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Facts
The assessee, a public charitable trust, filed its return for AY 2023-24 declaring nil income after claiming exemption under section 11. The return was processed under section 143(1), leading to an addition of Rs. 43,78,990/-. The assessee had accumulated funds in FY 2016-17 and claimed they were utilized within the permissible period.
Held
The Tribunal held that the amendment brought by the Finance Act, 2022, regarding the application of accumulated funds, is prospective and does not apply to accumulations made prior to AY 2023-24. Therefore, the addition made by the AO and confirmed by the CIT(A) was not sustainable.
Key Issues
Whether the accumulated sum of Rs. 43,78,990/- from FY 2016-17 can be treated as income in AY 2023-24, considering the amendments by the Finance Act, 2022? Whether the adjustment made by the AO was a permissible prima facie adjustment under section 143(1)?
Sections Cited
Section 250, Section 143(1), Section 11(3), Section 10(23C), Section 11(2)(a), Section 11(3)(c), Section 115BBI, Section 234A, Section 234B, Section 234C
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Before: SHRI T. R. SENTHIL KUMAR & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 19.03.2025 by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘CIT(A)’] for the assessment year (AY) 2023-24.
The grounds of appeal
raised by the assessee are as under:
1. In the facts and circumstances of the case and in law the Assessing Officer (CPC) erred in making addition of Rs Rs.43,78,990/-by a. making adjustment u/s 143(1) which is not permissible because the same is not a prima facie adjustment b. wrongly treating the accumulated sum of Rs Rs.43,78,990/- as not having been applied even though the same was spent in 6th year i.e. AY 23-24 /AY.2023-24 Green Mumbay Lions Education Trust c. even though time period of 6th year was allowed for applying the said sum of Rs Rs.43,78,990/- d. amended provisions of curtailing the application to 5 years is not retrospective e. Also erred in keeping application u/s 154 pending on the same line. f. Wrongly holding that for 10B is not filed g. Ignoring form 10BB which is correct report to be filed 2. In the facts and circumstances of the case and in law the Assessing Officer (CPC) erred in levying interest u/s 234A, B and C.
3. In the facts and circumstances of the case and in law, the leaned Addl/JCIT(A) erred in confirming the addition without considering the submission of the Appellant and without granting an opportunity of personal hearing thereby not complying with the principles of natural justice. [B] Relief Prayed: The appellant therefore prays Your Honour, 1) To delete the addition of RS 43,78,990/- 2) To quash adjustment made u/s 143[1][a] 3) To delete interest u/s 234A B C”
Brief facts of the case are that the assessee is a public charitable trust. It filed return of income for AY 2023-24 on 21.10.2023, declaring Nil total income after claiming exemption u/s 11 of the Act. The assessee had filed Form No.10B and 10BB as per Rule 17B of the IT Rules. The return was processed u/s 143(1) of the Act on 21.12.2024, determining total income at Rs.43,78,990/- and raising a demand of Rs.14,80,700/-. The CPC, Bangalore (in short, ‘AO - CPC’) had issued an prima facie adjustment communication to the assessee on 29.11.2024, stating that there was inconsistency in ‘deemed income’ referred in Explanation - 4 to the third proviso to section 10(23C) or section 11(3) at Sr. No.1 of Schedule 115BBI and Sr. No. 33(b) of Form No.10B.
/AY.2023-24 Green Mumbay Lions Education Trust 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The appellant filed a written submission, which is reproduced at page 6 to 9 of the appellate order. The CIT(A) has extracted provisions of section 143(1)(a) of the Act and observed that before making adjustment u/s 143(1)(a) of the Act, intimation has to be given to the assessee requiring him to respond such adjustment. The AO, CPC duly issued intimation regarding the prima facie adjustment vide communication dated 29.11.2024, which was not responded to by the assessee. Therefore, the AO, CPC made disallowance of Rs.43,79,990/- as deemed income u/s 11(3) or Explanation – 4 of section 10(23C) of the Act. In the appellate proceedings, the appellant contended that it had set apart or accumulated funds in FY 2016-17 (AY 2017-18) amounting to Rs.50,00,000/- and balance available for utilization was Rs.43,78,993/-. The appellant submitted that the unused fund can be used in the sixth year as per the provisions of section 11(3)(c) of the Act. However, the AO, CPC considered it as income for AY 2023-24. The CIT(A) referred to the amended provisions of section 11(3) and 10(23C) by the Finance Act, 2022 w.e.f. AY 2023-24 so as to tax such deemed income in sixth year if the accumulated income is not applied within five years. He also referred to the amended provisions of section 11(3) and 11(2)(a) of the Act w.e.f. AY 2023-2024 and stated that a reading of section 11(2)(a) and clause (c) of section 11(3) of the Act would show that the time allowed for applying accumulation for charitable purpose is five years as mentioned in section 11(2)(a) of the Act. Further, such unused funds by the end of fifth year shall be /AY.2023-24 Green Mumbay Lions Education Trust deemed as income u/s 11(3)(c) in the sixth year. Since the appellant had accumulated fund of FY 2016-17 of Rs.43,78,993/-, it should have used the same either on or before FY 2021-22 as per proviso to section 11(2)(a) of the Act. The unused fund by the end of fifth year would be deemed as income u/s 11(3)(c) of the Act. Therefore, the CIT(A) confirmed the order of AO, CPC.
Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee has filed a paper book including tax computation, audited financials, form 10BB, details of year-wise accumulation and year-wise spending, details of amount spent etc. He submitted that the impugned adjustment is not a permissible prima facie adjustment u/s 143(1) of the Act. He also submitted that the adjustment of Rs.43,78,993/- pertains to the old accumulation of FY 2016-17. He referred to page 26 of the paper book and submitted that the total amount accumulated in FY 2016-17 was Rs.50,00,000/- out of which Rs.6,21,007/- was applied for charitable purposes etc. and the balance of Rs.43,78,993/- was available for application. He relied on the decisions in case of Dadar Digamber Jain Mumkshu Mandal vs. CIT(E), (2025) 176 taxmann.com 661 (Mum – Trib.) and Shri Taldhwaja Jain Swetamber Tirth Committee vs. ITO (Exemption), (Ahd – Trib.) and requested to set aside the order of CIT(A).
On the other hand, learned Senior Departmental Representative (ld. Sr. DR) of the revenue supported the order of lower authorities.
/AY.2023-24 Green Mumbay Lions Education Trust 7. We have heard both the parties and perused the materials available on record. We have also deliberated on the decisions relied upon by the ld. AR. The issue under dispute is taxability of Rs.43,78,993/-, which was accumulated u/s 11(2) of the Act in FY 2016-17. The ld. AR has filed details of year-wise accumulation and spending, which is at page 26 of paper book. He submitted that out of Rs.50,00,000/- accumulated in FY 2016-17, Rs.6,21,007/- was applied and balance available for application was Rs.43,78,993/-. He submitted that the said amount was available for utilization during FY 2022-23 (AY 2023-24). He relied on the decision in case of Dadar Digamber Jain Mumukshu Mandal (supra) and Shri Taldhwaja Jain Swetamber Tirth Committee (supra). The ITAT, Mumbai in case of Dadar Digamber Jain (supra) held that amendment to section 11(3)(c) by the Finance Act, 2022 w.e.f. 01.04.2023, which omitted extra period of one year following expiry of initial period of accumulation of five years is prospective in nature and, thus, same would be applicable only to fresh accumulation for AY 2023 onwards. As far as accumulation relating to FYs 20216-17 and 2017-18 were concerned, the assessee had time window till 31.03.2023 and 31.03.2024 respectively, by which it had to utilize accumulated income. The amendment by the Finance Act, 2022 does not debar assessee from availing the said time window in respect of existing accumulations. The ITAT, Ahmedabad in case of Shri Taldhwaja Jain Swetamber Tirth Committee (supra) has also allowed the appeal of assessee under similar facts. The relevant part of the decision is reproduced below for ready reference:
/AY.2023-24 Green Mumbay Lions Education Trust “7. We have heard the rival contentions and perused the material on record. In the case of Meshri Mahajan Vanda vs. Income-tax Officer (Exemption) [2025] 178 taxmann.com 93 (Ahmedabad - Trib.), the Ahmedabad ITAT held that where assessee trust accumulated income pertaining to financial years 2016-17, assessee had time window till 31-3-2023 by which it could utilize accumulated income. The amendment brought in by Finance Act, 2022, did not debar assessee from availing said time window in respect of existing accumulations and amendment had to be read prospectively in respect of fresh accumulations for period pertaining to previous year starting from 1-4-2022 onwards. In the case of Dadar Digamber Jain Mumukshu Mandal vs. Commissioner of Income- tax (Exemption) [2025] 176 taxmann.com 661 (Mumbai - Trib.), the ITAT held that amendment to section 11(3)(c) by Finance Act, 2022 with effect from 1-4- 2023 which omitted extra period of one year following expiry of initial period of accumulation of five years is prospective in nature and, thus, same would be applicable only to fresh accumulations from assessment year 2023-24 onwards. In the case of Yashwantrao Chavan Maharashtra Open University vs. Commissioner of Income-tax (Exemption) [2025] 175 taxmann.com 988 (Pune - Trib.) vide order dated 23-06-2025, the ITAT held that where trust had accumulated an amount during assessment year 2017-18 and had utilized the same by 31-3-2023 i.e. in 6th year of accumulation, it could not be taxed in 6th year i.e. assessment year 2023-24.
The sole issue involved in the present appeal relates to the taxability of the amount of Rs.30,00,000/- accumulated under section 11(2) of the Act in Financial Year 2016–17 and utilised during Financial Year 2022–23. The Central Processing Centre (CPC) and the CIT(Appeals) held that since the amount was utilised beyond the stipulated five-year period, it was rightly treated as deemed income under section 11(3) and taxed under section 115BBI of the Act, as per the amended provisions introduced by the Finance Act, 2022. However, we find that this issue is now squarely covered in favour of the assessee by several decisions of the coordinate benches of the ITAT referred to above. In view of the above consistent judicial precedents, we are of the considered opinion that the amendment brought in by the Finance Act, 2022, is prospective and does not apply to accumulations made prior to Assessment Year 2023–24. Since the assessee in the present case had accumulated the amount of Rs.30,00,000/- in Financial Year 2016–17 and utilised the same in Financial Year 2022–23, i.e., within the extended time permitted under the unamended provisions of section 11(3) of the Act, the said amount cannot be treated as deemed income for the year under consideration.
9. Accordingly, the adjustment made by the CPC and confirmed by the CIT(Appeals) is not sustainable in law. We therefore set aside the order of the CIT(Appeals) and direct the Assessing Officer to delete the addition of Rs.30,00,000/- made under section 115BBI of the Act.”
/AY.2023-24 Green Mumbay Lions Education Trust 8. The facts of the present appeal are similar to the facts of the cases referred to above. Hence, following the above decisions cited supra, we hold that the adjustment made by the AO, CPC and confirmed by the CIT(A) is not liable to be sustained. However, the amounts accumulated, applied and balance available for application need verification by the AO. Accordingly, the order of CIT(A) is set aside and the AO is directed to verify the details as discussed above and allowed relief accordingly. The ground is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 23/12/2025.