2017 (8) TMI 169 - AT - Income Tax

Partial Appeal Success on Taxing Accumulated Fund Issue

The appeal was partly allowed, and the issue of taxing the accumulated fund under section 11(3)(c) for not being utilized within the prescribed time was ... Approval under section 12AA - Held that:- It is noticed that the assessee has taken a different plea that the amount accumulated during the earlier years were not distributed to various temples for the reason that approval under section 12AA for the Annadhanam Scheme of such temples were rejected and on appeal, registration was granted later. However, before the learned Commissioner of Income-tax (Appeals) taken a different contention stating that the assessee constituted as a central fund and act as a facilitator to disburse the funds from the service centre to the deficiency centre and until such disbursement act as a custodian of the funds due to the deficient centres. Hence, such funds are not exigible to the tax in the hands of the custodian. However, the assessee has not presented the details of utilisation of accumulated funds related to the assessment year 2005-06 and subsequent assessment years. Hence, we are inclined to set aside the order of the lower authorities and remit the issue in dispute to the file of the Assessing Officer for fresh consideration. It is needless to say that an opportunity of hearing to be given to the assessee to the present assessee's case. With this observation, the issue raised by the assessee in its appeal is partly allowed for statistical purposes. Issues:Taxing accumulated fund under section 11(3)(c) of the Income-tax Act for not being utilized within prescribed time.Interpretation of provisions of section 11(2) of the Act regarding accumulation of income.Applicability of CBDT Circular No. 29 dated August 23, 1969.Validity of taxing 15% of gross total income under section 11(3)(c).Interpretation of judicial precedents - CIT v. Karnataka Urban Infrastructure Development and Finance Corporation, CIT v U. P. Upbhokta Sahkari Sangh Ltd., and MR. A. R. Educational Society v. CIT.Applicability of the decision in Addl. CIT v. A. L. N. Rao Charitable Trust [1995] 216 ITR 697 (SC) on absolute exemption of accumulated income.Analysis:The appeal was against the order of the Commissioner of Income-tax (Appeals) directing the taxing of an accumulated fund of &8377; 3,26,56,820 under section 11(3)(c) for not being utilized within the prescribed time of five years. The Assessing Officer relied on CBDT Circular No. 29 dated August 23, 1969, and held the amount as deemed income of the assessee. The Commissioner upheld the decision, citing section 11(2) provisions allowing accumulation for five years post-2001. The assessee's reliance on judicial precedents was deemed irrelevant, and the Commissioner declined interference with the Assessing Officer's order on this count.Regarding the taxing of 15% of the gross total income under section 11(3)(c), the Assessing Officer relied on Circular No. 29, while the assessee cited the Supreme Court decision in Addl. CIT v. A. L. N. Rao Charitable Trust emphasizing absolute exemption. The Commissioner directed the deletion of the addition based on this decision.During the appeal, the assessee contended that the accumulated funds were spent up to the assessment year 2010-11 and the outstanding fund in 2011-12 was not from the 2005-06 assessment year. The Tribunal found discrepancies in the arguments presented and remitted the issue back to the Assessing Officer for fresh consideration, emphasizing the need for detailed utilization details to be provided.In conclusion, the appeal was partly allowed for statistical purposes, and the issue was remitted to the Assessing Officer for further examination, ensuring the assessee's right to be heard.