Substituted for "twenty-five" by the Finance Act, 2002, w.e.f. 1-4-2003.' The current departmental edition of s.11, which names the Act as the Income-tax Act, 1961 and carries a Year stamp of 2026, prints fifteen per cent. So a reader applying this case today takes 15 per cent of the gross receipts. Anyone who takes 25 because the judgment says 25 has misread it. What the case decides - that the percentage is computed on the income from the property and not on the balance surviving application - is untouched by that substitution and has never been doubted. It is applied routinely by the Tribunal and by High Courts and no later decision narrowing it was found. Two limits on that reassurance, both of which a reader should know. First, s.11 has been worked over repeatedly since. The current departmental page carries five Explanations to sub-section (1) - numbered one, two, three, three A and four - which qualify what counts as application of income and which this judgment, decided on the bare words of the clause in 1978-79, says nothing about. Their effect, including anything the Finance Act 2023 did to the treatment of a payment by one trust to another, is not stated here. What can be stated is that a corpus contribution is not part of this base at all: s.11(1)(d) deals with it separately, on the condition that it is invested or deposited in a form specified in sub-section (5) maintained specifically for the corpus. Second, the Income-tax Act, 1961 was repealed on 1 April 2026 by s.536(1) of the Income-tax Act, 2025, but s.536(2)(c) continues it for any tax year beginning before that date, so this remains live law for every such year. The 2025-Act successor to s.11 is not stated here because it was not established on the department's own page. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The Supreme Court's judgment is very short and is not served on Indian Kanoon; four separate searches for it there return nothing, including a search on the sentence quoted above, which returns only Tribunal orders. What was read directly, end to end and on its own address, is the Kerala High Court judgment appealed from, at indiankanoon.org/doc/550936. That is the source of the facts and of the figures set out above, and it is the reason those figures can be stated with confidence. The Supreme Court's own words were recovered from three Tribunal benches sitting twenty years and three zones apart, each reproducing the judgment inside quotation marks, and they agree word for word but for one digit: the Kolkata order prints the receipts as Rs 2,57,346 and the Mumbai and Delhi orders Rs 2,57,376. The Kerala High Court gives 2,57,376 three separate times - as the receipts, in the computation of 25 per cent of it as Rs 64,344, and against the alternative of 25 per cent of Rs 87,010 as Rs 21,752 - and the Gujarat High Court in Sthanakvasi Vardhman Vanik Jain Sangh gives the same figure. The correct figure is Rs 2,57,376 and the Kolkata transcription is a slip. On the date: the case is generally cited as a 2001 decision because it is reported in volume 248 of the Income Tax Reports for that year, but the judgment itself was delivered on 28 November 2000 in Civil Appeal No. 2655 of 1998, and the appeal number and date are recited in Tribunal orders of 2017 and of 2024 that have no connection with each other. The names of the judges who decided it could not be established from anything read, and are therefore not given rather than guessed. One point for the reader who goes looking for the original: the Kerala High Court judgment does run to numbered paragraphs, one to thirteen, and can be cited by paragraph; the Supreme Court's is shorter than a single paragraph of most judgments and cannot. The Kerala High Court judgment is worth opening for a second reason: it sets out the competing constructions at length, which the Supreme Court did not, and it is where the argument from the definition of total income in s.2(45) is answered. The judgment below was delivered by V.V. Kamat, J. On the change of rate: the percentage in the judgment is 25 and the percentage in the Act is 15, and the two are nowhere reconciled in the judgment, because the substitution came two years after it. Every statement of the holding above therefore carries the figure the Court used, and the correction sits under validity. The judgment decides one thing and only one thing: the base on which the s.11(1)(a) accumulation is computed. It does not decide what income means for any other purpose in s.11. It does not touch s.11(2), which is the separate machinery for accumulating beyond the permitted percentage on notice to the assessing officer, and nothing in it tells you how the two interact. It says nothing about the treatment of capital receipts, about depreciation, about whether an expenditure is application at all, or about the order in which application and accumulation are to be taken. It does not deal with a trust that receives corpus contributions, and the year before it, 1978-79, long pre-dates the registration and re-registration machinery a trust now has to satisfy before s.11 is reached at all. The Supreme Court's own reasoning is confined to the words of the provision; a reader looking for a discussion of the commercial or accounting meaning of income will find it in the High Court judgment below and not here. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The civil appeal was dismissed. On the plain language of the provision a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust; the donations of Rs 2,57,376 the assessee received constitute its property, and it is entitled to accumulate twenty-five per cent out of that sum. The Court recorded that it was unclear on what basis the Revenue contended that the assessee was entitled to accumulate only twenty-five per cent of Rs 87,010, the balance left after application.
TaxSphere, “CIT v Programme for Community Organisation”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-programme-for-community-organisation-accumulation-on-gross-receipts/ (validity last checked 2026-09-23)
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