Tribunal upholds decision on tax exemption exclusion.

The Tribunal upheld the Assessing Officer's decision to restrict the assessee's claim under Section 11(2) and confirmed that "deemed income" under Section 11(3) is not eligible for exemption under Section 11(1)(a) and 11(2). The Tribunal dismissed the appeals for the assessment years 2016-17 and 2017-18, directing the Assessing Officer to re-compute the exemption excluding the "deemed income" under Section 11(3).

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Issues Involved:
1. Confirmation of the Assessing Officer's action by the CIT(A), NFAC.
2. Restriction of claim of accumulation under Section 11(2).
3. Consideration of income chargeable under Section 11(3) as income derived from property held under trust.
4. Non-consideration of Ground 2 of appeal by CIT(A), NFAC.

Issue 1: Confirmation of the Assessing Officer's Action
The CIT(A), NFAC, confirmed the action of the Assessing Officer, which was challenged by the assessee. The Assessing Officer restricted the claim of the assessee under Section 11(2) to Rs. 73,89,082/-, citing that the assessee had claimed exemption on "deemed income" under Section 11(3), which was not allowable. The CIT(A) upheld this restriction.

Issue 2: Restriction of Claim of Accumulation under Section 11(2)
The assessee argued that there was no prohibition under the Act against claiming exemption on "deemed income" under Section 11(3). However, the Rajkot ITAT in Prabhas Patan Jain vs. Income Tax Officer held that exemption under Section 11 is not available on "deemed income." The Tribunal observed that allowing such exemption would result in unintended benefits and double deductions, which was not the legislative intent.

Issue 3: Consideration of Income Chargeable under Section 11(3)
The Tribunal noted that "deemed income" under Section 11(3) should not be considered as income derived from property held under trust for the purpose of exemption under Section 11(1)(a) and 11(2). The Tribunal relied on the Mumbai ITAT decision in Trustees, The B.N. Gamadia Parsi Hunnarshala, which distinguished between "income derived from property" and "deemed income."

Issue 4: Non-consideration of Ground 2 of Appeal by CIT(A), NFAC
The assessee contended that the CIT(A), NFAC, did not consider Ground 2 of the appeal, which related to the inclusion of income from A.M. College of Science and Technology and the non-allowance of TDS credit. The Tribunal did not specifically address this issue in the judgment.

Conclusion:
The Tribunal dismissed the appeals for both assessment years 2016-17 and 2017-18, holding that "deemed income" under Section 11(3) is not eligible for exemption under Section 11(1)(a) and 11(2). The Assessing Officer was directed to re-compute the exemption available to the assessee by excluding "deemed income" under Section 11(3).

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