The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has clarified that the amount of Rs. 3.32 crores credited to the consolidated income and expenditure Account was the balance of the funds accumulated in A.Y. 2012-13 of Rs. 5.60 crores which remained unutilized up to A.Y. 2017-18 i.e. up to the expiry of 5 years from the end of the assessment year in which the funds were so accumulated. Thus, as per the provisions of Section 11(3) of the Income Tax Act, they are deemed to be the income for the year in which they are not utilized for the purposes for which it is accumulated.
The ITAT held that the AO was right in holding that the amount of Rs. 3.32 crores needed to be added to the income of the respondent, liable to tax in the impugned year. The order passed by CIT(A) allowing respondent’s claim to exemption Rs. 3.32 crores is set-aside, the order of the Assessing Officer is confirmed, and the appeal of the Revenue is allowed.
The Division Bench comprising Sanjay Garg (Judicial Member) and Annapurna Gupta (Accountant Member) was not in agreement with the contention of the respondent for two reasons. First, the respondent failed to dislodge the fact on record that Rs. 3.32 crores, which admittedly form part of the income accumulated in A.Y. 2012-13 on 5.60 crores, was claimed as exempt in A.Y. 2012-13 in terms of the provisions of Section 11(2) of the Act.
Further, the Bench observed that Form 10B of A.Y. 2012-13 clearly reflected the fact of the amount of Rs. 5.60 crores having been claimed in terms of the provisions of Section 11(2) of the Act, and the respondent had not filed a copy of the return for A.Y. 2012-13 reflecting to the contrary. Therefore, for all purposes the respondent had claimed 5.60 crores as exempt in A.Y. 2012-13 itself and the claim of exemption of 3.32 crores again in A.Y. 2017-18 has been rightly held by the AO as double exemption claimed by the respondent.
Second, the Bench found that the taxpayer had not utilized Rs. 3.32 crores for application towards the objects of the respondent society / trust in the impugned year. The consolidated income and expenditure account shows the income earned by the respondent Board to be 34.52 crores and the total expenditure incurred to be 27.32 crores. The application of income during the year has been claimed out of the income of the impugned year alone as there was a surplus remaining therein of 7 crores which has been accumulated and set apart as claimed in Form 10B filed for the impugned year.
The amount of Rs. 3.32 crores which was credited to the income and expenditure account has remained unutilized and has been carried forward in the closing balance of the general reserves of the Board, added the Bench, while pointing out that the CIT(A)’s finding that there was no evidence to suggest that the amount of Rs. 5.60 crores was claimed as application for A.Y. 2012-13 is contrary to the facts, as the respondent itself had reflected Rs. 5.60 crore as accumulated u/s 11(2) of the Act in Form 10B for A.Y 12-13 and there is no evidence on record to show that the respondent had not claimed such exemption in A.Y. 2012-13.
Briefly, the solitary issue relates to the disallowance of Rs. 3.32 crores being accumulated amount out of Rs. 5.60 crores accumulated under Section 11(2) of the Income Tax Act. The Assessing Officer noted that the respondent had claimed deduction on account of accumulation of Rs. 5.60 crores in A.Y. 2012-13 itself, and therefore, the claim of Rs. 3.32 crores out of the said accumulated amount in the impugned year (A.Y. 2017-18) on account of application of the same was nothing but double deduction claimed by the respondent. On appeal, the CIT(A) found the respondent to have correctly claimed the application of the said amount in the impugned year and deleted the disallowance.
Form 10B pertaining to A.Y. 2012-13 reveals the respondent accumulated cash set apart for specified purposes under Section 11(2) of the Act amounting to Rs. 5.60 crores, which was invested in fixed deposits with GSFS Ltd. as prescribed in Section 11(2)(b). The disputed amount of Rs. 3,32,91,973/- is reflected as credited to the consolidated income and expenditure account of the impugned year, which the respondent stated was expended for revenue purposes.
