Charitable accumulation under section 11 cannot be retrospectively taxed when a vested right to utilise it had already accrued.

An amendment governing utilisation of charitable accumulation under section 11(3) could not be applied to past accumulations made under section 11(2) where the right to utilise the amount had already accrued under the earlier regime. Accumulated income set aside in assessment year 2017-18 was held capable of being applied in assessment year 2023-24, because the Finance Act, 2022 amendment could not retrospectively defeat that vested entitlement and the truncated compliance window left no real opportunity to meet the new condition. The addition under section 11(3) was therefore deleted and the assessee's use of the accumulated income in the later year was upheld.

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Issues: Whether the addition made under section 11(3) of the Income-tax Act, 1961 in respect of accumulated income of an earlier year, utilised in assessment year 2023-24, was rightly deleted on the ground that the amendment brought by the Finance Act, 2022 could not be applied to past accumulations and that the assessee was entitled to utilise the accumulated income in the sixth year.

Analysis: The accumulation had been made in assessment year 2017-18 under section 11(2) of the Income-tax Act, 1961, when the prevailing position permitted utilisation within five years and also in the immediately succeeding year. The amendment to section 11(3) brought by the Finance Act, 2022 was applicable from assessment year 2023-24, but it could not be read so as to take away a vested right already accrued at the time of accumulation. The time of the amendment also left practically no effective opportunity to comply within a truncated period, and the law does not compel performance of an impossible act. The Tribunal also followed coordinate-bench decisions recognising utilisation in the immediately succeeding year after expiry of the prescribed period.

Conclusion: The assessee was entitled to apply the accumulated income in assessment year 2023-24, and the deletion of the addition under section 11(3) was upheld.

Ratio Decidendi: An amendment to the law governing utilisation of charitable accumulation cannot retrospectively defeat a vested entitlement already accrued on the date of accumulation, and where the statutory change leaves no real opportunity for compliance, the accumulated amount cannot be treated as taxable merely because the later assessment year falls under the amended provision.

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