Section 11(2) : Accumulation or Setting Apart of the Trust Income for a Specific Purpose

[Section 11(2)] : Accumulation or Setting Apart of the Trust Income for a Specific Purpose

Where 85% of the income of charitable trust as referred above is not applied to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to charitable or religious purposes in India, such income so accumulated or set apart will not attract tax liability, provided that the following conditions are complied with—
(a)       the trustee gives notice to the Assessing Officer in the prescribed Form No. 10 specifying the purpose and the period (which should not exceed5years)*for which the income is to be accumulated. Such notice is to be given before the expiry of the time allowed under section 139(1), for furnishing the return of income;
ODIT (Exemption) Vs. Mamta Health Institute for Mother & Children [2007) 293 ITR 380(Delhi). It is true that specification of a purpose is necessary for accumulated of trusts income, but if the purpose of accumulation is achievement of object of the trust, any specific mention is not required.
(b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in section 11(5). Also refer Rule 17C for different forms and modes of investment or deposits.
(c) in computing the aforesaid period of five years, the period during which the income could not be applied for the purposes for which it is so accumulated or set apart, due to an order or injunction of any Court, shall be excluded.
(d) If in any year the accumulated income is applied to purposes other than charitable or religious purposes or ceases to be accumulated or set apart for application to such purposes, it will be subjected to tax as the income of that year.
(e) If in any year the accumulated income ceases to remain invested or deposited in the manner given above, it will be liable to tax as income of that year.
(f) If the accumulated amount or any part thereof is not utilised for the specified purposes during the period of accumulation or during the year immediately following the expiry thereof, the amount which has not been so utilised will be liable to tax as income of the previous year immediately following the expiry of the accumulation period.
(g) Where any amount, out of income accumulated or set apart, is credited or paid to any trust or institution registered under section 12AA or to any specific fund, institution, trust, university, educational institution, hospital or other medical institution as mentioned under section 10(23C), such amount shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.
Note: This implies that any payment to such trusts or institutions in the year of receipt of income will continue to be treated as application of income. 
If any income accumulated or set apart is paid or credited to such fund or institutions registered under section 12AA or as mentioned under section 10(23C)(iv) or (v) or (vi) or (via), such payment or credit shall be deemed to be the income of the assessee of the previous year in which such payment or credit is made.
(h)       If, due to circumstances beyond the control of the trustee, accumulated income cannot be utilised for the purpose or purposes for which it was accumulated or set apart, the Assessing Officer may allow the trustee to utilise the amount for any other charitable or religious purpose as is in conformity with the objects of trust, if an application to this effect is made by the trustee.