2019 (4) TMI 517 - HC - Income Tax

Application of income - income accumulated u/s 11(2) - assessee was enjoying an order u/s 11(3A)which was in force - HELD THAT - We do not think that there is any error, illegality, impropriety or purversity in the order passed by the Tribunal, especially in view of the provisions contained u/s 11(3A) that once the Assessing Officer allow the assessee to apply the income for such other charitable or religious purposes, as is specified in the application, which is in conformity with the objects of the trust, then the provisions of Section 3 shall apply, as if the purpose specified by such assessee will be deemed to be a purpose specified in the notice given to the Assessing Officer u/s 11(2A) - no substantial question of law

Summary

Issues:
1. Interpretation of Section 11(3) and Section 11(3A) of the Income Tax Act, 1961.
2. Validity of order passed by the Income Tax Appellate Tribunal.
3. Application of income accumulated under Section 11(2).

Analysis:
1. The primary issue in this case revolves around the interpretation of Section 11(3) and Section 11(3A) of the Income Tax Act, 1961. The Commissioner of Income-Tax(Exemptions) challenged the order of the Income Tax Appellate Tribunal, Cochin Bench, which deleted the additions made under Section 11(3) based on the non-application of income accumulated under Section 11(2). The key question raised was whether the Tribunal was correct in its decision considering the Assessing Officer's authority under Section 11(3A) to extend the time available for utilization of set-apart income under Section 11(2) beyond 5 years.

2. The Tribunal found that during the relevant period, the assessee held an order under Section 11(3A) of the Act issued by the Assessing Officer. It was noted that this order was neither cancelled nor modified by any higher authority and was still in force. Consequently, the Tribunal concluded that the assessee could not be deprived of the benefits under Section 11(2) of the Act. The additions made under Section 11(3) alleging non-application of the accumulated income were deemed unsustainable due to the existence of the order obtained by the assessee under Section 11(3A.

3. The High Court, in its judgment, upheld the Tribunal's decision and found no error, illegality, or perversity in the order passed. The Court emphasized that under Section 11(3A), once the Assessing Officer permits the assessee to apply the income for charitable or religious purposes specified in the application, in line with the trust's objectives, the provisions of Section 3 shall apply. This implies that the purpose specified by the assessee will be considered as specified in the notice given to the Assessing Officer under Section 11(2A. Consequently, the Court dismissed the appeal, stating that no substantial question of law necessitated a decision under Section 260A.

In conclusion, the judgment centered on the correct interpretation and application of Sections 11(3) and 11(3A) of the Income Tax Act, 1961, emphasizing the importance of the order obtained by the assessee under Section 11(3A) in determining the utilization of accumulated income under Section 11(2).