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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI SUDHIR PAREEK
Assessee by : None Revenue by : Ms. Monika Singh, CIT(DR) Date of Hearing : 10.07.2025 Date of Pronouncement : 10.07.2025 ORDER PER SUDHIR PAREEK, JM
The aforecaptioned appeal has been preferred by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)-40, Delhi, dated 04.01.2019 for A.Y. 2015-16.
ITA No.- 1453/Del/2019 Trust Fund for Empowerment of persons with disabilities 2. The appellant/assessee has raised following grounds of appeal for adjudication: -
The Learned Commissioner of Income Tax (Appeals),-40, (hereinafter referred to as the LD. CIT(A). New Delhi, erred on facts and in law in confirming the addition of Rs. 14,60,09,038/-made by the Ld. A.O. in the hands of the appellant without appreciating the fact that the whole of the receipts of Rs. 14,60,09,038/-pertaining to F.Y. 2008-2009 was utilized by the end of the F.Y. 2013-2014.
The Ld. CIT(A) erred on facts and in law in not appreciating that in case of non utilization of accumulated income by the end the 5th year, addition could be made in the 6th year only to the extent of accumulated income (ie Rs. 12,41,07,682/-) and not the whole of receipts.
3. The Ld CIT(A) erred on facts and in law in not appreciating that the accumulated income of the previous year is required to be utilized first and then the income of the current year. 4. The Ld. CIT(A) erred on facts and in law in confirming the charging interest u/s 234A, 234B and 234C of the Act. 5. The Ld. CIT(A) erred on facts and in law in not providing the appellant the proper adequate or sufficient opportunity to have it say or make necessary compliance of the reasons relied upon by him making various additions, charging interest and initiation of proceedings u/s 271(1)(c) of the I.T. Act, 1961. 6. The appellant reserves its right to advance such other grounds before or at the hearing, which it may consider fit and appropriate, for which it craves leave to amend, alter or otherwise modify the grounds appearing hereinbefore, with the kind permission of the Hon'ble Bench.”
Facts of the case may be summarized as that the return of income was filed by assessee, declaring Nil income on 14.08.2015, declaring Nil income after claiming exemption under Section 11 of the Income Tax Act, 1961 (‘the Act’). Further case was selected for scrutiny and Page 2 of 8
ITA No.- 1453/Del/2019 Trust Fund for Empowerment of persons with disabilities at the completion of the assessment proceedings, income of the assessee recomputed as Rs 14,60,09,038/-.
Aggrieved with the same, the assessee filed appeal before the Learned CIT(A) which was dismissed. Then, assessee by way of present appeal before us.
At the outset, it is noticed that on 13/06/2024 adjournment sought by the Learned AR and the case was adjourned accordingly for 09/09/2024, but thereafter from 13/06/2024 to till date none appeared on behalf of the assessee despite knowledge of hearings and without seeking adjournment by furnishing valid reasons.
5.1 We, therefore, proceed to dispose of the appeal ex parte qua the assessee, after hearing the Ld. Departmental Representative (DR) and on the basis of material available on record, as none appeared on behalf of the assessee for long time in this oldest case.
In the grounds of appeal, it is submitted that the Learned CIT(A) erroneously declined to appreciate that in the case of non-utilization of accumulated income by the end of 5th year, addition could be made in the 6th year only to the extent of accumulated income and not the Page 3 of 8
ITA No.- 1453/Del/2019 Trust Fund for Empowerment of persons with disabilities whole of receipts. Vide elaborated impugned order, the Learned CIT(A) observed that no accumulation of 15% is to be allowed on unutilized amounts which have been accumulated u/s 11(2) and which are to be brought to tax in accordance with the provisions of section 11(3) of the Act and this amount cannot be considered for the purpose of application as contended by the assessee. Relevant extract of the order as under:
“5.1.3 As noted above, while deciding the appeal for assessment year 2014-15, it had been held that the amount accumulated in financial year 2008-009 had to be considered as deemed income for assessment year 2015-16 since the same had not been utilized for the purpose for which it had been accumulated. Hence, there is no infirmity in the order of the Assessing Officer in bringing to tax the deemed income of Rs. 14.60,09,038/- under section 11(3)(c). As regards the contention of the appellant that the scheme for utilizing the amounts set aside have now been framed and the amounts would now be utilized, it is to be noted that as per the proviso to section 11(2), only that period during which the income could not be applied for the purpose for which it was accumulated or set apart due to an order or injunction of any court can be excluded. This is not the case with the appellant.
5.1.4 The other issue for consideration is whether 15% accumulation as claimed by the assessee will be allowed before taxing the unutilized amount in terms of section 11(3)(c). In the case of B.N. Gamadia Parsi Hunnarshala v. Asstt. DIT (Exemption) [(2002) 77 TTJ 274 (Mum.)], the assessee was a trust established with the object of carrying on charitable activities. In the assessment year 1983-84, it was allowed to accumulate a particular amount under section 11(2). In order to avail the benefit of section 11, the assessee had to utilize accumulated amount for the specified purposes within 10 years from the date of accumulation. The assessee did not do so till the Assessment Year 1993- 94. In the assessment for the assessment year 1993-94, the Assessing Officer observed that the unutilized amount was taxable under section 11(3) as 'deemed income. The assessee claimed that deemed income Page 4 of 8
ITA No.- 1453/Del/2019 Trust Fund for Empowerment of persons with disabilities should be included as income earned by the assessee in the relevant previous year and on such total income the assessee should be allowed to accumulate under section 11(2) in addition to deduction of 25 per cent of the unutilized amount. This claim was rejected by the Assessing Officer. On appeal, the Commissioner (Appeals) confirmed the order of the Assessing Officer. On second appeal, the Hon'ble ITAT, Mumbai held as under:
"Under section 11, exemption is available only on the income witlun the meaning of section 11 and not on the deemed income. Consequently, the assessee could not accumulate deemed income either under section 11(1)(a) or 11(2).
The intention of the legislature, as could be seen from section 11 ts to allow a charitable trust to accumulate a portion of income derived from property and not other incomes. However, by virtue of section 12, voluntary contributions are deemed to be income from property and, therefore, Explanation (1) was added to section 11(1) which specified that in computing 25 per cent of the income which maybe accumulated, voluntary contributions should be taken into account as they are deemed to be part of the income. Thus, wherever the legislature intended to include deemed income as part of the income 'derived from property' it was spelt out clearly. However, section 11(3) uses the expression 'income of such could not be said that deemed income under section 11(3) should be taken as part the income derived from property for the purposes of allowing the benefit of accumulation.
The matter might also be looked from another angle. The assessee would be allowed to accumulate income if there is real income. Something which is not in the possession of the assessee cannot be accumulated or utilized at a later date. Under section 11(3) the sum which is applied to the purposes other than the charitable or religious purposes would also be treated as deemed income of the assessee though the accumulated income is not available with the assesser because it was applied for the different purpose. Reverting to section 11(1)(a) and 11(2), 25 per cent of the income can be accumulated or set apart for an application to some specified purposes in India which means such amount should be available with the assessee for application. In the case of deemed income where the amount is already spent by an assesser (for the purposes other than charitable purposes) it cannot be said that the assessee accumulates with an intention to Page 5 of 8
ITA No.- 1453/Del/2019 Trust Fund for Empowerment of persons with disabilities apply it for a rightful purpose. Thus, even on the linuted count the assessee cannot claim the benefit of accumulation because the accumulation is allowed only if the intention of the assessee is to apply the same for the specific purpose. Thus, assessee could not claim the benefit of accumulation with respect to the deemed income.
Under the circumstances, and in the light of the decision of the Bombay high Court in CIT to. Thand Electricity Supply Ltd. [1994] 206 ITR 727 the assessee was not entitled to the benefit of accumulation of deemed income which was taxable under section 11(3).
The assessee relied upon certain decisions in support of its contention that a legal fiction luts to be carried to its logical conclusion. A legal fiction, no doubt, has to be carried to its logical concltision but at the same time it cannot be stretched to an extent that frustrates the object of the particular provision. In the instant case, it has been Iughlighted that where an assessee might have applied the income for the purpose other than charitable purposes and, thus, there was no money available with the assessee in which event it could not be said that the assessee could accumulate deemed income for some specified purposes. Such an interpretation would lead to anomalous situation wluch was not contemplated under section 11(1)(a) and 11(2) because an assessee is entitled to exemption only on such income which was either applied for charitable purposes or intended to be applied for charitable purposes and not otherwise.
The Circular No. 29 dated 23-8-1969, issued by the CBDT, was in consonance with the intention of the legislature and also the plain meaning that could be ascribed to section 11. Under these circumstances, there was no infirmity in the orders of the tax authorities and, therefore, the appeal filed by the assessee was to be dismissed."
6.2 On the basis of above fact situation, we do not find any ground to interfere with the logical findings of the Learned CIT(A).
ITA No.- 1453/Del/2019 Trust Fund for Empowerment of persons with disabilities 6.3 In view of the above, the appeal of the assessee deserves to be dismissed.
Order pronounced in the Open Court on 10.07.2025