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TMI Blog2021 (9) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. 3. That on the facts and circumstances of the case and in law the orders passed by both A.O. and CIT(A) are bad in law and void ab-initio." 2. Brief facts relevant qua the issue involved are that, a return declaring NIL income was filed by the appellant on 30thMarch, 2010 however, vide order of assessment dated 28th December, 2011 passed u/s 143(3) of the Act, the ld. AO has assessed the total income of the appellant at a sum of Rs. 4,39,07,729/-. Appellant is an Apex Coordinating Body of all Nationalized State Road Transport Corporations working under the Ministry of Road Transport & Highways. Appellant was established with main object of improving public transport systems in the country and to assist its members state transport undertakings by providing auto mobile part at the most economical and competitive rates. Appellant is registered u/s 12A of the Act vide Registration Order dated 27th April, 1982 and further vide Notification Order No.1348 dated 31st October, 2007 it is also registered under the provision of section 10(23C)(iv). Registration granted u/s 10(23C)(iv) of the Act is valid from assessment year 2007-08 onwards. 3. During the course of assessment, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mulation for five years, the period of which has expired as on 31.03.2009 as has been noted by AO and there is not dispute about this fact. After considering the various submissions and provisions of the At, and various commentaries, Journals in this regard, I found that appellant's case falls under the purview of Sec. 10(23C)(iv) of the IT Act, wherein it has bene specifically mentioned that in no case accumulation shall exceed five years period. I am reproducing the relevant portion of the Act so as to clarify the issue :- "Provided also that the fund or trust or Institution [or any University or other educational institution or any other hospital or medical institution] referred to in sub-clause (iv) or sub-clause (v) [or sub-clause (vi) or sub-clause (via)]. (a applies its income or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen percent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years.] 4.4 From the above reading of Section and after analyzing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax department that since appellant got registered u/s 10(23C)(iv) of the Act w.e.f. A.Y. 2007-08 the utilization of surplus though pertaining to FY 2003-04 should be examined only in accordance with provision of section 10(23C) of the Act. 8. We find that as per section 11(2) of the Act where 85% of the income referred to in clause (1) of section 11 is not applied or is not deemed to have been applied then the said sum can be accumulated or set apart for a period which shall in no case exceed 5 years. Sub section (3) of section 11 provides for an eventuality when the amount accumulated u/s 11(1) is not utilized. In this regard, section 11(3) provides as under:- "11 (3) Any income referred to in sub-section (2) which - (a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for applicable thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5) or (c) is not utilized for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears", i.e., the amount accumulated can therefore be utilized for a period up to five years i.e., FY 2008-09 i.e., AY 2009-10. We find that whereas provisions of section 11(3) provide for an additional year of grace period when utilization can be done, however, there is no such leverage given in section 10(23C) of the Act. If provision of section 11 are applicable then appellant is correct in submitting that the amount accumulated can be utilized till AY 2010-11, whereas if provision of section 10(23C) are applicable then the revenue is correct in holding that the amount accumulated must be utilized on or before AY 2009- 10. 10. We find from the orders of authorities below that the registration granted u/s 10(23C) of the Act is applicable from AY 2007-08 onwards. We also find that provisions of section 11 and 10(23C) are two parallel regimes. This is also stipulated by CBDT in their Circular No.14 dated 17th August, 2015 as under:- "2. Necessity for registration u/s 12AA while seeking approval / claiming exemption u/s 10(23C)(vi) 2.1 Section 10(23C)(vi) does not prescribe any stipulation which makes registration u/s 12AA a mandatory pre or post condition. In fact, provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om property held under trust in the first place. The provision of section 10(23C) also has similar conditions of accumulation and application of income, investment of funds in prescribed modes etc. Therefore, the Act was amended to provide specifically that where a trust or an institution has been granted registration for purpose of availing exemption under Section 11, and the registration is in force for a previous year, then such trust or institution cannot claim any exemption under any provision of section 10 [other than that relating to exemption of agricultural income and income exempt under section 10(23C) of the Income Tax Act. Similarly, entities which have been approved or notified for claiming benefit of exemption under section 10 (23C) of the Income Tax Act would not be entitled to claim any benefit of exemption under other provisions of section 10 of the Act; which means that one can claim exemption under Section 11 and Section 20(23C)." 12. From the above, it is clear that both the provision of section 11 and 10(23C) are two parallel regimes which do not overlap with each other. We therefore, find substantial merit in the case made out by the appellant that for examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which is exempt under section 10 of the Act. It has been noted that there is some anomaly by providing exclusion to institutions or fund registered under clause (23C) of section 10, but the same exclusion is not available to entities claiming exemption under clause (46) of section 10 which are established or constituted under a Central or State Act or by a Central or State Government. Such entities are, thus, not able to get notified under clause (46) of section 10 if they are holding registration under section 12A/12AA. The anomaly pointed out above, needs to be addressed. However, as the provisions relating to charitable entities constitute a complete code and that once any trust or institution has voluntarily opted for it by obtaining the requisite registration, it flows that the conditions in relation thereto should be complied with and the option of switching at convenience should not be available. Accordingly, while request for exclusion of clause (46) may be acceded to for exemption thereunder even in those cases where registration under section 12AA or 12A remains n force, there should be only one mode of exemption available and also, that the switching may be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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