2022 (1) TMI 640 - AT - Income Tax

Accumulation of income - Disallowance of claim made u/s 11(2) - AO disallowed the claim of accumulation u/s 11(2) of the Act on the ground that in the resolution passed for making such accumulation, no definite or concrete purpose has been mentioned - CIT(A) confirmed the Assessing Officer s action and held that the assessee is not entitled to claim benefit u/s 11(2) as from a reading of the objects of the assessee Trust it is seen that the assessee has numerous objects, some are charitable, some are not - HELD THAT - During the course of hearing, Ld AR brought to our notice the financials for the year ended 31.03.2016, as per the financial assessee utilised the accumulated sum for medical purpose in the 5th year i.e., in the year ending 31.03.2016. On the contrary the Revenue could not bring anything on record to show that the assessee has not utilized the accumulated sum within 5 years or has utilised the same for objects other than the avowed objects of the Trust. It cannot be denied that the assessee has proved and demonstrated that the funds were utilised for the objects of the trust within the time frame of 5 years. On a considered view of the matter, we have no hesitation in holding that the Revenue was not justified in denying the claim of accumulation merely on the ground that the reasons or object of the accumulation has not been specified and it is fact on record that the assessee has actually applied said funds to specific charitable purpose as resolved. The Revenue itself had accepted in the preceding assessment years the claim of accumulation under similar circumstances in assessment orders passed u/s 143(3) of the Act. Also, all other requirements like filing of Form 10 within due date and application of accumulated sum for the purpose of object of trust within the time limit of 5 years are fulfilled by the assessee. We accordingly direct the Assessing Officer to allow the claim of accumulation u/s.11(2) of the Act. Accordingly, grounds raised by the assessee are allowed.

Summary

Issues:
- Condonation of delay in filing appeal
- Disallowance of accumulation claim u/s 11(2) of the Income Tax Act, 1961

Condonation of Delay in Filing Appeal:
The appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-1, Mumbai for the A.Y. 2011-12 faced a delay of 49 days. An application for condonation of delay was submitted, citing an office order by the Hon’ble President, ITAT extending the period of limitation. The CIT(DR) had no objection to condone the delay, and it was allowed in light of the office order, enabling the appeal to proceed on merits.

Disallowance of Accumulation Claim u/s 11(2) of the Act:
The assessee, a charitable organization, claimed accumulation of income u/s 11(2) of the Act for utilization within 5 years. However, the Assessing Officer disallowed the claim, stating the purpose of accumulation was general and vague, lacking a definite and concrete plan. The CIT(A) upheld this decision, emphasizing the need for specific purposes, especially for mixed objects trusts. The CIT(A) dismissed the appeal, citing violations of section 11(2) of the Act.

During the appeal, the assessee argued that compliance with all conditions for the claim had been met, and the accumulated amount was utilized for charitable purposes within the stipulated time frame. The assessee highlighted resolutions specifying the purpose of accumulation for medical equipment and other charitable activities. The assessee also pointed out past acceptance of similar resolutions in previous years.

Upon review, the Tribunal found the Revenue unjustified in denying the accumulation claim solely on the basis of unspecified purposes. Citing relevant case laws, the Tribunal emphasized that lack of specific declaration in Form No. 10 regarding the purpose of accumulation did not invalidate the exemption under section 11(2) of the Act. The Tribunal noted past acceptance of similar claims by the Revenue and confirmed the fulfillment of all requirements by the assessee.

In conclusion, the Tribunal directed the Assessing Officer to allow the accumulation claim u/s 11(2) of the Act, thereby allowing all grounds raised by the assessee and ultimately allowing the appeal.