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Facts
The assessee, a registered charitable trust, accumulated funds under Section 11(2) of the Income Tax Act. These funds were utilized in FY 2022-23, which was the sixth year from the year of accumulation. The CPC disallowed the exemption based on an amendment by the Finance Act, 2022, which allegedly restricted accumulation to five years.
Held
The Tribunal held that the amendment by the Finance Act, 2022, is prospective and applies from AY 2023-24 onwards. For existing accumulations, the law prevailing at the time of accumulation applies. Since the utilization occurred within the extended period available under the pre-amendment law, the disallowance made by the CPC was incorrect.
Key Issues
Whether the amendment to Section 11(3) by the Finance Act, 2022, applies retrospectively to existing accumulations or prospectively from AY 2023-24 onwards.
Sections Cited
11, 11(2), 11(3), 143(1), 115BBI
AI-generated summary — verify with the full judgment below
Before: SHRI PAWAN SINGH & SMT. RENU JAUHRI
(धििाारण वर्ा / Assessment Year: 2023-2024) The Bombay Society of v/s. Income Tax Officer, the Franciscan Clarist बिाम Ward 2(4), Mumbai Sisters of the Most 6th Floor, MTNL Tel. Ex. Blessed Sacrament Building, Cumballa Hills, St. Anthony’s Home for the Pedder Road, Mumbai aged, 51, Chapel Road, 400026 Bandra (West), Mumbai 400050 स्थायी लेखा सुं./जीआइआर सुं./PAN/GIR No: AAATT0738Q Appellant/अपीलाथी .. Respondent/प्रधिवादी धििााररिी की ओर से /Assessee by: Shri Prashant Ghumare, Adv. राजस्व की ओर से /Revenue by: Shri Bhagirath Ramawat, Sr. DR (Virtually present) स िवाई की िारीख / Date of Hearing 03.09.2025 घोर्णा की िारीख/Date of Pronouncement 22.09.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the ADDL/JCIT (A)-2 Delhi, [CIT(A)] dated 28.02.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year 2023-2024.
The assessee has raised the following grounds in this appeal.
“1. THE ORDER BAD IN LAW, ILLEGAL AND WITHOUT JURISDICTION 1.1. tax in the facts and the circumstances of the case, and in law, the appellate order framed by the Additional Joint Commissioner of Income (Appeals)2, Delhi, ['Ld. CIT A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai (A)'] is bad in law, illegal and without jurisdiction, as the same is framed in breach of the statutory provisions of the Income tax Act, 1961 [the Act'] and the scheme and as otherwise also is not in accordance with the law. 1.2. Without prejudice to the generality of the above, the appellate order so passed is bad in law, illegal and void as the same is arbitrary and perverse and without application of mind to the facts and the legal position.
2. VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE 2.1. In the facts and the circumstances of the case, and in law, the appellate order so framed in bad in law and illegal, as the same is framed in breach of the principles of Natural Justice. 2.2. Without prejudice to the generality of the above ground, in the facts and the circumstances of the case, the Ld. CIT (A) erred in not granting proper, sufficient and fair opportunity of being heard to the Appellant while passing the appellate order. WITHOUT PREJUDICE TO THE ABOVE 3. ADDITION/ADJUSTMENT WITHOUT JURISDICTION 3.1. The Ld. CIT (A) erred in failing to appreciate that- (a) The intimation issued by the Deputy Director of Income Tax, Centralized Processing Centre, Bengaluru (the A.O.) u/s. 143 (1)(a) of the Act was beyond the scope and the power and, consequently, was without jurisdiction; (b) The adjustment so made by the A.O. did not fall under any of the limbs of section 143(1)(a) of the Act; (c) In any case and without prejudice, the issue concerning such adjustment u/s. 115BBI of the Act is highly debatable in nature, and, consequently, no adjustment in this regard could have been made by the A.O. in an intimation u/s. 143 (1) of the Act. 3.2. In the facts and circumstances, and in law, no such adjustment/addition was called for. WITHOUT FURTHER PREJUDICE TO THE ABOVE (ON MERITS) 4. ADDITION OF RS. 24,34,928/- U/S. 115BBI OF THE ACT 4. 4.1 The Ld. CIT (A) erred in confirming the action of the A.O. in making adjustment of the amount of Rs. 24,34,928/- to the income of the Appellant, by invoking the provisions of section 115BBI of the Act. 4.2. Without prejudice to the generality of the above ground, the CTT (A) failed to appreciate that: (i) The case of the Appellant did not fall within the purview of section 115BBI of the Act, A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai (ii) In any case, no such adjustment was required to be made u/s. 143(1) of the Act, and (iii) In any case, no reason for adjustment u/s. 115BB1 of the Act was brought on record by the A.O. 4.3. It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for. 4.4 Without prejudice to the above, assuming-not admitting that the addition was called for, the Ld. CIT (A) failed to appreciate that the computation of the taxable income was arbitrary, excessive and not in accordance with the law.
5. LIBERTY The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.”
Brief facts of the case are that the assessee, a registered charitable trust u/s. 12A of the Act, filed return declaring income of Rs. 21,65,070/- for AY 2023-24 after claiming exemption u/s. 11 of the Act. The assessee had accumulated funds of Rs. 32,50,000/- for FY 2016-17 u/s. 11(2) of the Act, which were intended to be utilised within the prescribed period. Out of these, the assessee utilised a sum of Rs. 24,34,928/- during FY 2022-23 relevant to AY 2023-24 and paid tax on unspent accumulation of Rs. 8,15,072/- u/s. 11(3) of the Act. While issuing intimation u/s. 143(1) of the Act, the CPC disallowed the utilisation of the accumulated funds on the ground that the prescribed period had expired in view of the amendment made by the Finance Act, 2022. As per the new restriction brought in by the amendment, the amount accumulated u/s. 11(2) is required to be utilised within the period of 5 years failing which it has to be added to the income of the assessee.
A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai 4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A) contending that the amendment to section 11(3) introduced by the Finance Act, 2022 is effective from 01.04.2023 and, therefore, applies prospectively from AY 2023-24 onwards with regard to the new accumulations. Ld. CIT(A) vide order dated 28.02.2025 has dismissed the assessee’s appeal with the following observations: “5.2 On perusal of the ground of appeal, it is found that the CPC has disallowed the exemption of unutilized accumulated amount Rs.24,34,928/- and the same is added to the income of the appellant due to this demand stands Rs.9,61,210/- In view of the above the appellant submits that the total accumulated income of Rs. 24,34,928/- had remained as unutilised at the end of fifth financial year i.e. 2021-22. however, the same was utilised in financial year 2022-23 being in the sixth financial year from the financial year of accumulation i.e. 2016-17 as per the condition of section 11(1)(c) before amendment. Though the accumulated unutilised income of Rs. 24,34,928/- as at the end of fifth financial year was spent in the sixth financial year i.e. in F.Y. 2022-23. Here the dispute is about the demand being raised which is opposed to the doctrine of the fairness.
The above amendment was introduced by the Finance Bill 2022 tabled in the parliament on 01-02-2022. The said bill received the assent of President of India on 30-03-2022. The notification about the Finance Bill 2022 becoming Finance Act 2022 was published in the Gazette of India on 30-03-2022. As per the Section 1(2)(a) of Finance Act 2022, Section 2 to 85 came into force on the first day of April, 2022.
A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai Hence, according to the assessee, the law is effective from AY 2023-24 and as the law at time of accumulation was for 5+1 years as per the SC case law, the appellant states that the said accumulation cannot be disallowed retrospectively. The contention raised by the appellant is not acceptable as the amendment is applicable for AY 2023- 24 assessment. 5.3 In view of the above amendment which is applicable from 01.04.2022 for FY 2022-23, which is under consideration, required amount of accumulated income was required to be spent by the end of the fifth year but the same has not been done before the due date prescribed by the Act applicable for that AY, thus, the same cannot be allowed. It is trite law that the law has to be upheld even if it causes inconvenience as the interpretation of the taxing statute is strict.”
5. Aggrieved with the order of Ld. CIT(A) the assessee has filed an appeal before the Tribunal. Before us, Ld. AR has submitted that the issue is covered by the decision of the coordinate bench in the case of Dadar Digamber Jain Mumukshu Mandal vs CIT(E) [2025] 176 taxmann.com 661 (Mumbai –Trib). Ld. DR, on the other hand, has thoroughly relied on the orders of the lower authorities.
We have heard the rival submissions and perused the material available on record as well as the decision of the coordinate bench relied upon by the assessee. We find that the issue has been examined at length for the very same year i.e. AY 2023-24 in the case Dadar Digamber Jain Mumukshu Mandal (supra) and it has been held by the coordinate bench as under: “12. We have heard the rival contentions and perused the material available on record. The issue under consideration relates to accumulation of income relating to FY. 2016-17 and FY. 2017-18 which could not be utilized in the respective financial years and accumulated for utilization in the subsequent financial years and the taxability of such accumulated income and whether the same can be brought to tax in the impugned assessment year 2023-24. The relevant provisions under consideration are sub-section (2) to Section 11 and sub-section (3) to Section 11. Under the existing provisions of the Act, a trust or institution is required to apply 85% of its income during the relevant previous year. Sub-section (2) to Section 11 provides that where the trust or institution is not able to apply 85% of its income during the previous year, it is allowed to accumulate or set apart either in whole or in part for application to such purposes in India and in such a scenario, income so accumulated or set apart shall not be included in the total income of the previous year of such trust A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai or institution. However, the same is subject to satisfaction of certain conditions, namely, such trust or institution has to furnish a statement as so prescribed to the Assessing officer stating the purpose for which the income is to be accumulated or set apart and the period for which the income is to be accumulated or set apart which shall in no case exceed five years. Secondly, the money so accumulated or set apart is invested or deposited in the forms or mode specified in section 11(5). Thirdly, the statement so referred is furnished on or before the date specified under sub-section (1) of section 139 for furnishing the return of income. It has been further provided that in computing the period of five years, the period during which the income could not be applied for the purpose for which it is so accumulated or set apart due to an onder or injection of any court shall be excluded. We, therefore, find that as per sub- section (2) to section 11 of the Act, the assessee has to comply with the aforesaid three conditions as so specified and the period for which the income can be accumulated is for a maximum period of five years. Here it is relevant to note that carlier, the period of accumulation was for a maximum period of ten years and by virtue of Finance Act 2001, the said period of accumulation has been amended and has been restricted for a maximum period of five years in respect of any income accumulated or set apart on or after 01-04-2001. As far as accumulation of any income prior to 01-04-2001, the same continues to be guided by the erstwhile provision and the accumulation continued for period of ten years.
In the instant case, the matter under consideration relates to accumulation of income done by the assesse pertaining to the FY. 201617 and FY. 2017-18 and as such, there is no amendment or change in law and the assessee continues to remain eligible insofar as the period for which the income can be accumulated or set apart which remains at five years and there has been no change which has been brought in by the Finance Act, 2022 14. Moving further, in terms of sub-section (3) of section 11, it talks about the situations where the income so accumulated and referred to in subsection (2) can be brought to tax in the hands of the trust or the institution. There has been an amendment to sub-section (3) by the Finance Act, 2022, w.e.f. 1 April, 2023 and it is therefore relevant to look at the un-amended provisions and the amendment which has been brought in by the Finance Act, 2022 15. The provisions of sub-section (3) to section 11, prior to its amendment by the Finance Act, 2022 read as under: "(3) Any income referred to in sub-section (2) which- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof. (d) is credited or paid to any trust or institution registered under section 12AA for section 12AB) or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vr) or sub-clause (via) of clause (23C) of section 10. shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid."
16. The provisions of sub-section (3) to section 11, as amended by the Finance Act, 2022 read as under: "(3) Any income referred to in sub-section (2) which- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section, (d) is credited or paid to any trust or institution registered under section 12AA for section 12AB) or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (v) or clause (via) of clause (230) of section 10. shall be deemed to be the income of such person of the previous year, (i) in which it is so applied or ceases to be so accumulated or set apart under clause (a), or (ii) in which it ceases to remain so invested or deposited under clause (b), or (ii) being the fast previous year of the period, for which the income is accumulated or set apart but not utilised for the purpose for which it is so accumulated or set apart under clause (e), or (iv) in which it is credited or paid to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution under clause (d) 17. We, therefore, find that under the un-amended law where the accumulated income is not utilized for the specific purposes during the period of five years or in the year immediately following the expiry of that period, then the accumulation to the extent not so utilized will be chargeable to tax as income of the previous year immediately following the expiry of that period. In other words, the assessec gets an extended period of one more year, in total, six years for utilization of accumulated income and on expiry of the said period, by virtue of the deeming fiction, the unutilised accumulated income shall be brought to tax in the previous year following the expiry of period of six years.
18. The Finance Act, 2022 has amended and omitted the extra period of one year following the expiry of the initial period of accumulation of five years. Therefore, unlike under the un-amended provisions wherein the income which is not utilized for the purposes it was accumulated can be brought to tax on the expiry of the sixth year, under the amended law, that income can be brought to tax on the expiry of five years itself.
19. Therefore, on a combined reading of sub-section (2) to Section 11 and sub-section (3) to Section 11 of the Act, we find that there is no change as such which has been brought about by the Finance Act, 2022 in terms of the initial period of accumulation which remains at five years, however, the extended period of accumulation of one year is no more is available to the trust or the institution. The said amendment has been brought in by the Finance Act, 2022 w.e.f. 1 April, 2023 and to apply in relation to AY. 2023-24 and subsequent assessment years.
The question that arises for consideration is whether the said amendment relates to existing accumulations which already stood for prior years or relates to fresh accumulations for the financial year 2022-23 onwards In this regard, we have gone through the Finance Bill, 2022 and the Memorandum explaining the provisions in the Finance Bill, 2022 and find that the amendment has been brought in the provisions of section 11 as well as section 10(230) of the Act with a view to bring consistency in the two exemption regimes which have been provided under the Act and as part of that, the instant amendment has also been carried out. There is nothing which has been specified as to limiting the extended period of accumulation already available to the trust or institution in respect of income already accumulated for earlier years. The said amendment has been clearly stated to take effect from 1st April, 2023 and to apply in relation to AY. 2023-24 and subsequent assessment years. 21. Therefore, both in terms of language as well as the intent, we find that the amendment which has been brought in by the Finance Act, 2022 relates to accumulation of income pertaining to previous year starting from 1 April, 2022 onwards relevant to AY. 2023-24 and subsequent assessment years and in that sense, has to be applied prospectively in respect of fresh accumulations and not in respect of existing accumulations which continue to remain guided by the erstwhile provisions at the relevant point in time when the accumulations were made in the respective financial years. 22. We find that similar view has been taken by the Co-ordinate Pune Benches in case of Yashwantrao Chavan Maharashtra Open University v. Commissioner of Income- tax (Exemption) [2025] 175 taxmann.com 988 (Pune - Trib)/ITA No. 505/pUN/2025) pertaining to AY-2023-24, wherein the Co-ordinate Bench referring to the provisions of the Finance Act, 2022, the memorandum explaining the Financial Bill, 2022 and drawing support from the decision of the Hon'ble Supreme Court in case of Vatika Township has held that where in terms of provisions at the time of accumulation, the assessee has utilized the amount in the year immediately following the prescribed period of 5 years and the amendment to the provisions of section 11(3) are held to be prospective in nature, no adjustment is warranted and the action of the AO/CPC was set aside. We can gainfully refer to the findings of the Co-ordinate Bench which reads as under "15. We have heard the rival arguments made by both the sides, perused the order passed by the CPC and the Ld. Addl/JCIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai before us. We find the assessee in the instant case filed its return of income on 30.11.2023 declaring total income as Nil. Since the assessee has accumulated an amount of Rs.90,70,20,511/- during the financial year 2016-17 and has utilized the same by 31.03.2023 ie in the 6th year of accumulation, the CPC taxed it in the 6th year Le. financial year 2022-23. We find in appeal the Ld. Addl/JCIT(A) upheld the addition made by the CPC, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the provisions of the Income Tax Act, 1961 as applicable to assessment year 2023-24 provides for taxation in the 5th year only and not in 6th year, therefore, taxing it in the 6th year ought to be deleted. It is his submission that for the amounts which are accumulated in assessment year 2017-18, the amount was taxable only if such accumulated amount was not applied within 6 years from the year of accumulation Le. 5 years plus one year. Since the assessee has applied such accumulated amount within 6 years therefore, it is not taxable in that year also. It is also his alternate submission that since the issue is a debatable one, therefore, no adjustment can be made by the CPC. Further, it is his submission that the amendment to section 11(3) of the Act is to be applicable prospectively i.e. applicable for the amounts accumulated from assessment year 2023-24 and onwards and not for the amounts which were accumulated earlier.
We find some force in the arguments of the Ld. Counsel for the assessee on this issue. The provisions of section 11(2) and 11(3) of the Act as stood at the relevant time read as under: "11(1). (2) Where eighty-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub- section is not applied, or is not deemed to have been 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 such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:- (a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded.
Explanation. Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA [or section 12AB or to any fund or institution or trust or any university or other educational institution or any hospita or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitabl or religious purposes, either during the period of accumulation or thereafter. (3) Any income referred to in sub-section (2) which- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to he accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section [or in the year immediately following the expiry thereof], [or section 12AB (d) is credited or paid to any trust or institution registered under section 12AA] or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vl) or sub-clause (via) of clause (230) of section 10, [shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or, as the case may be, of the previous year immediately following the expiry of the period aforesaid 17. A perusal of the above shows that the words "or in the year immediately following the expiry thereof was omitted by the Finance Act, 2022 w.e.f. 01.04.2023 which is applicable for assessment year 2023-24 onwards. It is an admitted fact that when the trust accumulated an amount of Rs.90,70.20.511/- during the financial year 2016-17 it was required to utilize the same within a period of 5 years from the end of the relevant assessment year or in the year immediately following the expiry thereof. In other words, the assessee was required to utilize the same before the end of the fith year ie. financial year 2022 23. The assessee in the instant case undisputedly has utilized the amount before 31.03.2023.
We find the relevant provisions of Memorandum explaining provisions of the Finance Bill, 2022 read as under "4. Bringing consistency in the provisions of two exemption regimes As mentioned earlier, there is a requirement for alignment of certain provisions of the two regimes as they both intend to grant similar benefit. 4.1 Accumulation provisions (1) Under the existing provisions of the Act, a trust or institution is required to apply 85% of its income during any previous A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai year. However, if it is not able to apply 85% of its income during the previous year, it is allowed to accumulate such income for a period not exceeding 5 years as per the following provisions, namely: (I) sub-section (2) of section 11 of the Act for the trusts or institution under the second regime; and (II) third proviso to clause (23C) of section 10 of the Act for trusts or institution under the first regime. (ii) However, the accumulation of income, as per the provisions of sub-section (2) of section 11 of the Act is allowed subject to the fulfilment of certain conditions while there are no such conditions specifically provided under the third proviso to clause (23C) of section 10 of the Act, (iii) Similarly, sub-section (3) of section 11 of the Act provides for the specific previous year in which the accumulated income will be subjected to tax in case of different types of violations. It, inter alia, provides that if the accumulated income is not applied within 5 years, it shall be taxed in the 6th year. While, on the other hand, there are no such specific provisions under clause (230) of section 10 of the Act and therefore, if the accumulated income is not applied within 5 years, the same shall be taxed in the 5th year itself. (iv) In order to bring consistency in the two regimes, the following are proposed:- A) It is proposed to amend the provisions of sub-section (3) of section II of the Act to provide that any income referred to in sub-section (2) which is not utilised for the purpose for which it is so accumulated or set apart shall be deemed to be the income of such person of the previous year being the last previous year of the period, for which the moome is accumulated or set apars under clause (a) of subsection (2) of section 11, but not utilised for the purpose for which it is so accumulated or set apart B) It is proposed to insert Explanation 3 to the third proviso to clause (230) of section 10 of the Act to provide that for the purposes of determining the amount of application under this proviso, where eighty-five per cent of the income referred to in clause (a) of the third proviso, is not applied, wholly and exclusively to the objects for which the trust or institution under the first regime is established. during the previous year but is accumulated or set apart, either in whole or in part, for application to such objects, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:- (a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years: (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) of section 11, and A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai (c) the statement referred to in clause (a) of Explanation 3 is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year, C) It is proposed to insert a proviso to the proposed Explanation 3 to the third proviso to clause (23€) of section 10 of the Act to provide that in computing the period of five years referred to in sub-clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded. D) It is also proposed to insert an Explanation (Explanation 4) to third proviso to clause (23C) of section 10 to provide that any income referred to in the proposed Explanation 3 shall be deemed to be the income of the previous year in which the following takes place- (a) the income is applied for purposes other than wholly and exclusively to the objects for which the trust or institution under the first regime is established or ceases to be accumulated or set apart for application thereto, or (b) the income ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5) of section 11, or (c) the income is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of the proposed Explanation 3, (d) the income is credited or paid to any trust or institution under the first or second regime. For the circumstances referred to in clause (c), it is proposed that the income shall be deemed to be the income of previous year which is the last previous year of the period, for which the income is accumulated or set apart under sub-clause (a) of clause (iii) of the proposed Explanation 3, but not utilised for the purpose for which it is so accumulated or set apart. E) It is proposed to insert an Explanation (Explanation 5) to third proviso to clause (23C) of section 10 of the Act to enable the Assessing Officer to allow trusts or institutions under the first regime in circumstances beyond their control to apply such accumulated income for such other purpose in India as is specified in the application by such person subsequent to fulfilment of specified conditions. These other purposes are required to be in conformity with the objects for which the trust or institution under the first regime is established. If it is done, the provisions of Explanation 4 to third proviso to clause (230) of section 10 shall apply as if the purpose specified by such person in the application under this Explanation were a purpose specified in the notice given to the Assessing Officer under clause (a) of the proposed Explanation 3 of the third proviso to clause (23C) of section 10. F) It is proposed to insert a proviso to proposed Explanation 5 to third proviso to clause (230) of section 10 of the Act to provide that the Assessing Officer shall not allow the application of any accumulated income, as referred to in the proposed Explanation 3, to be credited or paid to any trust or institution under the first or second regime, as referred to in clause (d) of proposed Explanation 4 to the third proviso to clause (23C) of section 10 (v) These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. "Clauses 4 and 5+"
We find the Hon'ble Supreme Court in the case of CTT v. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 (SC) on the issue of interpretation of taxing statutues about retrospective amendment and prospective amendment, has held as under: "30. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of interpretation of Statutes" Vis-a-vis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips v. Eyre[3], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
The obvious basis of the principle against retrospectivity is the principle of 'fairness", which must be the basis of every legal rule as was observed in the decision reported in L"Office Cherifien des Phosphates v. Yamashita- Shinnihon Steamship Co.Ltd[4]. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later.
We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors, v. Indian Tobacco Association [5], the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors. [6] It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here.
In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectively. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the nortual rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors."
20. We find the Bangalore C Bench of the Tribunal in the case of Mis. Phulchand Gulabchand Charitable Trustv. ITO (supra) has observed as under: "3. The facts are that assessee had surplus income of Rs. 1,93,64,000 in FY 2007 08 relevant to AY 2008-09 on account of sale of immovable property of the assessee trust. The objects of the trust, we may notice, was to run schools, colleges, dispensaries, Dharmashalas, etc. The assessee could not apply the aforesaid surplus for charitable purposes in AY 2008-09 and had applied for accumulation of such surplus in terms of section 11(2) of the Act. As per the provisions of section 11(2). accumulation is allowed for a period of 5 years. It is not in dispute that such accumulation was allowed by the AO for the AY 2008-09.
In AY 2013-14 which is the Assessment year in appeal, the AO held that since the five years period expires in AY 2013-14, and since the assessee did not utilize the sum accumulated for charitable purpose in terms of section 11(3)(c) of the Act, the sum accumulated and which remains unspent for charitable purposes, shall be deemed to be income of the person, of the previous year, immediately following the expiry of the period aforesaid. The relevant provisions of Sec.11(3) read as follows: "(3) Any income referred to in sub-section (2) which- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai (5) ceases to remain invested or deposited in any of the forms or modes specified in subsection (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that subsection or in the year immediately following the expiry thereof, (d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or], as the case may be, of the previous year immediately following the expiry of the period aforesaid."
A reading of Clause (c) of Sec. 11(3) of the Act would show that the time allowed for applying accumulation for charitable purpose is 5 year and one year following the expiry of 5 years. This is clear from the expression used "or in the year immediately following the expiry thereof". The previous year following the expiry of period of 5 years from AY 200809 will be AY 2014-15 and not AY 2013-14. This appeal relates to AY 2013-14 in which the AO sought to apply the provisions of section 11(3)(c). The Assessee did not raise such a plea regarding the applicability of the aforesaid provisions in AY 2014-15 only.
6. There is a reference to section 11(3)(d) in the order of AO, which in our opinion, is not the correct provision of law. Since the assessee did not give any explanation in not utilising the surplus funds accumulated, the AO brought to tax a sum of Rs.1,93,54,000.
Before the CIT(Appeals), the plea of assessee was that it had utilised the accumulated surplus for construction of a hostel building and products accounts evidencing income & expenditure towards the same. This plea of the assessee was rejected for the following reasonsc “5.0) I have gone through the facts of the case and the submissions of the appellant. The provisions of section 11(2)(a) is as under "If the accumulated amount or any part thereof is not utilised for the specified purposes during the period of accumulation of 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." In course of appellate proceedings the appellant has not furnished any details before me with regard to the said claun of expenditure pertaining to construction of hostel building and the advances given for the construction of building over the periods, which it claimed. A simple claim of maintenance of book of account is not sufficient. Further no details whatsoever were furnished before me regarding the claim that advance for purchase of property was made, with any corroborative evidence, that it incurred expenditure out of the A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai above surplus amount. In absence of the above, I do not hesitate in concluding that the action of the AO was correct and the addition was made rightly. The grounds 1 to 4 and 6 are hereby dismissed."
8. The Assessee did not raise plea regarding the applicability of the aforesaid provisions of Sec. 11(3) (c) of the Act only in AY 2014-15 only. Aggrieved by the order of CIT(Appeals), the assessec has preferred the present appeal before the Tribunal.
As we have already noticed, the period of 5 years for spending the accumulated surplus for AY 2008-09 "or in the year immediately following the expiry thereof is only AY 2014-15. This aspect has been highlighted by the assessee in ground Nos.2 to 4 in its appeal before the Tribunal, which reads as follows:- "2. That the learned CIT(A) ought to have appreciated that u/s 1113)(c) of the Income Tax Act, 1961 provides that accumulated income should be utilized during the 5 years period of accumulation or in the year immediately following the expiry thereof. That means, in the facts & circumstances of this case, the assesee at liberty to utilize the accumulated surplus up to 31-03-2014. Now in this case, the assessee has utilized of Rs. 1,67,47,400/- as investment in poor student hostel in the year 2013-14. Therefore, there is no contravention of section 11(3) and the accumulated surplus up to 31-3-2013 cannot become deemed income of the assessee for the assessment year 2013-14. 3. That the learned CIT(A) has failed to take note of the AO assessment order u/s.143(3) of the Act, dated 26.12.2016 for the AY 2014-15, Wherein the learned. AO has concluded the assessment after considering the bonafide explanation offered by the assessee and allowed the claim of Rs. 1,67,47,400/- out of total surplus of Rs. 1,93,54,529/- and the remaining balance of Rs:26 07,129 was treated as income u/s. 13(1)(c) of the Act. 4. That the learned CIT(A) has failed to appreciate the fact that the appellant has furnished all the details with regard to claim of expenditure pertaining to construction of hostel building and other advances given for building over the periods have been produced before the AO during the course of assessment proceedings for the AY 2014-15 and the same was considered and accepted by the AO."
The Id. counsel for the assessee has also filed before us a copy of the order of assessment for AY 2014-15 wherein the AO has accepted the utilization of accumulated surplus in AY 2008-09 for charitable purpose in AY 2014-15. The Id. Counsel for the assessee drew our attention to the fact that the assessee had spent a sum of Rs. 1,67,47,400 and to this extent, the application of income for charitable purposes has been accepted by the AO in AY 2014-15 in the order of assessment dated 26.12.2016 passed u/s. 143(3) of the Act. 11. The Id. DR while relying on the order of CIT(Appeals) submitted that this aspect has not been examined either by the AO or the CTT(Appeals) and therefore the issue should be sent back to the AO for fresh consideration in the light of order of assessment for AY 2014-15.
A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai 12. We have considered the rival submissions and are of the view that the issue raised now before the Tribunal in the form of grounds of appeal which we have extracted in the earlier part of the order should be considered by the AO. IF AY 2013-14 is not the period within which the accumulated surplus has to be applied, then the addition, made slavuld be deleted. We therefore set aside the order of CTT(Appeals) and remand this issue for fresh consideration by the AG, after affonding opportunity of being heard to the assessce
13. In the result, the appeal by the assessee is treated as allowed for statistical purposes
21. In light of the above discussion, we are of the considered opinion that since the assessee in the instant case has utilized the accumulated surplus funds in the year immediately following the prescribed period of 5 years Le before 31.03.2023 and the amendment to the provisions of section 11(3) are thichd to be prospective in nature, therefore, the Ld. Addi / JCIT(A) in our opinion is not justified in upholding the intimation of the CPC making adjustment of Rs.90,70,20,511- u/s 11(3) as deemed income of the assessee which was accumulated in the financial year 2016-17 and when the provisions at the relevam time prescribed the utilization of the amount within a period of 5 years or in the year immediately following the prescribed period of 5 years. Even otherwise also we find merit in the argument of the Ld Counsel for the assessee that the 5 year period ends on 31.03.2022 and therefore the unutilized amount could have been brought to tax in assessment year 2022-23 and not in assessment year 2023-24. In the light of the above discussion, we set aside the order of the Ld. Addl/JCTT(A) on this issue and direct the Assessing Officer/CPC to delete the adjustment. The grounds raised by the assessee are accordingly allowed."
Further, our reference was drawn to the decision of the Ld.Add/JCTT(A)-4, Chennai in case of Shri Dahanukarwadi Mahavir Nagar Shwetamber Murtipujak Jain Sangh for AY. 2023-24 wherein it was held that though the amendment to section 11(3)(c) was introduced from A.Y 2023-24, the same can't be applied for accumulations made in the earlier years as the Finance Act 2022 has not enacted this amendment retrospectively and is prospective in nature and the omission of words "or in the year immediately following the expiry thereof in section 11(3)(c) is applicable for the accumulations made from A.Y 2023-24 and not for the earlier years. Nothing has been brought on record as to whether the Revenue has challenged the said decision and thus, the same also supports the case of the assessee.
In light of the aforesaid discussion, we find merit in the contentions advanced by the Ld.AR that as far as the accumulation relating to the period of FYs. 2016-17 and 2017-18 are concerned, the assessee had the time window till 31-03-2023 and 31-03- 2024 respectively by which it has to utilize accumulated income and in that view of the matter, the amendment brought in by the Finance Act, 2022 does not debar the assessee from availing the said time window in respect of existing accumulations and the amendment have to be read prospectively in respect of fresh accumulations for the period pertaining to previous year starting from 1 April, 2022 onwards.”
A.Y.2023-24 Bombay Society of the Franciscan Clarist Sisters of the most Blessed Sacranment, Mumbai 7. Respectfully following the decision of the coordinate bench, we are of the considered view that the assessee is entitled to deduction u/s. 11(2) with respect to the amount of Rs. 24,34,928/- utilised during the year being the grace year (6th year) in terms of the provisions existing at the time of accumulation. Accordingly, assessee’s entitled to get the relief on this account.
In the result, the appeal of the assessee is allowed.