DEPUTY COMMISSIONER OF INCOME TAX, MUMBAI vs. SOCIETY OF THE SERVANTS OF THE HOLY SPIRIT, MUMBAI

Per Smt. Beena Pillai, JM: The present appeal filed by the revenue arises out of the order dated 25/08/2025 passed by the Ld. Commissioner of Income Tax, (Appeals) Addl./JCIT (A)-7 Kolkata [hereinafter the “Ld.CIT(A)”] for A.Y. 2015-16 on following grounds of appeal:-

2 I.T.A. No. 6844/Mum/2025 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred by ignoring that the action of CPC in deeming such unutilised accumulation as income for A.Y. 2023-24 is strictly within the framework of the law and does not impose any retrospective burden on the assessee. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in applying the doctrine of "impossibility of performance" to override the clear statutory mandate of section 11(3) of the Act as amended, particularly when the amendment to section 11(3) made vide the Finance Act, 2022 expressly applied in relation to Assessment Year 2023-24 and subsequent Assessment Year as per the memorandum to Finance Act, 2022. 5. The appellant craves leave to add, amend, alter vary and/or withdraw any of the grounds of appeal.” 2. The assessee is a charitable trust registered with the Charity Commissioner, Mumbai and also registered u/s 12A of Act. It is engaged in the field of medical relief and runs “Holy Spirit Hospital” at Andheri (East), Mumbai, a 300-bed multi-specialty hospital catering to a large population. The assessee provides free and concessional medical facilities to economically weaker sections and also operates community health centres and a nursing institute.

2.1. For the year under consideration, the assessee filed its return of income within the prescribed time declaring total income of Rs. 35,94,350/- after claiming exemption u/s 11 of the Act. The assessee also furnished audit report in Form 10B and exercised the option for accumulation of income by filing Form 9A u/s 11(1) and Form 10 u/s 11(2) of the Act. The return of income was processed by CPC u/s 143(1) of the Act, wherein total income was determined at Rs. 29,40,33,430/- by making addition u/s 11(3) of the Act in respect of accumulation of earlier years alleged to have remained unutilised within the prescribed period.

3 I.T.A. No. 6844/Mum/2025 Aggrieved by the said adjustment, the assessee preferred appeal before the Ld. CIT(A).

Being aggrieved by the relief granted by the Ld. CIT(A), the Revenue is in appeal before this Tribunal.

4.1. The Ld. DR submitted that by virtue of the amendment brought in by the Finance Act, 2022 to section 11(3) of the Act, the benefit of utilisation of accumulated income in the sixth year stands withdrawn with effect from A.Y. 2023-24. It was contended that the year under consideration being A.Y. 2023-24, the amended provisions squarely apply and govern the taxability of any accumulation remaining unutilised as on that date.

4.1.1. It was further submitted that the Ld. CIT(A) erred in holding that the amendment would not apply to accumulations made in earlier years. The Ld. DR submitted that, the amendment does not operate retrospectively but applies prospectively to the

4 I.T.A. No. 6844/Mum/2025 assessment year under consideration, and therefore governs all cases where the period of accumulation expires in A.Y. 2023-24 or thereafter. The Ld. DR also contended that the CPC rightly treated the unutilised accumulation as deemed income u/s 11(3) of the Act and such action is strictly within the framework of law. It was submitted that there is no question of any retrospective taxation, as the taxability arises only in the year under consideration when the statutory conditions stand violated.

4.2. The Ld. DR further submitted that the Ld. CIT(A) erred in invoking the doctrine of “impossibility of performance” to override the clear mandate of the amended statutory provisions. It was argued that when the law expressly provides for taxability in a particular year, equitable considerations cannot be invoked to dilute or bypass the legislative intent. The Ld. DR prayed that the order of the Ld. CIT(A) be set aside and that of the Ld.AO/CPC be restored.

4.3. The Ld. AR strongly supported the order passed by the Ld. CIT(A) and submitted that the same is in accordance with law and facts of the case. It was submitted that the assessee validly accumulated income of Rs. 29,04,39,083/- u/s 11(2) of the Act in A.Y. 2017-18 after complying with all statutory requirements, including filing of Form 10 within the prescribed time. The Ld. AR submitted that as per the legal position prevailing at the time of accumulation, the assessee was entitled to utilize the accumulated income within a period of five years and also in the immediately succeeding year, i.e., the sixth year. It was contended that the assessee has in fact applied such accumulated income in F.Y.

5 I.T.A. No. 6844/Mum/2025 2022-23 relevant to A.Y. 2023-24, i.e., within the permissible extended period.

4.4. The Ld. AR further submitted that the amendment brought in by the Finance Act, 2022 to section 11(3) of the Act cannot be applied to accumulations made in earlier years, as the same would amount to altering vested rights and changing the conditions of utilisation retrospectively. It was argued that the amendment, though applicable from A.Y. 2023-24, cannot operate in a manner so as to deny the assessee a reasonable opportunity to comply.

4.1.1. The Ld. AR emphasized that the amendment received Presidential assent on 30/03/2022, leaving practically no effective time for the assessee to utilise the accumulated income of A.Y. 2017-18 within the truncated period, thereby creating a situation of impossibility. In this regard, reliance was placed on the settled legal principle that, the law does not compel a person to perform an impossible act, as laid down by the Hon’ble Supreme Court in Life Insurance Corporation of India v. CIT reported in 219 ITR 410 and Krishnaswamy S. Pd. v. Union of India reported in 281 ITR 305 (SC).

4.2. It was further submitted that the issue involved is highly debatable and, therefore, falls outside the limited scope of adjustment permissible u/s 143(1) of the Act. The Ld. AR contended that CPC could not have made such an addition involving interpretation of amended provisions and their applicability.

6 I.T.A. No. 6844/Mum/2025 4.3. The Ld. AR also placed reliance on decisions of coordinate benches of the Tribunal to submit that utilisation of accumulated income in the immediately succeeding year is permissible. Reliance was placed on the decision in ACIT v. State Examination Board (ITA No. 3271/Ahd/2016), wherein it was held that utilisation of accumulation even in the year immediately following the expiry of the prescribed period is allowable. Further reliance was placed on Phulchand Gulabchand Charitable Trust v. ITO (ITA No. 794/Bang/2019), wherein it was held that the expression “in the year immediately following the expiry thereof” permits application of accumulated income in the sixth year.

Without prejudice, the Ld. AR submitted that suitable relief ought to be granted to avoid double taxation, as part of such income has already been applied or offered to tax in subsequent years. The Ld. AR prayed that the order of the Ld. CIT(A) be upheld and the grounds raised by the Revenue be dismissed.

We have perused the submissions advanced by both sides in light of the records placed before this Tribunal.

7 I.T.A. No. 6844/Mum/2025 accumulated income has been applied by the assessee in F.Y. 2022-23 relevant to A.Y. 2023-24.

6.1. The primary contention of the Revenue is that by virtue of the amendment brought in by the Finance Act, 2022 to section 11(3) of the Act, the benefit of utilisation in the sixth year stands withdrawn and, therefore, the unutilised accumulation becomes taxable in A.Y. 2023-24. On the contrary, the case of the assessee is that the said amendment cannot be applied to accumulations made in earlier years and that the assessee was entitled to utilise the same in the sixth year as per the law prevailing at the time of accumulation.

7.1. Further, we note that the amendment received Presidential assent on 30/03/2022, leaving practically no effective opportunity to the assessee to utilise the accumulated income within the truncated period. Accepting the contention of the Revenue would lead to a situation where the assessee is required to perform an act which had become impossible due to the timing of the amendment. The law is well-settled that no person can be compelled to perform an impossible act, as held by the Hon’ble Supreme Court in Life

8 I.T.A. No. 6844/Mum/2025 Insurance Corporation of India v. CIT (supra) and Krishnaswamy S. Pd. v. Union of India (supra).

7.2. We also find that coordinate benches of the Tribunal in the cases of ACIT v. State Examination Board and Phulchand Gulabchand Charitable Trust v. ITO (supra) have held that, utilisation of accumulated income in the immediately succeeding year after expiry of the prescribed period is permissible. Respectfully following the same, we hold that the assessee was entitled to apply the accumulated income in A.Y. 2023-24.

In view of the above discussion, we do not find any infirmity in the order passed by the Ld. CIT(A) in deleting the addition made u/s 11(3) of the Act. Accordingly, the grounds raised by the Revenue are dismissed.

In the result, appeal filed by revenue stands dismissed.

Order pronounced in the open court on 20/04/2026

Sd/- Sd/-

(JAGADISH) (BEENA PILLAI) Accountant Member Judicial Member Mumbai Dated: 20/04/2026 SC Sr. P.S.

9 I.T.A. No. 6844/Mum/2025

Copy of the order forwarded to:

(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.