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Facts
The appellant trust argued that the accumulated income could be utilized in the 6th year and that the amendment to Section 11(3)(c) of the Income Tax Act, effective from A.Y. 2023-24, should not apply retrospectively. The Assessing Officer (AO) added Rs. 59,02,718/- as deemed income.
Held
The Tribunal held that the amended provisions of Section 11(3)(c) are applicable prospectively and not retrospectively. The AO erred in making the addition as the trust utilized the accumulated amount in the 6th year as per the unamended provisions.
Key Issues
Whether the amendment to Section 11(3)(c) of the Income Tax Act, regarding utilization of accumulated income, applies prospectively or retrospectively.
Sections Cited
11, 11(3)(c), 115BBI, 143(1)
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Income Tax Appellate Tribunal, Mumbai “B” Bench, Mumbai.
Before: Shri Narender Kumar Choudhry (JM) & Shri Omkareshwar Chidara (AM)
The only issue to be decided in this case is whether the accumulation of surplus provisions under section 11 are applicable retrospective or prospective in nature. The Ld. AO made an addition of Rs. 59,02,718/- as deemed income under section 11(3)(c) of the Act and levied tax under section 115BBI of the Act. The Ld. CIT(A) has confirmed the addition.
The contention of the appellant is that the accumulated income can be utilized in 6th year also under section 11(3)(c) and hence the provisions of amendment relating to A.Y. 2023-24 are not applicable to the Trust. The appellant’s contention is that, since the amendment was not with retrospective effect, the amended provisions could not be applied to them with respect to accumulation of funds.
The appellant filed an appeal before the ITAT with the following grounds of appeal :-
2 Shree Mahavir Swetamber Murtipujak Tapagachha Jain Mandir Trust
1A. On the facts and circumstances of the case and in law the learned ADDL/JCIT(A) erred in confirming the addition of Rs. 5902718/- as deemed income under the provisions of Section ll(3)(c) and levying tax u/s 115BBI of the act. IB. The learned ADDL/JCIT(A) erred in not appreciating the fact that as per provisions of section 11(3)(c) the accumulated income can be utilized during the period referred to in clause 11(2)(a) or in the year immediately falling the expiry thereof i.e. 6th year. 1C. The learned ADDL/JCIT(A) erred on facts and law in sustaining the disallowance after having observed, in para 5.7, para 5.8 and para 5.14 of his order about the correctness of the claim of the appellant. ID. The appellant, therefore submits that the claim of the appellant of having applied the accumulation of FY 2016-17 in FY 2022-23 be allowed. IE. The appellant, therefore submits that the addition of Rs. 5902718/- as deemed income u/s 11(3)(c) should be deleted.
2. The learned ADDL/JCIT(A) erred in not appreciating the fact that the adjustment made u/s 143(1) is beyond the scope of permissible adjustments which requires interpretation of the provisions of the law.
The Ld. AR of the appellant has argued on the following lines :- a) The additions made in the case of appellant trust are beyond the scope of mistake apparent from record and hence such additions cannot be made under section 143(1) of the I.T. Act. In fact, the appellant Trust has objected to the proposed disallowance going to be made before Ld. CPC vide its letter dated 13.8.2024. The Ld. CPC has not given any reply to this letter and adjustments were made and hence the same violates the principles of natural justice. b) The provisions applied by CPC are applicable to the accumulation of income which starts from A.Y. 2023-24, whereas their accumulation took place 6 years back. c) Since the amendment relates to accumulation of funds after 2023-24 and it takes effect prospectively only as the amendment clearly says that it comes into effect from A.Y. 2023-24. There is no retrospective effect to the amended provisions and hence Ld. CPC is not correct in 3 Shree Mahavir Swetamber Murtipujak Tapagachha Jain Mandir Trust
making the addition as “deemed income” by invoking section 11(3)(c) of the Act. d) The Ld. AR of appellant relied on the following decision for the proposition that section 11(3)(c) of the Act clearly permit the appellant Trust to utilise the accumulation in the 6th year. i) Association of State Road Transport Vs. CIT (ITA No. 1952/Del/2013) e) The Ld. AR of the appellant has also relied on the following decisions of Coordinate Benches for the proposition that the amendment made to section 11(3)(c) by Finance Act 2022 is applicable for accumulation done after A.Y. 2023-24, and the amendment is prospective in nature : i) Shri Dadar Digambar Jain Mumuksho Mandal Vs. Ld. CIT(E) (ITA No. 2446/Mum/2025 dated 15.7.2025) ii) ITO Vs. Basilica of Our Lady of the Mount (ITA No. 2929/Mum/2025 dated 14.8.2025) f) The Ld. AR of the appellant relied on the decision of Hon'ble Supreme Court in the case of Vatika Township (P) Ltd., (49 Taxman.com 249)(SC) for the proposition that unless statute says that a particular provision operates with retrospective date, the same is deemed to be prospective in nature.
Per contra, Ld. DR has supported the orders of Ld. CPC and Ld. CIT(A). In his written submissions, it was mentioned that the amendment is applicable to accumulation made even prior to A.Y. 2023-24 also and disallowance under section 11(3)(c) was correctly made.
Heard both sides. There is sufficient force in the arguments of Ld. AR with respect to applicability of amended provisions prospectively in view of several decisions relied on by him. It is a settled law that, unless the legislation explicitly mentions that it has got retrospective effect, it operates prospectively only. The Ld. AR has demonstrated that the amount was spent
4 Shree Mahavir Swetamber Murtipujak Tapagachha Jain Mandir Trust in 6th year as per section 11(3) of the Act. The Ld. DR could not mention any case-law in support of his argument that the amended provisions are applicable retrospectively. While making additions, Ld. CPC has not even considered the contentions of appellant Trust. In view of the same, the adjustment made by Ld. CPC is against the provisions of law and the addition/disallowance made is hereby deleted.
The appeal of appellant is allowed.
Order pronounced in the open Court on 29/08/2025.