TaxTMI 
TaxTMI 
2025 (6) TMI 1759
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....n granted registration u/s 12AA of the Income Tax Act, 1961 (hereinafter referred to as "the Act") by the CIT(Exemption), Pune vide letter dated 25.07.2016 and the registration was renewed under the new law. It filed its return of income for the impugned assessment year 2023-24 declaring total income as Nil after claiming exemption u/s 11 of the Act. During the financial year 2016-17 the trust had accumulated an amount of Rs. 90,70,20,511/- which was required to be utilized within 5 years and if not utilized then unutilized amount, if any, was taxable in 6th year. The CPC in the Intimation u/s 143(1) of the Act added an amount of Rs. 90,70,20,511/- u/s 11(3) of the Act as deemed income. 3. Before the Ld. Addl / JCIT(A) it was submitted that the above accumulation amount was already fully utilized by the trust in financial year 2022-23. It was submitted that as per section 11(3) of the Act as stood at that time (at the time of accumulation i.e. as on 31.03.2017), accumulated amount of Rs. 90,70,20,511/- was required to be utilized by 31.03.2022. In case the same is not utilized, then the amount was taxable in the year 2023-24 only if such amount is unutilized by 31.03.2023. Since....
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....lization of accumulated funds within 5 years, is applicable prospectively and applicable only for the funds accumulated from AY 23-24 onwards and not for the funds which are already accumulated prior to AY 23-24. 4) The Adjustment made by the Ld. CPC is void ab initio and beyond CPCs scope as provided u/s 143(1), CPC has no power to make adjustment on the issue which are debatable in nature and therefore the intimation order passed by Ld. CPC be quashed. 5) The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case. 6. The Ld. Counsel for the assessee strongly challenged the order of the Ld. Addl / JCIT(A) dismissing the appeal. He submitted that financial year 2022-23 i.e. assessment year 2023-24 is the 6th year. Since the prevailing law provides for addition in the 6th year, if the accumulated amount is not utilized by the end of 31.03.2023, therefore, no addition can be made in the assessment year 2023-24. He submitted that the conditions as per the law prevailing at the time of accumulation i.e. assessment year 2017-18 are to be applied. Since all the conditions as per law of assess....
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....income accumulated under Section 11(2) is subject to application within a maximum permissible period of five years. In other words, income in excess of 15% of the total income (i.e. income not applied during the previous year) cannot be retained indefinitely by a charitable or religious organization. In cases where such income is not applied during the relevant financial year, the organization is required to either exercise the option to apply the unutilized income in the immediate next financial year by filing Form 9A electronically, or accumulate the unutilized income for a maximum period of five years by filing Form 10 electronically, specifying the purpose and period of accumulation. He submitted that failure to comply with these procedural and substantive requirements may result in the forfeiture of exemption under Section 11 and attract tax liability on the accumulated income. The incomes so accumulated (vide Form 10) will not be included in the total income of the NGO if the following conditions are applied: * Such trust or institution furnishes Form No. 10-notice of accumulation of income by charitable trust or institution electronically to AO, on or before the due....
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....e trust in the year immediately following the expiry of the five-year period. In this case, the deemed income will be taxable in AY 2023-24. Consequently, the accumulated funds utilized in FY 2022-23 after the expiry of the five-year period will be treated as deemed income and taxed as part of the trust's total income for Assessment Year 2023-24. Therefore, the utilization of the accumulated funds in FY 2022-23, after the expiration of the five-year period, does not qualify for exemption under Section 11, and the unutilized portion of the income will be deemed income and subject to taxation in Assessment Year 2023-24. He accordingly submitted that since the assessee has not utilized the accumulated portion of income of assessment year 2017-18 by 31.03.2022, the unutilized amount becomes taxable as deemed income in assessment year 2023-24. The amendment by the Finance Act, 2023 is not applicable to this case as it only affects the accumulations whose 5th year period ends on or after 01.04.2023. He accordingly submitted that the order of the Ld. Addl / JCIT(A) being in accordance with law should be upheld and the grounds raised by the assessee be dismissed. 15. We have heard t....
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....e total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:- (a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year: Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded. Explanation.-Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to t....
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..... The assessee in the instant case undisputedly has utilized the amount before 31.03.2023. 18. We find the relevant provisions of Memorandum explaining provisions of the Finance Bill, 2022 read as under: "4. Bringing consistency in the provisions of two exemption regimes As mentioned earlier, there is a requirement for alignment of certain provisions of the two regimes as they both intend to grant similar benefit. 4.1 Accumulation provisions i) Under the existing provisions of the Act, a trust or institution is required to apply 85% of its income during any previous year. However, if it is not able to apply 85% of its income during the previous year, it is allowed to accumulate such income for a period not exceeding 5 years as per the following provisions, namely: (I) sub-section (2) of section 11 of the Act for the trusts or institution under the second regime; and (II) third proviso to clause (23C) of section 10 of the Act for trusts or institution under the first regime. ii) However, the accumulation of income, as per the provisions of sub-section (2) of section 11 of the Act is allowed subject to the fulfilment o....
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....so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) of section 11; and (c) the statement referred to in clause (a) of Explanation 3 is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; C) It is proposed to insert a proviso to the proposed Explanation 3 to the third proviso to clause (23C) of section 10 of the Act to provide that in computing the period of five years referred to in sub-clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded. D) It is also proposed to insert an Explanation (Explanation 4) to third proviso to clause (23C) of section 10 to provide that any income referred to in the proposed Explanation 3 shall be deemed to be the income of the previous year in which the following takes place- (a) the income is applied for purposes other than wholly and exclusively to the objects for which the trust or institution under the first regime is established or ceases....
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.... and 5]" 19. We find the Hon'ble Supreme Court in the case of CIT vs. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 (SC) on the issue of interpretation of taxing statutues about retrospective amendment and prospective amendment, has held as under: "30. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of "Interpretation of Statutes". Vis-à-vis ordinary prose, a legislation differs in its provenance, lay-out and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 31. Of the various rules guiding how a legislation....
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....ly, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India & Ors. v. Indian Tobacco Association (2005) 7 SCC 396, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra & Ors. (2006) 6 SCC 286. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 34. In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 o....
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....or in the year immediately following the expiry thereof, (d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or], as the case may be, of the previous year immediately following the expiry of the period aforesaid." 5. A reading of Clause (c) of Sec.11(3) of the Act would show that the time allowed for applying accumulation for charitable purpose is 5 year and one year following the expiry of 5 years. This is clear from the expression used "or in the year immediately following the expiry thereof". The previous year following the expiry of period of 5 years from AY 2008-09 will be AY 2014-15 and not AY 2013-14. This appeal relates to AY 2013-14 in which the AO sought to apply the provisio....
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.... has been highlighted by the assessee in ground Nos.2 to 4 in its appeal before the Tribunal, which reads as follows:- "2. That the learned CIT(A) ought to have appreciated that u/s 11(3)(c) of the Income Tax Act, 1961 provides that accumulated income should be utilized during the 5 years period of accumulation or in the year immediately following the expiry thereof. That means, in the facts & circumstances of this case, the assessee at liberty to utilize the accumulated surplus up to 31-03- 2014. Now in this case, the assessee has utilized of Rs. 1,67,47,400/- as investment in poor student hostel in the year 2013-14. Therefore, there is no contravention of section 11(3) and the accumulated surplus up to 31-3-2013 cannot become deemed income of the assessee for the assessment year 2013-14. 3. That the learned CIT(A) has failed to take note of the AO assessment order u/s. 143(3) of the Act, dated 26..12,2016 for the A Y 2014-15, Wherein the learned AO has concluded the assessment after considering the bonafide explanation offered by the assessee and allowed the claim of Rs. 1,67,47,400/- out of total surplus of Rs. 1,93,54,529/- and the remaining balance of Rs:26 0....