Assessment of trust exemption under section 11: depreciation restored and 15% accumulation allowed after Form 10 held directory

Assessment of trust exemption addressed allowability of depreciation where asset cost had been treated as application of income in earlier years; tribunal found the depreciation disallowance unjustified and directed deletion, reasoning that the statutory amendment concerning application of income has prospective effect only, following Supreme Court precedent. Tribunal also considered denial of excess 15% accumulation due to belated filing of Form 10; treating the filing requirement as directory rather than mandatory, it ordered allowance of the accumulated amount and directed consequential recomputation by the assessing officer. Appeal allowed in favour of the assessee.

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Issues: (i) Whether the amendment to Section 11(6) of the Income-tax Act, 1961 (Finance (No.2) Act, 2014 w.e.f. 01.04.2015) applied to deny the assessee's depreciation claim for A.Y. 2012-13; (ii) Whether the denial of the assessee's 15% accumulation of income for belated filing of Form 10 is justified when filing is treated as directory.

Issue (i): Whether the amendment to Section 11(6) of the Income-tax Act, 1961 applies retrospectively to disallow depreciation claimed in A.Y. 2012-13.

Analysis: The amendment to Section 11(6) was enacted by Finance (No.2) Act, 2014 effective from 01.04.2015. The provision has been judicially held to have prospective operation and therefore does not affect assessment years prior to its effective date.

Conclusion: The amendment to Section 11(6) does not apply to A.Y. 2012-13; the disallowance of depreciation of Rs. 8,65,566/- is deleted in favour of the assessee.

Issue (ii): Whether belated filing of Form 10 justifies denying the 15% accumulation of income where the filing requirement is directory.

Analysis: Judicial precedent recognises filing of Form 10 as directory rather than mandatory for the purpose of claiming accumulation relief. Applying that principle, belated filing does not warrant denial of the 15% accumulation when substantive entitlement exists; consequential computation is required.

Conclusion: Denial of the 15% accumulation of income due to belated Form 10 filing is not sustained; the assessee's claim is allowed and the Assessing Officer is directed to compute consequential relief as per law in favour of the assessee.

Final Conclusion: Both substantive grievances of the assessee are allowed and the assessment is to be recomputed consequentially in accordance with law.

Ratio Decidendi: The amendment to Section 11(6) of the Income-tax Act, 1961 has prospective effect only and does not operate retroactively; procedural filing of Form 10 for accumulation of income is directory and belated filing does not justify denial of accumulation relief.

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