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TMI Blog2018 (6) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... ad [CIT(A) in short] vide appeal no.CIT(A)/GNR/505/2015-16 dated 29/09/2016 arising in the assessment order passed under s.143(3) r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 27/03/2015 relevant to Assessment Year (AY) 2009-10. 2. The grounds raised by the revenue per its appeal are as under: 1. Whether on the facts and in the circumstances of the case the Ld.CIT(A) is justified in allowing the assessee s appeal deleting the addition of ₹ 45,00,000/- being deemed income. 2. Whether on the facts and in the circumstances of the case the Ld. CIT(A) is justified in holding that the appellant has utilized accumulated income within the period of five years. 3. On the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the AO. 4. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing officer. 3. The solitary issue raised by the revenue in this appeal is that learned CIT(A) erred in deleting the addition made by the AO for ₹ 45,00,000/- under provision of section 11(3)(c) of the Act. 4. The briefly stated facts are that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for deduction u/s 11 of the Act. Secondly, the fund accumulated set apart was not utilized within the specified time i.e. 5 years. Accordingly, the AO treated the sum of ₹ 45,00,000/- as deemed income and added to the total income of the assessee. 5. Aggrieve, assessee preferred an appeal to Ld. CIT(A). The assessee before the Ld. CIT(A) submitted that fund accumulated u/s 11(2) of the Act was utilized for specified purposes. The assessee was to utilize such fund up to 31-03-2008 but the same was utilized in the immediate next year i.e. 31-03-2009 corresponding to AY 2009-10, which has been permitted under clause (c) of Section 11(3) of the Act. The Ld. CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under: I have carefully considered the facts of the case, assessment order and submission filed by the appellant. The undisputed facts of present appeal is that Appellant has shown total income in Profit Loss Account at ₹ 5,75,81,017/- which includes ₹ 45,00,000/- being amount accumulated in A.Y. 2003-04 and transfer from capital fund in current year. Thus, net total income for the current y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of said period and as per provisions of Section 11(3)(c) ₹ 45,00,000/- cannot be treated as deemed income of Appellant. On careful consideration of entire facts, it is pertinent to note that provisions of Section 11(2) and 11(3) read as under: [(2) 2[Where 3[eighty-five] per cent of the income referred to in clause (a) or v clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:-] [(a) such person furnishes a statement in the prescribed form and in the prescribed 5 manner 6 to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich expires on 31st March, 2008. The AO has not disputed the fact that Appellant has not filed prescribed form for accumulation. Further, provision of Section 11(3)(c) states that any income referred Section 11(2) if it is not utilized for the purpose for which it is accumulated in period of five years as referred in Section 11(2)(a) or in the year immediately following the expiry, it shall be deemed to be income of appellant on expiry of five years, In the present case Appellant has utilized accumulated income in A.Y. 2009-10 and AO has not denied the fact that same is not used for the purpose for which it was accumulated. The only dispute is regarding the year of utilization as AO is of the view that accumulated income is required upto 31st March, 2008, whereas Appellant is of the view that accumulation is required to be used upto 31/03/2009. The provisions of Section 11(3)(c) as discussed herein above clearly states that accumulated income can be deemed income only if it is not used within period of five years or the year immediately following the expiry and in present case Appellant has already utilized accumulated income in the year immediately following the expiry being A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be accumulated or set apart, which shall in no case exceed ten years; 67[(b) the money so accumulated68 or set apart is invested or deposited in the forms or modes specified in sub-section (5)]:] The provisions of Section 11(2) of the Act clearly authorize the assessee to accumulate the fund for the specific purpose for the specified period. In case on hand there is no allegation of the AO that the fund accumulated has been utilized other than the purpose for which it was accumulated. Therefore, it can be inferred that the fund accumulated has been utilized for the specified purposes. Therefore, there is no question of treating the deemed income of the assessee and therefore, we hold that the AO erred in treating the income transfer from capital fund account to the income and expenditure account as deemed income of the assessee. Similarly, we also note that indeed assessee was to utilize the fund within the period of 5 years, which ended on 31-03-2008 but the assessee failed to do so and utilized the same for specified purpose in the immediate succeeding financial year. In this regard, we note that the provisions of Section 11(3) of the Act clearly permits to ut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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