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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI S. RIFAUR RAHMAN, HONBLE & SHRI MS KAVITHA RAJAGOPAL, HONBLEDr. Gopal Rao Deshmukh Marg
IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI MS KAVITHA RAJAGOPAL, HON'BLE JUDICIAL MEMBER ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh v. CIT (Exemptions) Mangalayatan, Paranjpe B Scheme Room No. 601, 6th Floor Road No. 1, Vile Parle (E) MTNL TE Building, Pedder Road Mumbai - 400057 Dr. Gopal Rao Deshmukh Marg Cumballa Hill, Mumbai – 400026 PAN: AAATV2407Q (Appellant) (Respondent) Assessee Represented by : Mandar Vaidya Department Represented by : Achal Sharma
Date of Hearing : 04.08.2022 Date of Pronouncement : 20.09.2022
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Exemptions), Mumbai [hereinafter in short “Ld.CIT(E)”] dated 14.03.2022 for the A.Y. 2017-18 passed u/s. 263 of the Income-tax Act, 1961 (in short “Act”).
2 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh 2. Brief facts of the case are, assessee filed its return of income on 09.10.2017 along with the Income and Expenditure Account, Balance Sheet and Audit Report in Form No. 10B declaring total income at ₹.71,080/-. The trust is registered as a charitable organization u/s. 12A vide registration No. INS/1347 and with charity Commissioner, Mumbai vide Registration No.F-527(Bom). The object of the trust is charitable to the poor and needy people in the field of education and medical. The assessment u/s. 143(3) of the Act was completed on 14.10.2019, accepting the total income as declared by the assessee in the return of income.
Subsequently, Ld.CIT(E), Mumbai on verification of the assessment records observed that the accumulation details filed vide Form No. 10B by the assessee over the years, and he is of the view that the assessment order dated 14.10.2019 was erroneous in so far as it was prejudicial to the interests of revenue within the meaning of section 263 of the Act. Accordingly, he issued show case notice to the assessee. Ld.CIT(E) has informed the assessee on examination of the assessment order and documents furnished during the assessment proceedings, he noticed that the assessee had shown total accumulation of ₹.3,53,90,000/- u/s. 11(2)
3 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh of the Act was claimed for the A.Y. 2017-18 and unutilised balance of ₹.1,20,02,003/- for the A.Y. 2012-13 was taxed in Tax Computation Sheet without making any addition in Assessment Order. Since the assessee had filed its Form 10B beyond the due date, which was mandatory to be filed with the return w.e.f. A.Y. 2017 18. Therefore, allowance of accumulation of ₹.3,53,90,000/- u/s. 11(2) for Building Fund and Development Fund was required to be disallowed and brought to tax, in this case which is not done.
In response assessee filed letter dated 14.02.2022, for the sake of clarity it is reproduced below: - "We refer to your subject Notice No.ITBA/F/REV1/2021- 22/1039417962(1) dated 04/02/2022 and submit as under on the issues raised therein. 1. The extended due date for filing tax return and audit report in Form 10B for Trusts for AY 2017-18 as per section 139 was 7th November, 2017. We have filed the income tax return and audit report in Form 10B on 9th October, 2017, well within due date. Form NO.10 for accumulation of income was inadvertently filed late on 20.10.2018 due to oversight. 2. A condonation application was immediately made on 23/10/2018. The same however could not be granted as it was beyond the powers delegated to your office. A copy of order u/s.119(2)(6) dated 12.09.2019 is attached for ease of reference. 3. A fresh application for condonation of delay was made on 9th April, 2021 after the power of condonation was restored back section 119(2)(6) by the CBDT. The delay in filing Form 10 was finally
4 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh condoned by your honour on 09/11/2021. A copy of your order is attached for ready reference. 4. As the condonation for accumulation of Rs.3,53,90,000/- has been duly granted after careful consideration by your honour, adding it back will be counterproductive and unfair. 5. Our Trust is a public charitable trust totally engaged in the activity of propagation of secular education. The trust is established in the year 1952 and runs (sic) schools and colleges on its premises from 6 a.m. to 9 p.m. The school buildings have become old and new infrastructure of around 60000 sq feet is being reconstructed to accommodate growing number of students. The reconstruction project is expected cost of around Rs.25 crores (sic). The Trust premises are located very close to the airport and were required to obtain NOC from Airports Authority of India (AAI). The NOC from AAI, Delhi was not forthcoming resulting in lack of clarity on area restrictions, as a result, we could not receive approval from the municipal authorities to commence construction. The Trust thus, could not utilize the amount of Rs.1,20,02,003/- accumulated u/s.11(2) in A.Y.2012-13 for reasons beyond our control. 6. The Trust is committed to use the sum of Rs.1,20,02,003/- accumulated for the purpose of construction of school building by keeping the money invested in the mode stipulated under section 11(5). The trust has also not written back the accumulation in its books of accounts. The addition and levy of tax would be unfair and unjust as it would reduce the development funds needed for public good. 7. It is humbly submitted that the Trust being completely into imparting of secular education, is factually eligible for exemption under section 10(23C). The application made couple of times in past got rejected for technical reason due to lack of clarity on how much of its activities were substantially financed by government. The Trust has a mix of aided and unaided institutions under its management. Had the benefit been made available under section 10(23C) there would be no cause of making application for accumulation or not being able to utilize the sum set aside within stipulated time."
5 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh 5. After considering submissions of the assessee, Ld.CIT(E) issued another show cause notice dated 18.02.2022, for the sake of clarity it is reproduced below: - “In continuation to the show cause notice u/s. 263 dated 04.02.2022, in addition to the points raised in the said notice, it is further noticed from the assessment records for the A.Y. 2017-18 in your case that: 1. It is seen from assessment order that the AO has failed to examine the application of accumulation made in F.Y. 2010-11. The accumulation made in F.Y. 2010-11 which was remaining for application at the end of F.Y. 2015-16 was Rs.2,36,06,199/-. Further, on verification of the return of A.Y. 2016-17, it is seen that no income has been offered u/s. 11(3) on account of this unspent accumulation. Therefore, the unspent accumulation of Rs.2,36,06,199/- had to be offered to income in the sixth year, i.e. A.Y. 2017-18 as per Section 11(3). Thus, the unspent accumulation amounting to Rs.2,36,06,199/- which has not been applied for the purpose of object of the trust has not been offered as income in the year under consideration and the AO has not brought to tax from such non-application of accumulated fund on the object of the trust in the assessment order. Thus, the AO passed order without the basic verification of the above facts and therefore, the assessment order is erroneous and prejudicial to the interest of revenue. 3. In view of the above, may I request you to show cause why the assessment order made u/s. 143(3) of the Act dated 14.10.2019 should not be set aside by invoking the provisions of Section 263 of the Act with appropriate directions to the AO to make a fresh assessment. You are accorded an opportunity to furnish a written response online electronically through your e-filing account in incometax.gov.in on or before 25.02.2022. You may further note that if nothing is heard from you at the specified date, it will be presumed that you have no submissions to make and
6 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh order will be passed accordingly on the information available on the record.”
In response to the above notice assessee submitted its response vide letter dated 25.02.2022, for the sake of clarity it is reproduced below:- “We refer your subject Notice No.ITBA/REV/F/REV1/2021- 22/1039884260(1) dated 18/02/2022 and submit as under on the issues raised therein 1. Form 10 for AY 2016-17 mentions the amount of Rs.34,08,801/- utilized against the sum of Rs.2,70,15,000/- accumulated in FY 2010-11. The sum of Rs.34,08,801/- is in fact the sum utilized during the FY 2015-16 against the accumulation. The sum of Rs.34,08,801/- is made up of Expenditure on property amounting to Rs. 29,50,672/- and Rs.4,58,129/- on Furniture, Deadstock and Library Books. 2. The financial year cumulative sum utilized against accumulation of ₹.2,70,15,000/- set aside in F.Y. 2010-11 is as under: - Financial Expense on Deadstock Year No Total Year Property and Books 4797117 1 2011-12 1831052 2966065 2 685503 2012-13 0 685503 3 4928431 4928431 2013-14 0 4 593408 593408 2014-15 0 5 2015-16 2950672 436869 3387541 6 2016-17 0 620997 620997 Total 15012997 12002003 Disclosed under section 11(3) in AY.2017-18 return 3. The total sum utilized is Rs.1,50,12,997/- and the sum added in computation under section 11(3) works out to Rs. 1,20,02,003/-. 4. The working for sum utilized against accumulation of Rs. 2,84,15,0007- in F. Y.2011-12 till F. Y.2016-17 relevant to A. Y.2017- 18 is as under: Financial Expense on Deadstock Year No Total Year Property and Books 1 2012-13 0 2135670 2135670
7 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh 4 2015-16 0 155117 155117 5 2016-17 5839869 0 5839869 Total 8130656 5. The sums utilized can easily be ascertained from the face of the financial statements and relevant extracts highlighting the sums are attached for ease of reference. 6. Thus making an additional disallowance of Rs.2,36,06, 199/- will not be factually correct or justified."
After considering the above submissions, Ld.CIT(E) relying on section 11(2) and section 11(3) of the Act observed that the charitable entity in order to avail exemption under Section 11 of the Act must spend or apply 85% of its income towards charitable purpose in India. However, if the application is below the stipulated 85%, then assessee requires to furnish Form 10 within the specified date stating the purpose for which the income is accumulated or set apart. Further, he observed that additional condition required for accumulation is to furnish the Return of Income for the relevant year in which accumulation is claimed to be filed within the due date as specified in Section 139(4A) of the Act. In case of claim meeting of the above conditions is allowable, but in no case exceeding five years. He observed that as per the provisions of Section 11(3)(c) of the Act, if the accumulated amount is not utilized for the specified purpose in five years or in the year immediately following thereof, the amount so accumulated but unutilized shall be deemed to be
8 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh the income of the assessee. Ld.CIT(E) observed that it is of relevant to see the Form No. 10 filed by the assessee and he reproduced the Form filed by the assessee for the A.Y. 2016-17 as under: - Amount deemed Amount to be applied income Amount Date of Period for which up to the within Year of Amount remaining S.No. filing Form accumulated/set end of meaning accumulation accumulated for 10 apart the of sub- application previous section year (3) of section 11 1 2010 31/08/2011 27015000 2010 3408801 23606199 0 2 2011 05/09/2012 28415000 2011 0 28415000 0 3 2012 23/08/2013 27151000 2012 0 27151000 0 4 2013 29/08/2014 32300000 2013 0 32300000 0 5. 2014 10/09/2015 28837500 2014 0 28837500 0
From the above chart he observed that for the F.Y. 2010-11, assessee had accumulated a total amount of ₹.2,70,15,000/- out of which ₹.34,08,801/- had been applied and an amount of ₹.2,36,06,199/- remained accumulated but unutilized. As per the provisions of Section 11(3)(c) of the Act, the unutilized amount of ₹.2,36,06,199/- should have been offered for tax in the present A.Y. i.e. 2017-18. He observed that the assessee has failed to do so in its return of income and discharge the mandate of Section 11(3)(c) of the Act.
9 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh 9. Further, he relied on the Form-No. 10 filed by the assessee for the A.Y. 2017-18, for the sake of clarity it is reproduced below: - Amount deemed Amount to be applied Amount income Date of Period for which Year of Amount up to the remaining within S.NO filing Form accumulated/set accumulation accumulated end of the for meaning 10 apart previous application of sub- year section (3) of section 11 1 2011 05/09/2012 28415000 2016 16412997 12002003 12002003 2 2012 23/08/2013 27151000 2017 1851000 25300000 0 3 2013 29/08/2014 32300000 2018 0 32300000 0 4 2014 10/09/2015 28837500 2019 0 28837500 0
5 2015 12/09/2016 28833000 2020 0 28833000 0
With reference to the above chart he observed that assessee itself admitted on record that an amount of ₹.1,20,02,003/- accumulated but not utilized is deemed as income for the year. However, in the computation of income for AY 2017-18, the assessee has failed to offer the aforesaid amount as income, and the Assessing Officer has not conducted any verification on the issue. Therefore, he observed that the above said discrepancies were noticed.
10 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh 11. Further, the explanation and submissions made by the assessee in response to two show cause notices, Ld.CIT(E) observed that the assessee has submitted that due to oversight, the accumulation of income in Form No.10 was filed beyond the due date. It was further submitted that this belated application of Form No.10 was condoned by the undersigned vide order dated 09.11.2021 and an accumulation of ₹.3,53,90,000/- was duly granted. Further, he observed that the assessee in its submissions has not commented at all on the unutilized balance of ₹.1,20,02,003/- which has been deemed to be income by the assessee. Therefore, the Assessing Officer accepted the accumulation for the year of ₹.3,53,90,000/- and no adverse view is taken. According to him the condonation does not, in any way, override the provisions of Section 11(3)(c) of the Act which categorically and unequivocally states that any unutilized accumulation beyond the specified period will be deemed to be the income of the year. Accordingly, he came to the conclusion that he has satisfied that the Assessing Officer in non-consideration and non- verification of the unutilised amount out of total accumulation for the A.Y.2010-11 which is emerging from Form No. 10 for the A.Y. 2016-17 and also assessee has accepted in Form No. 10 filed for the A.Y. 2017-18 the amount of unutilised funds which works out to ₹.1,20,02,003/- which
11 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh is with definite tax implications and Assessing Officer has framed the order which is erroneous and prejudicial to the interest of the Revenue within the meaning of section 263 of the Act. Accordingly, he directed the Assessing Officer to reframe the Assessment Order for the A.Y. 2017-18 as under: - “(a) The unutilized accumulation of FY 2010-11 of Rs.2,36,06,199/- as evident from Form 10 of AY 2016-17 may be brought to tax as per the provisions of Section 11(3) of the Act. (b) The unutilized accumulation of Rs.1,20,02,003/- deemed as income by the assessee in its Form 10 for AY 2017-18, and further confirmed vide its submission dated 25/02/2022 as deemed to be income within the meaning of Section 11(3) of the Act may be brought to tax accordingly.”
Aggrieved assessee is in appeal before us raising following grounds in its appeal: - “1. The Ld. CIT(E) fell in factual error in not appreciating that the amount of untilised accumulation of Rs.1,20,02,003/- for F.Y. 2010- 11 viz. A.Y. 2011-12 was offered for tax by the assessee in its computation, u/s. 11(3), as is evident from clause 5 (ii) & (v) of its computation for A.Y. 2017-18. 2. The Ld. CIT(E) erred in not appreciating the facts & circumstances and holding that the amount of accumulation of Rs.2,36,06,199/- for F.Y. 2010-11 was unutilised and was to be brought to tax u/s. 11(3). 3. The Ld. CIT(E) misdirected himself in ignoring the computation of income filed by the assessee and accepted by the Ld. AO. 4. The Ld. CIT(E) was not justified in overlooking the assessee's submissions dated 25th Feb'2022 wherein the assessee had brought
12 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh to his notice the manner in which the accumulations created in F.Y. 2010-11 were utilised from F.Y. 2011-12 which clearly indicated that amount of Rs.1,50,12,997/ was utilised upto F. Y. 2016-17. 5. The assessee craves leave to add, modify, amend grounds(s) of appeal.”
At the time of hearing, Ld. AR of the assessee briefly explained the facts on record and he brought to our notice Page No. 8 of the Paper Book which is return of income filed by the assessee for the A.Y. 2017-18 and also brought to our notice Page No. 39 to 42 of the Paper Book which is the notice issued by the Assessing Officer u/s. 142(1) of the Act and he specifically brought to our notice Page No. 41 of the Paper Book to show that the Assessing Officer has asked the details relating the utilization of income u/s. 11(1)(a) of the Act and also details of amount paid during the previous year to any person referred in section 13(3) of the Act. Further, he brought to our notice additions declared by the assessee in its return of income u/s. 11(3) of the Act to the extent of ₹.120,02,003/-. He brought to our notice Page No. 37 of the Paper Book in which assessee has declared the unutilised fund u/s. 11(3) of the Act in Form No. 10. He basically submitted that assessee has to declare the unutilised income in the sixth year of accumulation of income. Since section 11(2)(a) of the Act specifies the period of accumulation or set apart which shall not exceed five years, that means the assessee has to declare the unutilised
13 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh accumulation of income in the sixth year of accumulation. He prayed that the 263 order passed by the Ld.CIT(E) is not proper and Assessing Officer has passed his order after consideration and proper verification has allowed the claim of the assessee.
On the other hand, Ld.DR relied on the order passed by the Ld.CIT(E).
Considered the rival submissions and material placed on record, we observe that Ld.CIT(E) invoked provisions of section 263 of the Act by observing the Assessment Order passed by the Assessing Officer dated 14.10.2019. The Assessing Officer passed the Assessment Order accepting the submissions of the assessee and accepted the return of income filed by the assessee. Ld.CIT(E) is of the opinion that assessee has not declared the deemed income u/s. 11(3) of the Act for the A.Y.2010-11 and A.Y.2011-12 in the present assessment year. Further, he observed that assessee has not declared the accumulation of income for A.Y. 2010-11 to the extent of unutilised as per the form-10 filed for the A.Y. 2016-17. He is of the view that assessee should have declared the unutilised accumulation of income for the A.Y. 2010-11 during this
14 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh assessment year and he is of the view that Assessing Officer has not verified the return of income properly.
After considering the submissions of both the parties and provisions of section 11(2) and 11(3) of the Act, we observe that assessee is allowed to set aside the unutilised income during the assessment year, such unutilised income can be accumulated for a period of the five years and any way would not exceed five years. That means assessee would be allowed to carry the unutilised income or accumulation of income for a period of five years. “Section 11(3) (a). …. (b) …. is not utilised for the purpose for which it is so accumulated (c) 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) ….. 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.”
In case of un-utilization of the above said income or to the extent of accumulation, such income should be declared by the assessee after
15 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh expiry of five years, that means the assessee should declare the unutilised funds in the previous year immediately following the expiry of the period aforesaid i.e., on the sixth year of such accumulation. Therefore, as per the above provision assessee has to declare such deemed income in A.Y. 2017-18 relevant to A.Y. 2011-12. Accordingly, we noticed that assessee has properly declared the unutilised accumulated funds to the extent of ₹.120,02,003/- during the A.Y.2017-18.
We observe, Ld.CIT(E) noticed that assessee has not declared such unutilised accumulation relating to A.Y. 2010-11. As per the above provision this should have been declared by the assessee in the A.Y.2016- 17. Since Ld. AR of the assessee as well as Ld.DR has not brought to our notice details of the assessment for A.Y. 2016-17, if at all, assessee has to declare the same in A.Y. 2016-17 and if assessee failed to declare the same in the above said assessment year the Ld.CIT(E) should have initiated the proceedings against the assessee for the A.Y. 2016-17 and not in the present assessment year. However, from the Form No-10 submitted by the assessee it indicates that assessee has properly declared the same in A.Y. 2016-17 and 2017-18. Therefore, the order passed by
16 ITA NO. 1066/MUM/2022 (A.Y. 2017-18) Vile Parle Mahila Sangh the Ld.CIT(E) u/s. 263 is set-aside and grounds raised by the assessee are allowed.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 20th September, 2022.
Sd/- Sd/- (KAVITHA RAJAGOPAL) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 20.09.2022 Giridhar, Sr.PS
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER
(Asstt. Registrar) ITAT, Mum