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2025 (8) TMI 296
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....11(3)(d) while calculating the period of expiry for utilization of accumulated fund and erroneously confirming the addition of the same to the Total Income of the appellant. c) The learned CIT(A) failed to appreciate and consider that accumulated amount in FY 2016-17 i.e relevant to AY 2017-18 can be utilized before 31.03.2023 & also further failed to consider that accumulated amount in FY 2017-18 can be utilized before 31.03.2024 2. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in passing order without giving adequate opportunity of being heard through Video conferencing which is contrary to provisions of law and natural justice. The order passed in violation of the principles of natural justice is of no value as held by the Supreme Court in R.B. Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission [1989] 43 Taxman 34 (SC)." 2. Briefly the facts of the case are that the assessee trust filed its original return of income on 31-10-2023 for the impugned A.Y. 2023-24, declaring total income of Rs. 14,37,197/-. The return was processed and in terms of intimation issued u/s. 143(1) of the Act, assessed income was determi....
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....ed during the relevant AY. 2023-24. The remaining balance of Rs. 14,33,460/- was voluntarily disallowed by the assessee in the return of income. Hence, the Ld.AR submitted that the assessee utilized the funds within the legally allowed time frame, i.e., till FY. 2022- 23, in line with Section 11(3) of the Act, as it existed before being amended by the Finance Act, 2022 and, therefore, argued that the addition of Rs. 35,66,540/- to the total income by the AO/CPC was incorrect and this mistake was further wrongly upheld by the Ld.CIT(A)-(NFAC). 6. It was further submitted by the Ld.AR that similarly, for the accumulation made u/s. 11(2) of the Act in FY. 2017-18, the funds had to be utilized by 31st March 2024. This is because the five year period ended on 31st March 2023, and the additional one-year grace period ends on 31st March 2024. The assessee had accumulated Rs. 48,00,000/- in FY. 2017- 18 and out of this amount Rs. 8,00,000/- was used in earlier years and Rs. 40,00,000/- was utilized in the relevant financial year 2023-24 and submitted that the utilization falls within the allowed time frame (ie, up to FY. 2023-24), in accordance with Section 11(3) of the Act as it stood be....
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....cing the permissible period for utilization from six years to five years. But the same will have a prospective effect and not a retrospective effect. It was submitted that the same is apparent from the case laws cited below that amendments are always prospective until and unless the language of the statue itself envisages that the amendment is sought to be retrospective. In this connection, the Ld. AR drawn our reference to the following decisions: a. Asst. Commissioner of Income Tax Vs. NCC Ltd. (157 taxmann.com144) (ITAT Hyderabad). b. Indian Bank Vs. Commissioner of Income Tax (151 taxmann.com 205) (High Court of Calcutta) c. MAJ Hospital Vs. Deputy Commissioner of Income Tax (100 taxmann.com 1) (ITAT Cochin). 9. The Ld.AR further submitted that the Ld. CIT(A) erred in not considering the decision of ld Add/JCIT-1 Gurugram dated 31-01-2025 on the similar issue dealt with in case of another charitable trust i.e., Shri Premvardhak Shewatambar Murtipujak Tapagachha Jain Singh, for A.Y 2023-24 though the same was brought to his notice by the assessee during the first appellate proceedings. Further, our reference was drawn to another decision of Ld.Add/JCIT(A)-4, Chennai dated....
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....lation of income relating to FY. 2016-17 and FY. 2017-18 which could not be utilized in the respective financial years and accumulated for utilization in the subsequent financial years and the taxability of such accumulated income and whether the same can be brought to tax in the impugned assessment year 2023-24. The relevant provisions under consideration are sub-section (2) to Section 11 and sub-section (3) to Section 11. Under the existing provisions of the Act, a trust or institution is required to apply 85% of its income during the relevant previous year. Sub-section (2) to Section 11 provides that where the trust or institution is not able to apply 85% of its income during the previous year, it is allowed to accumulate or set apart either in whole or in part for application to such purposes in India and in such a scenario, income so accumulated or set apart shall not be included in the total income of the previous year of such trust or institution. However, the same is subject to satisfaction of certain conditions, namely, such trust or institution has to furnish a statement as so prescribed to the Assessing officer stating the purpose for which the income is to be accumulate....
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....2 read as under: "(3) Any income referred to in sub-section (2) which- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof, (d) is credited or paid to any trust or institution registered under section 12AA for section 12AB) 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 aforesai....
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....umulation of five years. Therefore, unlike under the un-amended provisions wherein the income which is not utilized for the purposes it was accumulated can be brought to tax on the expiry of the sixth year, under the amended law, that income can be brought to tax on the expiry of five years itself. 19. Therefore, on a combined reading of sub-section (2) to Section 11 and sub-section (3) to Section 11 of the Act, we find that there is no change as such which has been brought about by the Finance Act, 2022 in terms of the initial period of accumulation which remains at five years, however, the extended period of accumulation of one year is no more is available to the trust or the institution. The said amendment has been brought in by the Finance Act, 2022 w.e.f. 1st April, 2023 and to apply in relation to AY. 2023-24 and subsequent assessment years. 20. The question that arises for consideration is whether the said amendment relates to existing accumulations which already stood for prior years or relates to fresh accumulations for the financial year 2022-23 onwards. In this regard, we have gone through the Finance Bill, 2022 and the Memorandum explaining the provisions in the Finan....
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....of income on 30.11.2023 declaring total income as Nil. Since the assessee has accumulated an amount of Rs. 90,70,20,511/- during the financial year 2016-17 and has utilized the same by 31.03.2023 i.e. in the 6th year of accumulation, the CPC taxed it in the 6th year i.e. financial year 2022-23. We find in appeal the Ld. Addl / JCIT(A) upheld the addition made by the CPC, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the provisions of the Income Tax Act, 1961 as applicable to assessment year 2023-24 provides for taxation in the 5th year only and not in 6th year, therefore, taxing it in the 6th year ought to be deleted. It is his submission that for the amounts which are accumulated in assessment year 2017-18, the amount was taxable only if such accumulated amount was not applied within 6 years from the year of accumulation i.e. 5 years plus one year. Since the assessee has applied such accumulated amount within 6 years therefore, it is not taxable in that year also. It is also his alternate submission that since the issue is a debatable one, therefore, no adjustment can be made by the CPC.....
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....v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. (3) Any income referred to in sub-section (2) which- (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section [or in the year immediately following the expiry thereof], [or section 12AB (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 t....
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....s, it shall be taxed in the 6th year. While, on the other hand, there are no such specific provisions under clause (23C) of section 10 of the Act and therefore, if the accumulated income is not applied within 5 years, the same shall be taxed in the 5th year itself. iv) In order to bring consistency in the two regimes, the following are proposed:- A) It is proposed to amend the provisions of sub-section (3) of section 11 of the Act to provide that any income referred to in sub-section (2) which is not utilised for the purpose for which it is so accumulated or set apart shall be deemed to be the income of such person of the previous year being the last previous year of the period, for which the income is accumulated or set apart under clause (a) of subsection (2) of section 11, but not utilised for the purpose for which it is so accumulated or set apart. B) It is proposed to insert Explanation 3 to the third proviso to clause (23C) of section 10 of the Act to provide that for the purposes of determining the amount of application under this proviso, where eighty-five per cent of the income referred to in clause (a) of the third proviso, is not applied, wholly and exclusively to ....
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....se (c), it is proposed that the income shall be deemed to be the income of previous year which is the last previous year of the period, for which the income is accumulated or set apart under sub-clause (a) of clause (iii) of the proposed Explanation 3, but not utilised for the purpose for which it is so accumulated or set apart. E) It is proposed to insert an Explanation (Explanation 5) to third proviso to clause (23C) of section 10 of the Act to enable the Assessing Officer to allow trusts or institutions under the first regime in circumstances beyond their control to apply such accumulated income for such other purpose in India as is specified in the application by such person subsequent to fulfilment of specified conditions. These other purposes are required to be in conformity with the objects for which the trust or institution under the first regime is established. If it is done, the provisions of Explanation 4 to third proviso to clause (23C) of section 10 shall apply as if the purpose specified by such person in the application under this Explanation were a purpose specified in the notice given to the Assessing Officer under clause (a) of the proposed Explanation 3 of the ....
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....range his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips vs. Eyre[3], a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 32. The obvious basis of the principle against retrospectivity is the principle of 'fairness‟, which must be the basis of every legal rule as was observed in the decision reported in L'Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd [4]. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislat....
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.... factors." 20. We find the Bangalore 'C' Bench of the Tribunal in the case of M/s. Phulchand Gulabchand Charitable Trust vs. ITO (supra) has observed as under: "3. The facts are that assessee had surplus income of Rs. 1,93,64,000 in FY 2007 08 relevant to AY 2008-09 on account of sale of immovable property of the assessee trust. The objects of the trust, we may notice, was to run schools, colleges, dispensaries, Dharmashalas, etc. The assessee could not apply the aforesaid surplus for charitable purposes in AY 2008-09 and had applied for accumulation of such surplus in terms of section 11(2) of the Act. As per the provisions of section 11(2), accumulation is allowed for a period of 5 years. It is not in dispute that such accumulation was allowed by the AO for the AY 2008-09. 4. In AY 2013-14 which is the Assessment year in appeal, the AO held that since the five years period expires in AY 2013-14, and since the assessee did not utilize the sum accumulated for charitable purpose in terms of section 11(3)(c) of the Act, the sum accumulated and which remains unspent for charitable purposes, shall be deemed to be income of the person, of the previous year, immediately followi....
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....ed for the following reasons:- "5.0) I have gone through the facts of the case and the submissions of the appellant. The provisions of section 11(2)(a) is as under: "If the accumulated amount or any part thereof is not utilised for the specified purposes during the period of accumulation or during the year immediately following the expiry thereof, the amount which has not been so utilised will be liable to tax as income of the previous year immediately following the expiry of the accumulation period." In course of appellate proceedings the appellant has not furnished any details before me with regard to the said claim of expenditure pertaining to construction of hostel building and the advances given for the construction of building over the periods, which it claimed. A simple claim of maintenance of book of account is not sufficient. Further no details whatsoever were furnished before me regarding the claim that advance for purchase of property was made, with any corroborative evidence, that it incurred expenditure out of the above surplus amount. In absence of the above, I do not hesitate in concluding that the action of the AO was correct and the addition was made rightly.....
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....see drew our attention to the fact that the assessee had spent a sum of Rs. 1,67,47,400 and to this extent, the application of income for charitable purposes has been accepted by the AO in AY 2014-15 in the order of assessment dated 26.12.2016 passed u/s. 143(3) of the Act. 11. The ld. DR while relying on the order of CIT(Appeals) submitted that this aspect has not been examined either by the AO or the CIT(Appeals) and therefore the issue should be sent back to the AO for fresh consideration in the light of order of assessment for AY 2014-15. 12. We have considered the rival submissions and are of the view that the issue raised now before the Tribunal in the form of grounds of appeal which we have extracted in the earlier part of the order should be considered by the AO. If AY 2013-14 is not the period within which the accumulated surplus has to be applied, then the addition made should be deleted. We therefore set aside the order of CIT (Appeals) and remand this issue for fresh consideration by the AO, after affording opportunity of being heard to the assessee. 13. In the result, the appeal by the assessee is treated as allowed for statistical purposes." 21. In light of th....