9911796707
TMI Blog1992 (10) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer found that the learned Commissioner of Income-tax, A.P. permitted the assessee to accumulate its income pertaining to financial years 1972-73 to 1982-83 i.e., up to 31-3-1982 and since the accumulated income of Rs. 5,66,735 had crossed the period of 10 years limit, he proposed to assess Rs. 5,66,735 in the hands of the assessee for assessment year 1983-84. The authorised representative for the assessee replied to the Income-tax Officer stating that the assessee acquired property in March 1984 and the proposed assessment of Rs. 5,66,735 is therefore, not called for. The Income-tax Officer appeared to have been satisfied with this explanation and therefore, having regard to the provisions of section 11(2)(a) held that the accumulated building fund of Rs. 3,432 pertaining to 1973-74 had to be brought to tax in assessment year 1984-85. Ultimately, he determined the income of the assessee at Rs. 3,07,151 and he held it to be exempt under section 11 of the Income-tax Act. Thus he passed the assessment order dated 19-3-1986. 3. The learned Commissioner of Income-tax, A.P.-I, Hyderabad had sought to revise the assessment order under section 263 of the I.T. Act. He too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The accumulation set apart is out of income earned during the Financial Year. The first Financial Year ended on 31-3-1973 and the accumulation starts from 1-4-1973. The 10 years period as mentioned in Section 11(2)(a) commences from 1-4-1973 and expires on 31-3-1983. (ii) The time for utilisation of the accumulated funds i.e., the year immediately following the expiry of the period of 10 years expired on 31-3-1984 and the assessee has utilised the accumulated amount in purchase of the land on 5-1-1984. Thus there is no contravention. (iii) Each year's accumulation should be treated as a separate accumulation within the meaning of section 11(2). (iv) Under section 11(3), the Income-tax Officer had discretion to allow any person to apply the accumulated income for alternate charitable purposes as may be specified in the application and the Income-tax Officer while allowing the application for accumulation for assessment year 1983-84 should be deemed to have allowed accumulation under section 11(3). (v) There is no power to prescribe time limit for submission of form No. 10 and as such the Income-tax Officer should decide the application on merits and pass necessary orders. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs expires on 31-3-1984. If the accumulation is not utilised before 31-3-1984, then according to Shri Y. Ratnakar, the set apart amount during assessment year 1973-74 becomes taxable in assessment year 1984-85. But in this case, the assessee had utilised this amount in purchase of land on 5-1-1984 itself and so there was no contravention of provisions of section 11(3). Sri Ratnakar contended that the Commissioner cannot legally impose any conditions while condoning the delay nor can he reduce the period available for accumulation while condoning the delay as is done in this case. The learned Commissioner of Income-tax, A.P-1, by his order dated 12-3-1984 under which he dealt with the question of condonation of delay for accumulation for assessment years 1972-73, 1973-74, 1976-77, 1977-78, 1979-80, 1980-81, 1981-82, 1982-83 and 1983-84 a copy of which is now furnished at page 51 52 of the paper compilation filed before us, held the following while granting accumulation of income relating to financial year 1972-73 : " In the notice filed for the assessment year 1973-74, the assessee had mentioned that it intends to accumulate its income for the financial year 1972-73 and the subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mental Representative. The learned Commissioner had granted 10 years period as the period of accumulation. The income for financial year 1972-73 is the first year's income for which accumulation is prayed for. No permission for accumulation is needed if the said amount is to be spent within 31-3-1983 itself. Permission for accumulation is needed only if the amount is accumulated or set apart after the close of the financial year i.e., if accumulation starts from 1-4-1973. Thus the 10 years accumulation extends up to 31-3-1983. Simply because the Commissioner had a mistaken notion about the period of accumulation available under law and simply because he erroneously thought that the period of accumulation starts even on 1-3-1972 cannot be binding against the assessee. Further section 11(2)(a) does not vest in the Commissioner any authority to restrict the period of accumulation from out of the period prayed for. Suppose if 10 years accumulation is prayed for, can the Commissioner of Income-tax restrict it only to 6 or 7 years ? Under section 11(2)(a) such power did not appear to have been conferred on the Commissioner of Income-tax. Section 11(2)(a) states as follows : " Such pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 years. The period of accumulation is a point of law to be determined and it is not vested in the Commissioner to prescribe the dates within which the accumulation is permitted. Therefore, even though the order of the Commissioner states that the period of accumulation extends only to 31-3-1982, it is not binding against the assessee, the assessee is entitled to show that the period thus limited by the Commissioner is wrong in law. We are satisfied that in fact the period of accumulation extends up to 31-3-1983. 7. The further question would be what is the date within which the utilisation of the accumulated income is to be made. As per for utilization of accumulated funds, the Legislature thought it fit to extend the period for utilisation for one more year from the end of 10 year period of accumulation. Under section 11(3)(c), the question of the accumulated income being considered as deemed income is dealt with. According to it the accumulated income should be utilised during the 10 years period of accumulation or in the year immediately following the expiry thereof. That means, in the facts and circumstances of this case, the assessee is at liberty to utilise the accumulated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the accumulated income relating to assessment year 1973-74 i.e., Rs. 3,432 and not the whole of the accumulated income. 9. We cannot accept this plea. Section 11(3) commences with the words any income referred to in sub-section (2), if not applied to charitable or religious purposes ceases, to be accumulated or set apart, ceases to remain invested or deposited in the forms or modes specified in sub-section (5) of section 11 or is not utlised within 10 years period of accumulation or in the immediately following year following the expiry of 10 years period of accumulation shall be deemed to be the income of such person. Therefore, the deemed income is the income referred to in sub-section (2). Sub-section (2) inter alia refers to accumulated income for a period of 10 years. Therefore, it follows that if conditions set out in section 11(3) are not fulfilled the whole of the accumulated income shall become the deemed income of the assessee under section 11(3). Therefore, in view of this, the argument that the deemed income under section 11(3) could only be the accumulated income relating to financial year 1972-73 equivalent to assessment year 1973-74 is not correct. 10. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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