Unutilized charitable income deemed as income under Income Tax Act

The appeal was disposed of with the direction to recompute the income in line with the legal provisions, considering the unutilized amount of charitable income already factored into the computation. The Tribunal upheld that the unutilized amount should be treated as deemed income under section 11(3) of the Income Tax Act, 1961, upon the expiration of the five-year utilization period.

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Issues:
Adjustment of unutilized income for charitable purposes under section 11(2) of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order by the Commissioner of Income Tax (Appeals) regarding the adjustment made to the returned income by adding an amount of Rs.6,30,000 under section 143(1) of the Act, invoking provisions of Section 11(2). The issue raised by the assessee was that the Revenue authorities erred in making this adjustment. The assessee had set apart Rs.6,30,000 for charitable purposes in A.Y 2007-08 but failed to utilize it, leading to its addition back to the income for the relevant year. The contention was that this addition amounted to double counting since the unutilized income had already been considered in the computation of income. The Department argued that the unutilized amount should have been added to the income, as per law. The assessee conceded that the unutilized amount should be treated as deemed income, as per section 11(3) of the Act.

The treatment of unutilized accumulated income for charitable purposes is governed by section 11(3) of the Act. The unutilized amount of Rs.6,30,000 was required to be treated as deemed income of the assessee when the five-year period for utilization expired. The relevant provisions of section 11(3) were cited to support this treatment. The assessee acknowledged this legal position but requested a reworking of the computation to reflect the consideration of the unutilized amount. Consequently, the Tribunal directed the Assessing Officer to recompute the income in accordance with law, considering the fact that the unutilized amount had already been factored into the computation.

In conclusion, the appeal was disposed of with the direction to recompute the income in line with the legal provisions, taking into account the unutilized amount of charitable income considered during the computation.

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