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Facts
The assessee trust accumulated Rs. 35,81,000/- in FY 2016-17, of which Rs. 10,13,623/- was utilized in AY 2022-23 and the balance Rs. 25,67,377/- was utilized in FY 2022-23 (AY 2023-24). The Assessing Officer denied the benefit of accumulation under Section 11(3) of the Income Tax Act, 1961, stating it was not utilized within the stipulated time.
Held
The Tribunal held that the amendment to Section 11(3) regarding utilization of accumulated funds within 5 years is applicable prospectively from AY 2023-24 onwards. For the period in question (AY 2017-18), the unamended provisions were applicable, and the funds were utilized within the prescribed time. Therefore, the addition made by the AO was deleted.
Key Issues
Whether the amendment to Section 11(3) of the Income Tax Act, 1961, regarding the utilization of accumulated funds, is applicable retrospectively or prospectively, and whether the utilization of funds in the present case was within the stipulated time.
Sections Cited
143(1), 250, 11(3), 11(2), 139, 12AA, 12AB, 10(23C)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: MS.ASTHA CHANDRA & DR.DIPAK P. RIPOTE
Assessment Year: 2023-24 Shri Nashik Road Jain V Exemption Ward-1(1), Shwetambar Murtipujak Trust, s Nashik. 1, Datta Mandir Road, Nashik Road, Nashik – 422101. Maharashtra. PAN: AAJTS3553P Appellant/ Assessee Respondent / Revenue Assessee by Shri Sharad A Shah – AR Revenue by Smt. Shilpa NC – Addl.CIT(DR) Date of hearing 01/07/2025 Date of pronouncement 29/07/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by Assessee against the order of ld.Addl./Joint Commissioner of Income Tax(Appeal)-2, Gurugram passed under section 250 of the Income Tax Act, 1961 for the A.Y.2023-24 dated 03.03.2025, emanating from order u/s.143(1)of the Income Tax Act, 1961, dated 02.12.2024. The Assessee has raised following grounds of appeal :
1) The Ld. CPC erred in (CIT-A in confirming) making adjustment of Rs. 25,95,759/-u/s 11(3) as deemed Income and thereby erred in raising net demand of Rs. 9,05,840/- 2) The Ld. CPC and Ld. CIT-A ought to have appreciated the fact that amendment to S. 11(3), regarding utilization of accumulated funds within 5 years, is applicable prospectively and applicable only for the funds accumulated from AY 23-24 onwards and not for the funds which are already accumulated prior to AY 23-24. 3) On without prejudice basis, the Ld. CPC/AO and CIT-A be directed to consider the fact that, in FY 16-17, the assessee trust was not liable to make any accumulation, and it filed Form No-10 mistakenly. In FY 16-17 trust had utilized more than 85% of its receipt towards charitable objects and therefore no adjustment be made in AY 23-24. 4) The Adjustment made by the Ld. CPC is void ab initio and beyond CPCs scope as provided u/s 143(1), CPC has no power to make adjustment on the issue which are debatable in nature and therefore the intimation order passed by Ld. CPC be quashed 5) The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case.
Submission of ld.AR :
2. The ld.AR for the Assessee submitted that during the F.Y.2016-17, the Trust had accumulated an amount of Rs.35,81,000/-. Out of the sum of Rs.35,81,000/-, amount of Rs.10,13,623/- was utilized in A.Y.2022-23 and balance amount of Rs.25,67,377/- has been utilized in F.Y.2022-23 i.e.A.Y.2023-24. The said amount is allowable as per the Section 11(3) as applicable in A.Y.2017-18. The ld.AR relied on the decision of ITAT Pune Bench of Yashwantrao Chavan Maharashtra Open University Vs. for A.Y.2023-24 vide order dated 23.06.2025.
Submission of ld.DR : 3. The ld.DR for the Revenue relied on the order of ld.CIT(A).
Findings & Analysis : 4. We have heard both the parties and perused the record placed before us. In this case, Return of Income for A.Y. 2023-24 was filed on 30.10.2023. An order u/s.143(1) was passed on 02.12.2024. The order u/s.143(1) denied assessee benefit of accumulation u/s.11(3) of the Act. It is mentioned in the order u/s.143(1) that accumulation should be allowed for F.Y.2017-18 upto five years i.e.upto 31.03.2023 only. Aggrieved by the order us/.143(1), Assessee filed appeal before the ld.CIT(A).
4.1 The ld.CIT(A) upheld the order u/s.143(1), the relevant paragraph 6.3 of the order of ld.CIT(A) is reproduced here as under : “6.3 Thus, as per these provisions' income accumulated during A.Y. 2017-18 was required to be utilized upto A.Y. 2022-23 (till 31.03.2022). Since the appellant was not able to utilise it within stipulated time, according to provisions of Section 11 (3) of Income Tax Act, the amount of Rs 25,67,377/- is taxable as deemed income during the instant assessment year.”
Aggrieved by the order of the ld.CIT(A), Assessee has filed appeal before this Tribunal.
5.1 Thus, it is an admitted fact that during A.Y.2017-18, Assessee had accumulated certain income, out of that Rs.25,67,377/- was not utilized till 31.03.2022. Hence, Assessing Officer made addition u/s.11(3) of the Act. In this context, we must apply Section 11(3) as it existed during A.Y.2017-18, when the amount was accumulated. There have been Amendments to Section 11(3) subsequently.
5.2 However, the identical issue has been decided by ITAT Pune Bench in the case of Yashwantrao Chavan Maharashtra Open University(supra) which is reproduced here as under : “16. 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 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 not be treated as application of income for charitable 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 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], [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 (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 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 6th year i.e. financial year 202223. The assessee in the instant case undisputedly has utilized the amount before 31.03.2023.”
Therefore, respectfully following the Co-ordinate Bench’s decision, we direct the Assessing Officer to delete the addition of Rs.25,67,377/-. Accordingly, Ground Nos.1, 2 and 3 raised by the Assessee are allowed.
Since we have allowed the Ground Nos.1, 2 and 3 of the Assessee, the Ground No.4 becomes academic in nature. Accordingly, Ground No.4 is dismissed.
Ground No.5 is general in nature, needs no adjudication, hence, dismissed.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 29 July, 2025.