TaxTMI 
TaxTMI 
2025 (11) TMI 1762
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....ns of the Income tax Act, 1961 [the Act'] and the scheme and as otherwise also is not in accordance with the law. 1.2. Without prejudice to the generality of the above, the appellate order so passed is bad in law, illegal and void as the same is arbitrary and perverse and without application of mind to the facts and the legal position. 2. VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE 2.1. In the facts and the circumstances of the case, and in law, the appellate order so framed in bad in law and illegal, as the same is framed in breach of the principles of Natural Justice. 2.2. Without prejudice to the generality of the above ground, in the facts and the circumstances of the case, the Ld. CIT (A) erred in not granting proper, sufficient and fair opportunity of being heard to the Appellant while passing the appellate order. WITHOUT PREJUDICE TO THE ABOVE 3. ADDITION/ADJUSTMENT WITHOUT JURISDICTION 3.1. The Ld. CIT (A) erred in failing to appreciate that- (a) The intimation issued by the Deputy Director of Income Tax, Centralized Processing Centre, Bengaluru (the A.O.) u/s. 143 (1)(a) of the Act was beyond th....
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....143(1) of the Act, the CPC disallowed the utilisation of the accumulated funds on the ground that the prescribed period had expired in view of the amendment made by the Finance Act, 2022. As per the new restriction brought in by the amendment, the amount accumulated u/s. 11(2) is required to be utilised within the period of 5 years failing which it has to be added to the income of the assessee. 4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A) contending that the amendment to section 11(3) introduced by the Finance Act, 2022 is effective from 01.04.2023 and, therefore, applies prospectively from AY 2023-24 onwards with regard to the new accumulations. Ld. CIT(A) vide order dated 28.02.2025 has dismissed the assessee's appeal with the following observations: "5.2 On perusal of the ground of appeal, it is found that the CPC has disallowed the exemption of unutilized accumulated amount Rs.24,34,928/- and the same is added to the income of the appellant due to this demand stands Rs.9,61,210/- In view of the above the appellant submits that the total accumulated income of Rs. 24,34,928/- had remained as unutilised at t....
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.... acceptable as the amendment is applicable for AY 2023- 24 assessment. 5.3 In view of the above amendment which is applicable from 01.04.2022 for FY 2022-23, which is under consideration, required amount of accumulated income was required to be spent by the end of the fifth year but the same has not been done before the due date prescribed by the Act applicable for that AY, thus, the same cannot be allowed. It is trite law that the law has to be upheld even if it causes inconvenience as the interpretation of the taxing statute is strict." 5. Aggrieved with the order of Ld. CIT(A) the assessee has filed an appeal before the Tribunal. Before us, Ld. AR has submitted that the issue is covered by the decision of the coordinate bench in the case of Dadar Digamber Jain Mumukshu Mandal vs CIT(E) [2025] 176 taxmann.com 661 (Mumbai -Trib). Ld. DR, on the other hand, has thoroughly relied on the orders of the lower authorities. 6. We have heard the rival submissions and perused the material available on record as well as the decision of the coordinate bench relied upon by the assessee. We find that the issue has been examined at length for the very same year i.e. AY 2023-24 in....
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....eriod of accumulation was for a maximum period of ten years and by virtue of Finance Act 2001, the said period of accumulation has been amended and has been restricted for a maximum period of five years in respect of any income accumulated or set apart on or after 01-04-2001. As far as accumulation of any income prior to 01-04-2001, the same continues to be guided by the erstwhile provision and the accumulation continued for period of ten years. 13. In the instant case, the matter under consideration relates to accumulation of income done by the assessee pertaining to the FY. 201617 and FY. 2017-18 and as such, there is no amendment or change in law and the assessee continues to remain eligible insofar as the period for which the income can be accumulated or set apart which remains at five years and there has been no change which has been brought in by the Finance Act, 2022 14. Moving further, in terms of sub-section (3) of section 11, it talks about the situations where the income so accumulated and referred to in subsection (2) can be brought to tax in the hands of the trust or the institution. There has been an amendment to sub-section (3) by the Finance Act, 2....
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....ub-clause (v) or sub-clause (v) or clause (via) of clause (230) of section 10. shall be deemed to be the income of such person of the previous year, (i) in which it is so applied or ceases to be so accumulated or set apart under clause (a), or (ii) in which it ceases to remain so invested or deposited under clause (b), or (ii) being the fast previous year of the period, for which the income is accumulated or set apart but not utilised for the purpose for which it is so accumulated or set apart under clause (e), or (iv) in which it is credited or paid to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution under clause (d) 17. We, therefore, find that under the un-amended law where the accumulated income is not utilized for the specific purposes during the period of five years or in the year immediately following the expiry of that period, then the accumulation to the extent not so utilized will be chargeable to tax as income of the previous year immediately following the expiry of that period. In other words, the assessee gets an extended period of one m....
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....e Act, 2022 relates to accumulation of income pertaining to previous year starting from 1 April, 2022 onwards relevant to AY. 2023-24 and subsequent assessment years and in that sense, has to be applied prospectively in respect of fresh accumulations and not in respect of existing accumulations which continue to remain guided by the erstwhile provisions at the relevant point in time when the accumulations were made in the respective financial years. 22. We find that similar view has been taken by the Co-ordinate Pune Benches in case of Yashwantrao Chavan Maharashtra Open University v. Commissioner of Income- tax (Exemption) [2025] 175 taxmann.com 988 (Pune-Trib)/ITA No. 505/PUN/2025) pertaining to AY-2023-24, wherein the Co-ordinate Bench referring to the provisions of the Finance Act, 2022, the memorandum explaining the Financial Bill, 2022 and drawing support from the decision of the Hon'ble Supreme Court in case of Vatika Township has held that where in terms of provisions at the time of accumulation, the assessee has utilized the amount in the year immediately following the prescribed period of 5 years and the amendment to the provisions of section 11(3) are held t....
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....es in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the 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 ....
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....elevant assessment year or in the year immediately following the expiry thereof. In other words, the assessee was required to utilize the same before the end of the fith year i.e. financial year 2022 23. 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 (1) 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 o....
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....ose 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) 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 (23EUR) 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 follo....
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....C) of section 10 (v) These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. "Clauses 4 and 5+" 19. We find the Hon'ble Supreme Court in the case of CTT v. Vatika Township Put. 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-a-vis ordinary prose, a legislation differs in its provenanc....
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.... construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, 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 [5], 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. [6] 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 provisi....
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.... (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 subsection 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 p....
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.... years for spending the accumulated surplus for AY 2008-09 "or in the year immediately following the expiry thereof is only AY 2014-15. This aspect 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 1113)(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 AY 2014-15, Wherein the learned. AO has concluded the assessment after considering the bonafide explanation....
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....ospective in nature, therefore, the Ld. Addi/JCIT(A) in our opinion is not justified in upholding the intimation of the CPC making adjustment of Rs.90,70,20,511- u/s 11(3) as deemed income of the assessee which was accumulated in the financial year 2016-17 and when the provisions at the relevam time prescribed the utilization of the amount within a period of 5 years or in the year immediately following the prescribed period of 5 years. Even otherwise also we find merit in the argument of the Ld Counsel for the assessee that the 5 year period ends on 31.03.2022 and therefore the unutilized amount could have been brought to tax in assessment year 2022-23 and not in assessment year 2023-24. In the light of the above discussion, we set aside the order of the Ld. Addl/JCTT(A) on this issue and direct the Assessing Officer/CPC to delete the adjustment. The grounds raised by the assessee are accordingly allowed." 23. Further, our reference was drawn to the decision of the Ld. Add/JCTT(A)-4, Chennai in case of Shri Dahanukarwadi Mahavir Nagar Shwetamber Murtipujak Jain Sangh for AY. 2023-24 wherein it was held that though the amendment to section 11(3)(c) was introduced from A.Y 2....