SANTHOME CHARITABLE SOCIETY,CHENNAI vs. THE ITO EXEMPTIONS, WARD-3, CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi, dated 17.03.2023 relevant to the assessment year 2016-17.

Brief facts of the case are that the assessee society is registered under section 12AA of the Income Tax Act, 1961 [“Act” in short] and filed its return of income for the assessment year 2016-17 on 22.07.2016 declaring total income of NIL. The Assessing Officer has noted that the gross receipts was to be ₹.2,66,53,730/- as per its return of income. The assessee has claimed an expenditure of ₹.1,27,89,278/- (excluding depreciation) towards revenue expenditure and an amount of ₹.11,92,185/- towards capital expenditure. Accordingly, the case of the assessee was selected for complete scrutiny and notice under section 143(2) of the Act dated 05.09.2017. Notice under section 142(1) of the Act dated 29.05.2018 was also issued and served on the assessee. After considering the submissions of the assessee and materials available on record, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 28.12.2018 by assessing total income of the assessee at ₹.1,13,63,423/- after making various additions.

The only issue involved in this appeal is with regard confirmation of disallowance on accumulation of ₹.26,89,215/-. During the course of assessment proceedings, the Assessing Officer has noted that the assessee has mentioned in the ITR in col.9(vi) and in the Audit report in col.5, the assessee had set apart an amount of ₹.1,01,87,466/- towards accumulation under section 11(2) of the Act. However, the assessee has not filed Form 10 towards the same. As per the provisions of section 11(2) read with Rule 17, the assessee has to exercise the option under the said provisions by filing the Form No. 10 electronically before the due date of filing the return of income. Since, the assessee has not filed Form 10 towards accumulation of income as per the provisions of the Act, the Assessing Officer completed the assessment by denying the claim of accumulation under section 11(2) of the Act. Further, the Assessing Officer has noted from the return of income filed, in Schedule I, the assessee had accumulated an amount of ₹.41,49,136/- during the financial year 2009-10 corresponding to assessment year 2010-11 and the same has not been expended as on date. The assessee has submitted the computation of income filed for the assessment year 2010-11 and added that actual surplus amount was only ₹.26,89,215/- and that the amount of ₹.41,49,136/- includes 15% excluded under section 11(1)(a) of the Act. The Assessing Officer has observed that the period for which the income is to be accumulated or set apart shall in no case exceeds five years i.e. the amount that has been accumulated should be utilized within five years. Accordingly, the unutilized amount of ₹.26,89,215/- has been brought to tax as per the provisions of Section 11(3) of the Act. Since the assessee trust has not furnished any evidence for the utilization of accumulated amount or payment of tax on the same. On appeal, the ld. CIT(A) confirmed the disallowance since the assessee has not furnished any evidence for the utilization of accumulated amount or payment of tax thereon.

On being aggrieved, the assessee is in appeal before the Tribunal by raising following grounds of appeal:

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. As per return of income filed, in Schedule I, the Assessing Officer has noted that the assessee had accumulated an amount of ₹.41,49,136/- during the financial year 2009-10 corresponding to assessment year 2010-11 and the same has not been expended as on date. The assessee has submitted the computation of income filed for the assessment year 2010-11 and added that actual surplus amount was only ₹.26,89,215/- and that the amount of ₹.41,49,136/- includes 15% excluded under section 11(1)(a) of the Act. The Assessing Officer has observed that the period for which the income is to be accumulated or set apart shall in no case exceeds five years i.e., the amount that has been accumulated should be utilized within five years. Accordingly, the unutilized amount of ₹.26,89,215/- has been brought to tax as per the provisions of Section 11(3) of the Act. On appeal before the ld. CIT(A), the assessee filed a chart, which is pointed out by the ld. counsel and submitted that accumulated amount has been utilized. However, neither before the ld. CIT(A) nor before the Tribunal, the assessee was not able to established that income accumulated has been utilized within the period specified in the Income Tax Act, 1961. Thus, we sustain the order of the ld. CIT(A) on this issue in confirming the disallowance made under section 11(3) of the Act. Accordingly, the ground raised by the assessee is dismissed.

In the result, the appeal filed by the assessee is dismissed. Order pronounced on 21st February, 2024 at Chennai.