Charitable accumulation under section 11(2) cannot be reused as exemption without proof of actual application within time.

Income accumulated and claimed exempt under section 11(2) cannot be claimed again in a later year unless the assessee shows actual utilisation for the permitted charitable purposes within the statutory accumulation period. On the facts, the Tribunal found that the earlier accumulated amount had already been reflected as exempt, while the impugned sum had not been applied during the year and was separately dealt with in the current return and Form 10B. The claim was therefore treated as an impermissible second exemption, and the unutilised accumulated income attracted taxation under section 11(3).

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Issues: Whether the amount of Rs. 3.32 crores claimed in the impugned year as application of income out of earlier accumulation under section 11(2) could again be treated as exempt income and whether, on the facts, the amount had in fact been utilised for charitable purposes in the impugned year.

Analysis: The accumulation of Rs. 5.60 crores in the earlier assessment year was reflected in Form 10B under section 11(2) of the Income-tax Act, 1961, and the Tribunal found no material to show that such accumulated amount had not been claimed as exempt in that year. The Tribunal also found, on the assessee's own accounts, that the impugned amount of Rs. 3.32 crores had not been utilised during the year for application towards the charitable objects, and the surplus of the current year was separately dealt with in the return and Form 10B for that year. On this footing, the claim in the impugned year was treated as an impermissible of the earlier exemption and, independently, the amount attracted the deeming consequence under section 11(3) as unutilised accumulated income.

Conclusion: The claim of exemption for Rs. 3.32 crores in the impugned year was rejected and the addition made by the Assessing Officer was upheld.

Final Conclusion: The Revenue succeeded, the relief granted by the first appellate authority was reversed, and the assessment order was restored.

Ratio Decidendi: Income once claimed as exempt on accumulation under section 11(2) cannot again be treated as exempt in a later year unless the assessee proves actual utilisation for the permitted purposes within the statutory accumulation period; unutilised accumulated income is liable to be taxed under section 11(3).

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