2024 (9) TMI 642 - AT - Income Tax

Trust wins accumulation benefits dispute after school redevelopment delays caused by Airport Authority NOC requirements under section 11

ITAT Mumbai dismissed revenue's appeal regarding disallowance of accumulation benefits under section 11(2) to a charitable trust. The trust, registered ... Disallowance of the benefit of accumulation of funds to the assessee u/s 11(2) - income was not utilised for the purpose for which it was accumulated or set aside - assessee is a charitable trust registered u/s 12A and was formed in the year 1952 to promote education - as per the assessee since it operates very close to the Mumbai Airport, therefore for any extension/redevelopment work it has to take NOC from the Airport Authority of India and because of the said reason the redevelopment work of its school building was delayed. Accordingly, the assessee submitted that the funds accumulated in the financial year 2012-13 for the redevelopment work could not be utilised in the year under consideration HELD THAT:- As is evident from the record, the AO considered the amount as income of the assessee for the assessment year 2018-19 as per the provisions of section 11(3)(c) of the Act on the basis that the income was not utilised for the purpose for which it was accumulated or set aside. In this regard, it is pertinent to note that there is no dispute regarding the fact that the assessee’s application filed under section 11(3A) of the Act is pending consideration before the AO. Therefore, we find no infirmity in the findings of the learned CIT(A) in deleting the addition of Rs. 2,05,47,846 made by the AO, as section 11(3)(c) does not apply to the present case in view of the pendency of the aforesaid application under section 11(3A) of the Act. Further, in view of the aforesaid facts, the direction to the AO to consider the application of the assessee under section 11(3A) of the Act is also affirmed. As a result, Ground No. 1 raised in Revenue’s appeal is dismissed. Non considering revised Form No. 10 for determining the accumulated funds available with the assessee under section 11(2) - We find that vide Form No. 10 filed by the assessee on 26/09/2018 the period of accumulation was stated to be ending on 31/03/2017. Similar to the contention in the year 2018-19, even in the assessment year 2017-18 we find that the resolution for accumulation was passed just 2 days prior, i.e. on 29/03/2017. Accordingly, for similar reasons stated above, we find merits in filing the revised Form No.10 on 08/03/2021 by the assessee stating the period of accumulation till 31/03/2022. Therefore, we are of the view that the revised Form No. 10 should be considered for determining the accumulated funds available with the assessee under section 11(2) - Thus discernible that the assessee’s claim was under section 11(2) and not under section 11(1)(a) - mode of investment was also as per section 11(5) as the amount was deposited in scheduled banks or co-operative societies as per section 11(5)(iii) - deletion of the addition by the learned CIT(A) is upheld. Rejecting the revised Form No. 10 filed by the assessee for the assessment year 2018-19 - From the record it is evident that Form No. 10 for the assessment year 2018-19 was also rejected on the basis that the assessee did not have sufficient surplus left during the year in order to accumulate under section 11(2) of the Act. Since we have found the accumulation of Rs. 3,53,90,000 made during the assessment year 2017-18 to be available till 31/03/2022 and also in view of the fact that the assessee’s application under section 11(3A) of the Act is still pending consideration, therefore the option of utilising the accumulated funds of Rs. 2,05,47,846 of the assessment year 2012-13 is available to the assessee in the year under consideration. Therefore, we find no merits in the aforesaid basis for rejecting the revised Form No. 10. Appeal of revenue dismissed. Issues Involved:1. Relief on the addition of Rs. 2,05,47,846 under section 143(1) of the Income Tax Act, 1961.2. Allowing the relief for accumulation of Rs. 4,00,00,000 for the purpose of 'building fund' despite the belated filing of Form 10.3. Disallowance of the addition of Rs. 10,19,601 due to belated filing of Form 10.4. Disallowance of the addition of Rs. 3,53,90,000 due to belated filing of Form 10.Detailed Analysis:1. Relief on the Addition of Rs. 2,05,47,846:The Revenue challenged the relief granted by the NFAC on the addition of Rs. 2,05,47,846 under section 143(1) of the Act. The assessee, a charitable trust, had accumulated this amount in AY 2012-13, but it remained unutilized until AY 2017-18, allegedly violating section 11(3)(c). The AO considered this amount as the income of the assessee for AY 2018-19. However, the CIT(A) deleted this addition, noting that the assessee's application under section 11(3A) for extension/modification of the accumulation period was pending. The Tribunal upheld the CIT(A)'s decision, stating that section 11(3)(c) does not apply due to the pending application under section 11(3A).2. Allowing the Relief for Accumulation of Rs. 4,00,00,000:The Revenue contended that the NFAC erred in allowing the accumulation of Rs. 4,00,00,000 for the 'building fund' because the corrected Form 10 was filed belatedly, and the power to condone such delay lies with the jurisdictional PCIT/CIT. The Tribunal found that the assessee had initially filed Form 10 on time but corrected it later to rectify a mistake. The revised Form 10 was considered valid, and the CIT(A)'s decision to delete the addition was upheld.3. Disallowance of the Addition of Rs. 10,19,601:The AO added Rs. 10,19,601 to the assessee's income, stating that it was not spent before 31/03/2018 and the belated Form 10 was not condoned. The CIT(A) deleted this addition, noting that the assessee's claim was under section 11(2) and complied with section 11(5). The Tribunal upheld this deletion, agreeing that the revised Form 10 should be considered and the mode of investment was compliant with section 11(5).4. Disallowance of the Addition of Rs. 3,53,90,000:The AO added Rs. 3,53,90,000 to the assessee's income for AY 2018-19, stating that the amount was not spent before 31/03/2017 and the belated Form 10 was not condoned. The CIT(A) deleted this addition, noting that the revised Form 10 was valid and the accumulation was compliant with section 11(2) and section 11(5). The Tribunal upheld this deletion, agreeing with the CIT(A)'s findings.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on all grounds. The Tribunal found that the assessee's applications and revised forms were valid and compliant with the relevant sections of the Income Tax Act, 1961. The Tribunal also directed the AO to consider the assessee's pending application under section 11(3A).