Income Tax Act, 1961, Section
11(2)
Charitable trust--Exemption under section
11--Form 10 filed after due date of filing
of return but before completion of assessment
Conclusion: Assessee
is entitled for benefit provided under section 11, if Form 10 is filed before
completion of assessment.
AO disallowed assessee's claim of exemption under section
11(2) on the reasoning that Form 10, which was mandatory to claim for such
accumulation, was not filed along with return of income. CIT (A) confirmed the
order of AO. Assessee contended that Form 10 was filed before completion of
assessment, therefore, it could not be denied benefit provided under section
11(2). Held: In view of decision of High Court in the case of Asstt.
CIT v. Stock Exchange Ahmadabad (2012) 25 taxmann.com 469 (Guj) : 2012 TaxPub(DT)
3044 (Guj-HC), assessee is entitled for benefit provided under section 11,
if Form 10 is filed before completion of assessment. In instant case,
admittedly, Form 10 was filed by assessee after due date of filing of return
but before completion of assessment, the assessee could not be denied benefit
of section 11(2), merely on the reasoning that Form 10 was filed belatedly.
Decision: In
assessee's favour
Followed: Asstt.
CIT v. Stock Exchange Ahmadabad (2012) 25 taxmann.com 469 (Guj) : 2012
TaxPub(DT) 3044 (Guj-HC)
Income Tax Act, 1961, Section
11(3)
Charitable trust--Exemption under section
11--Accumulation of income--Amount accumulated in earlier not offered as income in year under
consideration
Conclusion: Where amount accumulated by assessee in earlier year, had been shown as
income in Income and Expenditure Account in pursuance to provisions of section
11(3), and therefore, the said amount was duly offered to tax, impugned
addition was liable to be deleted.
AO alleged that amount accumulated in earlier year by
assessee, was not offered as income in computation of total income in year
under consideration in pursuance to provisions of section 11(3) and
accordingly, made addition. CIT (A) upheld the addition. Assessee contended
that amount accumulated in earlier year, had been shown as income in Income and
Expenditure Account in pursuance to provisions of section 11(3) and thus, the
same was duly offered to tax. Assessee further contended that fund amounting to
Rs. 28,16,959, had been applied in year under consideration, which also
represented expenditure out of accumulated fund. Held: It was
grievance of Revenue that assessee re-accumulated fund, which was to be treated
as income under provision of section 11(3). However, the said finding of
Revenue was contrary to the facts available on record. From Form 10, it was
clearly spelt out that fund of Rs. 25,23,000 was accumulated out of current
year's gross receipt. Thus, it could be safely inferred that accumulated amount
in earlier year had not been re-accumulated in the year under consideration.
Hence, impugned addition was deleted.
Decision: In
assessee's favour
IN THE ITAT, AHMADABAD BENCH
WASEEM AHMED, A.M. & MADHUMITA ROY, J.M.
Madhuchampaklal Charitable Trust v. ITO
ITA No. 575/AHD/2023
3 April, 2024
Assessee by: Dhrunal Bhatt,
A.R.
Revenue by: V.K Mangla, Sr.
D.R.
Waseem Ahmed, A.M.
The captioned appeal has been filed at the instance of the
Assessee against the order of the learned Commissioner (Appeals), Ahmadabad,
arising in the matter of assessment order passed under section 143(3) of the
Income Tax Act, 1961 (here-in-after referred to as "the IT Act")
relevant to the assessment year 2016-17.
2. The first issue raised by
the assessee is that the learned Commissioner (Appeals) erred in not granting
the benefit provided under section 11(2) of the Act, on the reasoning that the
form 10 was not filed along with the return of income.
3. In the present case, the
assessee is a trust and claimed exemption under section 11(2) of the Act
amounting to Rs. 25,22,300 which was disallowed by the assessing officer on the
reasoning that form 10 which was mandatory to claim for such accumulation was
filed belatedly. Thus, the assessing officer added the sum of Rs. 25,22,300 to
the total income of the assessee.
4. Aggrieved assessee
preferred an appeal to the learned Commissioner (Appeals) who also confirmed
the order of the assessing officer.
5. Being aggrieved by the
order of the learned Commissioner (Appeals), the assessee is in appeal before
us.
6. The learned Authorized
Representative before us filed a paper book running from pages 1 to 25 and
contended that the form 10 was filed before the completion of the assessment
and therefore, the assessee cannot be denied for the benefit provided under section
11(2) of the Act.
7. On the other hand, the
learned Departmental Representative vehemently supported the order of the
authorities below.
8. We have heard the rival
contention of both the parties and perused the materials available on record.
Admittedly, the form 10 was filed by the assessee claiming the exemption of Rs.
25,22,300 under section 11(2) of the Act after the due date of return filing
but before the completion of the assessment. The Hon'ble High Court of Gujarat
in the case of ACIT v. Stock Exchange Ahmadabad reported in (2012) 25
taxmann.com 469 (Guj) : 2012 TaxPub(DT) 3044 (Guj-HC) has held that the
assessee is entitled for the benefit of under section 11 of the Act if the form
10 is filed before the completion of the assessment. The relevant extract of
the judgment is reproduced as under:
8. From the facts and
contentions noted hereinabove, the sole question that arises for consideration
is whether the Tribunal was justified in holding that the time limit prescribed
for filing Form No.10 under rule 17 of the Rules read with section 11(2) of the
Act is directory. In the present case, it is an admitted position that the
assessee had filed Form No.10 as required under rule 17 of the Rules along with
the revised returns filed in respect of all the assessment years under
consideration. Thus, admittedly, the forms had been submitted before the
assessment came to be completed. At this juncture reference may be made to the
decision of the Supreme Court in the case of Nagpur Hotel Owners'
Association (supra) on which reliance had been placed by the learned
counsel for the revenue, wherein it has been held thus:
"6. It is abundantly clear
from the wordings of sub-section (2) of section 11 that it is mandatory for the
person claiming the benefit of section 11 to intimate to the assessing
authority the particulars required, under Rule 17 in Form 10 of the Act. If
during the assessment proceedings the assessing officer does not have the
necessary information, question of excluding such income from assessment does
not arise at all. As a matter of fact, this benefit of excluding this
particular part of the income from the net of taxation arises from section 11
and is subject to the conditions specified therein. Therefore, it is necessary
that the assessing authority must have this information at the time he
completes the assessment. In the absence of any such information, it will not
be possible for the assessing authority to give the assessee the benefit of
such exclusion and once the assessment is so completed, in our opinion, it
would be futile to find fault with the assessing authority for having included
such income in the assessable income of the assessee. Therefore, even assuming
that there is no valid limitation prescribed under the Act and the Rules even
then, in our opinion, it is reasonable to presume that the intimation required
under section 11 has to be furnished before the assessing authority completes
the assessment concerned because such requirement is mandatory and without the
particulars of this income the assessing authority cannot entertain the claim
of the assessee under section 11 of the Act, therefore, compliance with the
requirement of the Act will have to be any time before the assessment
proceedings. Further, any claim for giving the benefit of section 11 on the
basis of information supplied subsequent to the completion of assessment would
mean that the assessment order will have to be reopened. In our opinion, the
Act does not contemplate such reopening of the assessment. In the case in hand
it is evident from the records of the case that the respondent did not furnish
the required information till after the assessments for the relevant years were
completed. In the light of the above, we are of the opinion that the stand of
the Revenue that the High Court erred in answering the first question in favour
of the assessee is correct, and we reverse that finding and answer the said
question in the negative and against the assessee."
9. Examining the facts of
the present case in the light of the principles enunciated in the above
decision, as noticed earlier, the assessee filed Form No. 10 under rule 17 of
the Rules at the time of filing revised returns in respect of each of the
assessment years under consideration. Thus, evidently, the requirements of
section 11(2) of the Act had been complied with before the completion of the
assessments. Therefore, while completing the assessments for the assessment
years under consideration, the assessing officer had the necessary information
in respect of the claim for exemption under section 11 of the Act made by the
assessee before him. Thus, this is not a case where information in respect of
the claim of the assessee for giving benefit of section 11 of the Act was
furnished after the assessments for the relevant assessment years were
completed. Under the circumstances, the present case is squarely covered by the
aforesaid decision of the Supreme Court. The assessee was, therefore, entitled
to the benefit of section 11 of the Act on the basis of the information
supplied by it prior to framing of the assessment orders.
8.1 In view of the above, we
hold that the assessee cannot be denied the benefit of section 11(2) of the
Act, merely on the reasoning that form 10 was filed by the assessee belatedly
in the given facts and circumstances. Hence, we set aside the order of the learned
Commissioner (Appeals) and direct the assessing officer to delete the addition
made by him. Thus, the ground of appeal of the assessee is allowed.
9. The second issue raised
by the assessee is that the learned Commissioner (Appeals) erred in confirming
the order of the assessing officer on the reasoning that the amount accumulated
in the earlier year (Rs. 15,53,217 for the assessment year 2011-12), has not
been shown as income under the provision of section 11(3) of the Act.
10. The assessing officer
during the assessment proceedings found that the assessee has accumulated the
sum of Rs. 15,53,217 for the year ending 31-3-2011, but the same was not
offered as income in the computation of total income in the year under
consideration in pursuance to the provisions of section 11(3) of the Act.
However, the assessee, on question by the assessing officer, submitted that the
amount accumulated in the earlier year for Rs. 15,53,217 has been shown as
income in the income and expenditure account in pursuance to provisions of
section 11(3) of the Act. As per the assessee, out of total application of
fund, in the year under consideration, the amount of Rs. 28,16,959 includes the
expenditure incurred out the fund accumulated in the earlier year. Thus,
according to the assessee the amount accumulated in the earlier year was duly
offered to tax. However, the assessing officer dis-agreed with the submission
of the assessee by observing as under:
From the income &
Expenditure, it is seen that during the year the assessee has received Rs.
44,54,163 as revenue receipts, out of these receipts assessee has made
application for Rs. 28,16,959 at 63,243% which was below 85% of the receipts.
Therefore, assessee can accumulate only Rs. 9,69,080 (85% of Rs. 44,54,163
comes to Rs. 37,86,038 - 28,16,959) only. However, the assessee has accumulated
Rs. 25,23,000 during the financial year 2015-16 relevant to assessment year
2016-17. From the above, it is seen that the assessee has re accumulate the
amount. The assessee has not utilized Rs. 15,53,217 in last year (i.e. fifth
year) but re accumulate part amount. The assessee has utilized accumulated
amount within five years if not utilized than deemed income is to be shown in
the sixth year under section 11(3) of the Act.
11. Aggrieved assessee
preferred an appeal to the learned Commissioner (Appeals) who confirmed the
order of the assessing officer by observing as under:
I have gone through the facts of
the case. Despite the appellant mentioning a plethora of case laws, when it
comes to merits, I agree with the assessing officer that on verification of
Form No.10, it is seen that the it has not mentioned any amount of utilization
of ealier year's accumulation. Therefore, information furnished in Form no.10
filed on 21-11-2018 does not seen to be accurate.
The appellant has shown income
for Rs. 15,53,217 directly in the income & expenditure A/c. in the last
year i.e. fifth year which was accumulation of earlier year's (31-3-2011) as
per the Balance Sheet of assessment year 2016-17.
I therefore refuse to interfere
with the order of the assessing officer on this ground.
12. Being aggrieved by the
order of the learned Commissioner (Appeals), the assessee is in appeal before
us.
13. The learned Authorized
Representative before us filed a paper book running from pages 1 to 26 and
reiterated the contention as made before the assessing officer during the
assessment proceedings. The learned Authorized Representative to buttress his
argument has also drawn our attention on form 10 along with the resolution
placed on pages 7 to 8 of the paper book demonstrating that the amount of Rs.
25,26,000 was accumulated under section 11(2) of the Act, out of the receipt
pertaining to the year in dispute. Thus, it was contended by the learned
Authorized Representative that the amount accumulated in the earlier year has
been duly incurred in the income and expenditure account. The fund has been
applied in the year under consideration amounting to Rs. 28,16,959 which also
represents the expenditure out of the accumulated fund.
14. On the other hand, the
learned Departmental Representative vehemently supported the order of the
authorities below.
15. We have heard the rival
contentions of both the parties and perused the materials available on record.
It is the grievance of the revenue that the assessee has re-accumulated the
fund which was to be treated as income under the provision of section 11(3) of
the Act amounting to Rs. 15,53,217 only. However, this finding of the revenue
is contrary to the facts available on record. For this purpose, we refer the
form No. 10 place on pages 7 and 8 of the paper book. The relevant extract of
the form is reproduced as under:
Piyushbhai S. Shah on behalf of
Madhu Champaklal Charitable Trust, hereby bring to your notice that it has been
decided by a resolution passed by the trustees on 15-9-2016 (copy enclosed)
that, out of the income of the trust for the previous years(s), an amount of
Rs. 25,23,000 percent of the income of the trust such sum as it is available at
the end of the previous years), should be accumulated or set apart till the
previous year(s) ending 31-3-2021, in order to enable the trustees to
accumulate sufficient funds for object of the trust.
15.1 From the above form 10,
it is clearly spelt out that the fund of Rs. 25,23,000 was accumulated out of
the current year gross receipt. Thus, it can be safely inferred that the
accumulated amount in the earlier year has not been reaccumulated in the year under
consideration. In view of the above, we set aside the findings of the learned
Commissioner (Appeals) and direct the assessing officer to delete the addition
made by him. Hence, the ground of appeal of the assessee is hereby allowed.
16. In the result, the
appeal filed by the assessee is hereby allowed.