MADHUCHAMPAKLAL CHARITABLE TRUST,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-1 (EXEMPTION), AHMEDABAD

On the other hand, the Ld. DR vehemently supported the order of the authorities below.

We have heard the rival contention of both the parties and perused the materials available on record. Admittedly, the form 10 was filed by the assessee claiming the exemption of Rs.25,22,300/- u/s 11(2) of the Act after the due date of return filing but before the completion of the assessment. The Hon’ble High Court of Gujarat in the case of ACIT v/s. Stock Exchange Ahmedabad reported in 25 taxmann.com 469 has held that the assessee is entitled for the benefit of u/s 11 of the Act if the form 10 is filed before the completion of the assessment. The relevant extract of the judgment is reproduced as under: 8. From the facts and contentions noted hereinabove, the sole question that arises for consideration is whether the Tribunal was justified in holding that the time limit prescribed for filing Form No.10 under rule 17 of the Rules read with section 11(2) of the Act is directory. In the present case, it is an admitted position that the assessee had filed Form No.10 as required under rule 17 of the Rules alongwith the revised returns filed in respect of all the assessment years under consideration. Thus, admittedly, the forms had been submitted before the assessment came to be completed. At this juncture reference may be made to the decision of the Supreme Court in the case of Nagpur Hotel Owners' Association (supra) on which reliance had been placed by the learned counsel for the revenue, wherein it has been held thus: "6. It is abundantly clear from the wordings of sub-section (2) of Section 11 that it is mandatory for the person claiming the benefit of Section 11 to intimate to the assessing authority the particulars required, under Rule 17 in Form 10 of the Act. If during the assessment proceedings the Assessing Officer does not have the necessary information, question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particular part of the income from the net of taxation arises from Section 11 and is subject to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time he completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, in our opinion, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules even then, in our opinion, it is reasonable to presume that the intimation required under Section 11 has to be furnished before the assessing authority completes the assessment concerned because such requirement is mandatory and without the particulars of this income the assessing authority cannot entertain the claim of the assessee under Section 11 of the Act, therefore, compliance with the requirement of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit of Section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. In our opinion, the Act does not contemplate such reopening of the assessment. In the case in hand it is evident from the records of the case that the respondent did not furnish the required information till after the assessments for the relevant years were completed. In the light of the above, we are of the opinion that the stand of the Revenue that the High Court erred in answering the first question in favour of the assessee is correct, and we reverse that finding and answer the said question in the negative and against the assessee."

Examining the facts of the present case in the light of the principles enunciated in the above decision, as noticed earlier, the assessee filed Form No. 10 under rule 17 of the Rules at the time of filing revised returns in respect of each of the assessment years under consideration. Thus, evidently, the requirements of section 11(2) of the Act had been complied with before the completion of the assessments. Therefore, while completing the assessments for the assessment years under consideration, the Assessing Officer had the necessary information in respect of the claim for exemption under section 11 of the Act made by the assessee before him. Thus, this is not a case where information in respect of the claim of the assessee for giving benefit of section 11 of the Act was furnished after the assessments for the relevant assessment years were completed. Under the circumstances, the present case is squarely covered by the aforesaid decision of the Supreme Court. The assessee was,

The AO during the assessment proceedings found that the assessee has accumulated the sum of Rs. 15,53,217/- for the year ending 31/03/2011, but the same was not offered as income in the computation of total income in the year under consideration in pursuance to the provisions of section 11(3) of the Act. However, the assessee, on question by the AO, submitted that the amount accumulated in the earlier year for Rs. 15,53,217/- has been shown as income in the income and expenditure account in pursuance to provisions of section 11(3) of the Act. As per the assessee, out of total application of fund, in the year under consideration, the amount of Rs. 28,16,959/- includes the expenditure incurred out the fund accumulated in the earlier year. Thus, according to the assessee the amount accumulated in the earlier year was duly offered to tax. However, the AO dis-agreed with the submission of the assessee by observing as under: From the income & Expenditure, it is seen that during the year the assessee has received Rs.44,54,163/- as revenue receipts, out of these receipts assesee has made application for Rs.28,16,959/- at 63,243% which was below 85% of the receipts. Therefore, assessee can accumulate only Rs.9,69,080/- (85% of Rs.44,54,163 comes to Rs.37,86,038 - 28,16,959) only. However, the assesee has accumulated Rs.25,23,000/- during the F.Y 2015-16 relevant to A.Y 2016-17. from the above, it is seen that the assessee has re accumulate the amount. The assessee has not utilized Rs.15,53,217/- in last year (i.e fifth year) but re accumulate part amount. The assessee has utilized accumulated amount within five years if not utilized than deemed income is to be shown in the sixth year u/s.11(3) of the Act.

Aggrieved assessee preferred an appeal to the Ld. CIT(A) who confirmed the order of the AO by observing as under: I have gone through the facts of the case. Despite the appellant mentioning a plethora of case laws, when it comes to merits, I agree with the AO that on verification of Form No.10, it is seen that the it has not mentioned any amount of utilization of ealier year’s accumulation. Therefore, information furnished in Form no.10 filed on 21.11.2018 does not seen to be accurate. The appellant has shown income for Rs.15,53,217/- directly in the income & expenditure A/c. in the last year I.e fifth year which was accumulation of earlier year’s (31.03.2011) as per the Balance Sheet of A.Y 2016-17. I therefore refuse to interfere with the order of the AO on this ground.

Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

The Ld. AR before us filed a paper book running from pages 1 to 26 and reiterated the contention as made before the AO during the assessment proceedings. The Ld. AR to buttress his argument has also drawn our attention on form 10 along with the resolution placed on pages 7 to 8 of the paper book demonstrating that the amount of Rs. 25,26,000/- was accumulated under section 11(2) of the Act, out of the receipt pertaining to the year in dispute. Thus, it was contended by the ld. AR that the amount accumulated in the earlier year has been duly incurred in the income and expenditure account. The fund has been applied in the year under consideration amounting to Rs. 28,16,959/- which also represents the expenditure out of the accumulated fund.

On the other hand, the Ld. DR vehemently supported the order of the authorities below.

We have heard the rival contentions of both the parties and perused the materials available on record. It is the grievance of the revenue that the assessee has re-accumulated the fund which was to be treated as income under the provision of section 11(3) of the Act amounting to Rs. 15,53,217/- only. However, this finding of the revenue is contrary to the facts available on record. For this purpose, we refer the form No. 10 place on pages 7 and 8 of the paper book. The relevant extract of the form is reproduced as under: PIYUSHBHAI S. SHAH on behalf of MADHU CHAMPAKLAL CHARITABLE TRUST, hereby bring to your notice that it has been decided by a resolution passed by the trustees on 15/09/2016 (copy enclosed) that, out of the income of the trust for the previous years(s), an amount of Rs.25,23,000/- percent of the income of the trust such sum as it is available at the end of the previous years), should be accumulated or set apart till the previous year(s) ending 31sth March, 2021, in order to enable the trustees to accumulate sufficient funds for object of the trust. 15.1 From the above form 10, it is clearly spelt out that the fund of Rs. 25,23,000/-was accumulated out of the current year gross receipt. Thus, it can be safely inferred that the accumulated amount in the earlier year has not been re- accumulated in the year under consideration. In view of the above, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed.

In the result, the appeal filed by the assessee is hereby allowed.