2019 (12) TMI 862 - AT - Income Tax

Accumulation of fund u/s 11(2) - Failure to submit Form 10 - information related to accumulation and purpose for utilization of accumulated income - alternatively claim of exemption u/s 10(23C)(iiiad) - HELD THAT - It is pertinent to note that as per section 11 of the Act, the assessee is required to exercise option for accumulation of funds in a prescribed format as prescribed under rule 17 of the Income Tax Rules (in short the Rules ). The time limit prescribed under the rule 17 for exercising such option is the time limit as prescribed under sub-section 1 of section 139 of the Act for furnishing of return of income. Admittedly, the assessee failed to exercise this option as prescribed under the rule 17. CIT(A) has pointed out serious discrepancies in the resolution of the society for setting apart of fund. Therefore, the judgement of the Hon'ble Bombay High Court rendered in the case of CIT Vs. Nagpur Hotel Owners Association 1992 (10) TMI 12 - BOMBAY HIGH COURT in our considered view would not be applicable as in this case, the foundation of exercising the option itself is found to be faulty. Therefore, we do not see any reason to interfere in this finding of the Ld. CIT(A). Same is hereby affirmed. Ground No.3 of the assessee s appeal is rejected. Availability of exemption u/s 10(23C)(iiiad) - HELD THAT - As relying on COUNCIL FOR THE INDIAN SCHOOL CERTIFICATE EXAMINATIONS VERSUS DIRECTOR GENERAL OF INCOME TAX 2012 (3) TMI 289 - DELHI HIGH COURT we hereby direct the A.O. to grant exemption u/s 10(23C) of the Act and delete the addition.

Summary

Issues:
1. Disallowance of accumulation claim u/s 11(2) of the Income Tax Act.
2. Disallowance of exemption claim u/s 10(23C)(iiiad) of the Act.

Analysis:

Issue 1: Disallowance of accumulation claim u/s 11(2) of the Income Tax Act:
The appellant contested the disallowance of the accumulation claim of ?16,74,668 under section 11(2) of the Act. The Assessing Officer (A.O.) treated this amount as income, which was upheld by the CIT(A). The appellant argued that the authorities failed to appreciate the facts and law correctly. The appellant's representative cited relevant case laws, including the Supreme Court and High Court judgments to support their contention. They emphasized that the non-submission of Form No.10 should not invalidate the accumulation of income under section 11(2). The appellant's counsel highlighted that the necessary details were available in the ITR 7 form submitted by the assessee. The Dispute Resolution (D.R.) opposed these arguments. The tribunal examined the contentions, records, and lower authorities' orders. The CIT(A) rejected the accumulation claim citing discrepancies in the resolution of the society and non-exercise of the option as prescribed under Rule 17. The tribunal affirmed the CIT(A)'s decision, stating that the foundation of exercising the option was faulty, hence dismissing Ground No.3 of the appeal.

Issue 2: Disallowance of exemption claim u/s 10(23C)(iiiad) of the Act:
The second issue pertained to the disallowance of the exemption claim under section 10(23C)(iiiad) of the Act. The appellant argued that the CIT(A) should have allowed the exemption claim, citing a judgment of the Delhi High Court. The D.R. contended that the appellant was not an educational institution but a regulatory commission. The tribunal reviewed the submissions, evidence, and lower authorities' decisions. The CIT(A) held that the appellant was not an educational institution solely operating for education purposes but a regulatory commission. The appellant relied on the Delhi High Court judgment to support their claim. Following the Delhi High Court's decision, the tribunal directed the A.O. to grant the exemption under section 10(23C) and delete the addition. Consequently, the appeal was partly allowed.

In conclusion, the tribunal addressed the issues of disallowance of accumulation claim under section 11(2) and exemption claim under section 10(23C)(iiiad), providing a detailed analysis of the arguments, legal precedents, and decisions of the lower authorities, ultimately partially allowing the appellant's appeal.