Income Tax Appellate Tribunal - Chandigarh
M/S Mtsmc W Charitable Trust,Ludhiana vs Cit(E), Chandigarh on 19 May, 2025
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, 'B' CHANDIGARH
BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND
SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 36/CHD/2021
नधारण वष / Assessment Year: 2016-17
M/s MTSMC W Charitable Trust, The CIT (Exemptions),
MTSM College for Women, Vs Room No.1, 5th Floor,
Mata Rani Chowk, Old Sabzi Mandi, CR Building, Sector 17,
Ludhiana. Chandigarh.
थायी लेखा सं./PAN NO: AABTM0284B
अपीलाथ /Appellant यथ /Respondent
Assessee by : Shri Pankaj Bhalla, CA and Shri Hunny Bajaj, Advocate
Revenue by : Smt. Kusum Bansal, CIT DR
Date of Hearing : 15.05.2025
Date of Pronouncement : 19.05.2025
HYBRID HEARING
ORDER
PER RAJ PAL YADAV, VP The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax [in short 'the CIT ] dated 15.03.2021 passed for assessment year 2016-17.
2. Though the assessee has taken six grounds of appeal, but its grievance revolves around a single issue namely, ld. CIT has erred in exercising jurisdictional powers u/s 263 of the ITA No.36/CHD/2021 A.Y.2016-17 2 Act and thereby setting aside the assessment order passed by the AO for passing a denovo assessment.
3. The brief facts of the case are that the assessee has filed its r eturn of income on 21.09.2016 declaring 'nil' income. The Society at the relevant time was running educational institution imparting quality education like Master Tara Singh Memorial College for Women, Master Tara Singh Memor ial Public School etc. at Ludhiana. This case was selected for scrut iny assessment and notice u/s 143(2) was issued and served upon the assessee. Thereafter, ld. AO has accepted the retur n of the assessee. The ld. CIT has gone through the recor d and formed an opinion that assessm ent order is erroneous which has caused prejudice to the interests of revenue. The CIT was of the view that from F.Y. 2010-11, assessee has been accum ulating its unutilized income derived from the Society as per Section 11(2). This unutilized income is to be applied for future year. The assessee has used accumulated funds for the purpose of day-to-day running of Institution and current year income has been accum ulated for future year. Thus, in the opinion of the CI T, it is just a roll ITA No.36/CHD/2021 A.Y.2016-17 3 over of past funds and such benefit cannot be allowed to the assessee. Accordingly, CI T has issued notice u/s 263 of the Act. The assessee has filed reply. Thereafter, ld. CIT did not accept the contentions of the assessee and set aside the assessment order.
4. With the assistance of ld. Representative, we have gone through the record carefully. Before we embark upon an enquiry on the facts and issues agitat ed befor e us to find out whether the action u/s 263 of the Act deserves to be taken against the assessee or not, it is pertinent to take note of this section. It reads as under:-
"263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Off icer is erroneous in so f ar as it is prejudicial to the in terest of the revenue, he m ay, af ter giving the assessee an opportunity of being heard and af ter making or causing to be made such inquiry as he deems necessary, p ass such order thereon as the circumstances of the case jus tify, including an order enhancing or modifying the assessment, or cancelling the assessmen t and direc ting a f resh assessment.ITA No.36/CHD/2021
A.Y.2016-17 4 [Expl anation.- For the removal of doubts, it is hereby declared that, f or the purposes of this sub-section ,-
(a) an order passed on or before or af ter the 1st d ay of June, 1988 by the Assessing Off icer shall include-
(i) an order of assessment m ade by the Assistan t Commissioner or Deputy Commissioner or the Income Tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A;
(ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conf erred on, or assigned to, him under the orders or direc tions issued by the Board or by the Chief Commissioner or Direc tor General or Commissioner authorized by the Board in this behalf under sec tion 120;
(b) "record shall include and shal l be deemed al ways to have included all rec ords relating to any proceeding under this Ac t available at the time of examination by the Commissioner;
(c ) where any order referred to in this sub-sec tion and passed by the Assessing Of ficer had been the subjec t matter of any appeal f iled on or before or af ter the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be ITA No.36/CHD/2021 A.Y.2016-17 5 deemed al ways to have extended to such matters as had not been considered and decided in such appeal . (2) No order shall be made under sub-section (1) af ter the expiry of two years from the end of the f inancial year in which the order sought to be revised was passed.
(3) Notwithstanding anything contained in sub-section (2), an order in revision under this section m ay be passed at any time in the c ase of an order wh ich has been passed in consequenc e of, or to give effect to, any finding or direction contained in an order of the Appell ate Tribunal, National Tax Tribunal , the High Court or the Supreme Cour t.
Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to sec tion 129 and any period during wh ich any proceeding under this sec tion is stayed by an order or injunction of any court shall be excluded."
5. A bare perusal of the sub section-1 would reveal that powers of revision granted by Section 263 to the learned Comm issioner have four compar tments. In the first place, the learned Commissioner may call for and examine the records of ITA No.36/CHD/2021 A.Y.2016-17 6 any proceedings under this Act. For calling of the record and exam ination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Off icer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the recor d and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistanc e of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show-cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this s tage the oppor tunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he m ay deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner m ay annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the or der and direct the ITA No.36/CHD/2021 A.Y.2016-17 7 Assessing Officer to pass a fresh order.
6. A perusal of sub-clause (c) of the above would contemplate that if any order, which is subject matter for revision under section 263 is challenged in appeal, then, on the items which are subject matter of appeal, no power under section 263 could be exercised by the ld. Commiss ioner. We may elaborate further, for example- an assessment order was passed, it contains five issues, which were challenged before the ld. CIT(A), but ld. Assessing Officer failed to look into few issues, which may ar ise from the record, then inspite of the assessment order being challenged before the ld. CIT(A), the ld. Commissioner would have jurisdiction on such item s, which are not subject matter of appeal in that assessment order.
7. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it per tinent to take note of the fundam ental tests propounded in various judgments relevant for judging the action of the CIT taken u/s
263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of ITA No.36/CHD/2021 A.Y.2016-17 8 Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263.
(i) The CIT m ust record satisfaction that the or der of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled.
(ii) Sec. 263 cannot be invoked to correct each and ever y type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted.
(iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirem ent of order being erroneous.
(iv) If the order is passed without application of mind, such order will fall under the category of erroneous order.
(v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. ITA No.36/CHD/2021
A.Y.2016-17 9
(vi) If while making the assessm ent, the AO examines the accounts, makes enquir ies, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitut e his estimate of income in place of the incom e estimated by the AO.
(vii) The AO exercises quas i-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because t he CIT does not fee stratified with the conclusion.
(viii) The CIT, before exercising his jur isdiction under s. 263 must have material on record to arrive at a satisfaction.
(ix) If the AO has made enquiries during the cour se of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.
8. Before adverting to the facts of the present case, we ITA No.36/CHD/2021 A.Y.2016-17 10 would like to make reference to one of the submissions raised by the ld. CIT DR. The ld. CIT DR made r eference to the decision of Hon'ble Punjab & Haryana High Court in ITA No.153/2024 dated 13.02.2025 in the case of Veena Shah Vs PCIT Rohtak. She put reliance on the following observations of the Hon'ble High Court :
"7. Vide order dated 27.03.2023 passed under Section 263 of the Act by the PCIT, the matter was remanded back to the Assessing Officer to pass a fresh order. During the pendency of the appeal before the Tribunal, itself, the Assessing Officer passed a fresh order on 18.02.2024 in compliance of order dated 27.03.2023. Undisputedly the appellant has preferred appeal against order dated 18.02.2024 as well, which is pending consideration. Simultaneously, the present appeal is preferred against order dated 28.06.2024 passed by the learned Income Tax Appellate Tribunal, Delhi Bench 'G', New Delhi.
8. Since the very order of remand dated 27.03.2023, which was challenged before the learned Income Tax Appellate Tribunal, Delhi Bench 'G', New Delhi, was implemented and a fresh order dated 18.02.2024 was passed by the Assessing Officer, further the learned Tribunal vide order dated 28.06.2024 did not interfere with the order dated 27.03.2023 passed under Section 263 of the Act by PCIT (remanding the case back to the Assessing Officer) and the appellant has preferred an appeal against order dated 18.02.2024, which is pending consideration, therefore, the present appeal is liable to be dismissed.
9. In view of the above, the present appeal is dismissed.
10. Pending applications, if any, also stand disposed of."
9. The ld. CIT DR contended that in the present case also, AO has passed a consequential order in pursuance of 263 order and assessee has also filed appeal, therefore, present appeal should not be decided on mer it.
10. We have duly considered the contention of ld. CIT DR but we do not find any merit in this cont ention. Appeal against ITA No.36/CHD/2021 A.Y.2016-17 11 an order passed u/s 263 has been provided to the ITAT which is a statutory appeal. In authoritative pronouncem ent of Hon'ble Supreme Court as well as of the Hon'ble High Cour t, it has been propounded that powers u/s 263 can only be exercised if twin conditions are available, namely;
a) The order passed by the AO is erroneous, and
b) It has caused a prejudice to the interests of Revenue If any one condition is unavailable, then order passed u/s 263 cannot be upheld or sustained. This aspect has to be decided on merit. It has to be found out what prejudice has been caused to the Revenue by the impugned order of the AO and how the assessment order is erroneous. We have made reference to the judgement of Hon' ble Supreme Court in the case of Malabar Industr ies. Similarly, we would like to make reference to the decision of Hon'ble Supreme Court in the case of CIT Vs Max India 295 ITR 282. In the judgement referred by the ld. CIT DR, Hon'ble Court has not interpreted the scope of Section 263, rather decided the issue on the given facts and circumstances of that particular case. The Hon'ble Court has not propounded the meaning and scope of Section 263. If the interpretation suggested by the ld. CIT DR is being accepted, ITA No.36/CHD/2021 A.Y.2016-17 12 then merely on passing of the assessment order, the statutory rem edy of appeal would becom e redundant. Therefore, we do not find merit in the contention of ld. CIT DR and this plea is rejected.
11. Let us revert to the facts of the prese nt case. We find that ld. CIT has taken note of Sect ion 11(2) of the Income Tax Act and rightly construed the provision. The lucid discussion made by the ld.CIT in paragraph No. 3.2 to 3.6 read as under:
3.2 The s ubstantive provisions contained i n. section " 11(1) of the Act is that t he assessee has to utilize 85% of the inco me for the object s during the year in which it i s earn ed. Accumulat ion of funds of mor e than 1 5% of the income is allowed u/s 11 (2) of the Act as an exception to the general rule. However, there are very explicit and restrictive provisions in t he Act r egarding accumulation of funds. Relevant sub s ecti ons (2 ), (3) and (3A) of sectio n 11 of the Act need to be r evisited here as under:
'Su b-section (2) of section 11 r equires th e assessee to furnish a s tatement in the pres cribed form and in the prescribed manner to the Assessing Of ficer, stating the purpose for w hich the income is being accu mulated o r set apart and t he peri od fo r which the income is to be accumulated or set a part, which sha ll in no case exceed five years. This sub-section provid es an exception t o th e gen eral rule that 85% of the income is t o be utilized during t he same year. This sub-section allows accumulation/ setting apa rt of mor e than 15% of the funds during the year b ut this excepti on is subject to certain conditi ons. For cl aiming exemption u/s 11 of the Act, the assessee is anyway required to apply its income for its o bjects. How ever, in ord er to claim the benefit of this exception , the assessee has to g ive a specific purpos e within the obj ects o f the a ssessee an d also stat e how many years the funds are b eing accumulated/s et apart (not exceeding 5 years).
Further, sub -s ection (3) of sect ion 11 in claus e (c) s ays that if income referred to in s ection 11(2 ) is not utilized fo r the ITA No.36/CHD/2021 A.Y.2016-17 13 purpose for which it is so accumulated or set a part during the period referred or in the year immediately following the expiry thereof, then such income will be deemed to income of the assessee of the previous year immediately fo llowing the expiry of the period aforesaid. This mean s that the fun ds accumulated in excess of 15% have to be utili zed for t he specific purpose during the peri od for which it is accumulated or the year i mmediately following that i.e. t he ass essee has a maximum of 6 years to u tilize t hese accumulated funds fo r the specific purpose.
Furthermore, sub -section (3A) of s ection 11 says that, "Notwith standing anything contain ed in sub-section (3 ), where du e to circumstances beyond th e control of the person in receipt of the income, any income invested or deposit ed in accord ance with the provisions of cla use (b) of sub - section (2) cannot be applied for the purpose f or which it was a ccumulated or set apart, the Assessin g Officer may, on an appli cati on made to him in this behalf, allow such person to apply such income for such other charitable or religio us purpose in India as is specified in the application b y su ch person and as is in conformity with th e objects of the tru st; and thereupon the provisions of sub-secti on (3) shall a pply as if the purpose sp ecifi ed by su ch p erson in the application under this sub-section were a purpo se specified in the notice given to the Assessing Officer und er clause (a) of sub - section (2 )."
Sub-s ection (3A ) of s ection 11 further gi ves option to the assessee in extraordinary circumstances beyond hi s control t o apply to the Assessing Offi cer requestin g him to allow application of thes e accumulated f unds for some other purpose other than the on e for which the funds w ere init iall y accumulated/ set apart but w hich are in conformity with the objects of the trust and gives p ower to the Asses sing officer to decide on this applicatio n. The assessee can utiliz e the funds for th e new/ changed purpos e on ly if the Assessing Offi cer allows it. This subsect ion abs olutel y bind s and clarifies what is meant in s ection 11 (2 ).
3.3 Above sections envisage that If a trust or in stitut ion is un able to apply 85% of its income f rom property held under them, the income is still exempt if the following conditions are met (i) The income is deemed to have been applied for charitable purposes in specified scenarios, and (ii ) 85% of income is neither applied nor deemed to have been ap pli ed, the trust is allowed to accumul ate such un app lied portion of income under specified condi tion s to claim the exemption. So far as accumulat ion of 85% of income of trust/institution is concerned, if a minimu m of 85% of the in come of tr ust or institution has not applied or deemed to ha ve been ITA No.36/CHD/2021 A.Y.2016-17 14 applied as above, it is allow ed to accumulate or s et aside. And such income s hall be exempt, if following conditio ns ar e satisfied :
(i) Such trust or i nstitution f urnishes F orm No. 10 - notice of accumulation of income by charitabl e tru st or institution electronically on or before the due dat e for fili ng th e return of income, (ii) Mention the pur pose for which in come i s being accumulated or set aside, (iii) Income shall not be accu mulated for more than 5 years and years in which income accu mul ated or set aside due to order or injunction of an y court to be excluded in comput ing '5 years, (iv) Money so accumulated or set aside is invested o r deposit ed in specified mode. However, if inco me is not acumul ated/applied as above, it is taxabl e as fo llows :
Categor y of violation Year of taxat ion If income is applied fo r purpose Year of such applicati on other than char itable or religious Income ceas es to be in ves ted as Year in which it cease s to be invested specified as specified Not utiliz ed for the pur pose for 6th year which it was accu mula ted or set aside upto 6 ye ars Donated to trust registered Year in which inc ome is so donated under Section 1 2AA or10(23C) 3.4 On in-depth reading sub-section (2), (3) and (3A ) of section 11 together, follow ing picture emerges i.e. (i) the assessee can accumulate/ set apart mor e than 15% o f funds of the year by specifying in th e prescribed for m the specific purpose for which the funds are accumulated and the peri od for whi ch the fun ds ar e accumulated, (ii ) t he assessee has to utilized thes e funds for the specific purpose within the period of accumula tion mentioned in the pr escribed form or in the i mmediately following year, and (iii) in case of extraordinary ci rcumstances b eyond th e control of the assess ee, it has the option of applying to the Ass essing Officer to allow it to use the funds f or purpose other than the purp ose specified earlier in the prescribed form. This n ew purpose ha s to be in conformit y with the objects of the tru st. Only if the Assessing Officer allows, th e assessee can lawfull y utilize the same for the new/ changed purp ose. Moreover, the Act in cla use (2)(b ) of Exp lanation to section 11(1) allows the appellan t to benefi t of ITA No.36/CHD/2021 A.Y.2016-17 15 deemed ap plication of income d eri ved durin g the year if this optio n is availed in the prescribed for m an d if th e inco me is utilized in th e immediately fo llowing year. Here, the app ellan t is not requir ed to give any specific purpose but the fu nds ha ve to be utilized in the next year for the obj ects of the app ellant. B esides , the Act already provides accumulation/ s et apart of 15% of income of th e year for contingenci es, expansion, emergen cies, etc. in order to ensure smooth functionin g of the or gani zation. If the appellant wants to accumulate over and above th is u/s 11 (2 ), it has to b e a s pecific purpose and a s pecific time period and ha s to be stated to th e Assessing Officer in the prescribed form.
3.5 Th e Hon 'ble Kerela High Court in the case of CIT vs . Shree Seeth aramaAnjaneya Veda K endra (2 008) report ed as 174 Taxman 523 has held that a ccumulation under section 11 (2) of th e Act shoul d not be adopted in a routine basis and if it is done, then the very purpose of t rust will be defeated. The r elevant extracts o f the judicial pronou ncement ar e as under: -
"Learning Standing Counsel f or the d epa rtment rightly pointed out that the approach of the Tribunal is technical and the Assessing Officer is j ustifi ed in g oing into the question whether the objects of the trust are really accomplished which alone will entitle the assessee for claiming exemption. Prima facie, we are of th e view t hat the carry forw ard of income up to 75% tho ug h p ermitted under section 11(2) of the Act , should not be adopt ed on a routi ne basis and if it i s do ne, t he ver y purpose o f the trust will be defeated. In fact, section 11 (2 ) of the Act p roviding for carrying over up to 75 per cent is an exception and if it is follow ed from year to year, then the g enu ineness of the activities of the trust its elf should b e examin ed by the Assessing Officer..................
In fact, we are of the view that a d etailed in vestigation is required about the activities of the trust an d the expenditur e it in curred so far to achieve the o bjects of t he trust and diversions, if any made. We therefore s et a side the orders of the Tribunal and all the authorities below and remand the matter back to the Assessing Officer for fresh consideration with reference to subsequen t assessments and after cond ucting enquiry and if necessary, aft er condu cting a local in spection in the premises of th e ass essee about the activit y bei ng carried on by the tru st."
3.6 In the instant cas e, the ass essee has not b een providing specific objects in respect of accumulation u/s 11(2) of the Act . As per the provisions o f the Act, t he assess ee ha s to give specific purpose i n r es pect of accumulation. Therefore, the assessee has ITA No.36/CHD/2021 A.Y.2016-17 16 not men tioned any s pecific purposes in Form no. 10 in r espect of the accumulation but mentioned "To maintain and d evelop educa tional institutions". It ha s been decided in the vari ous case laws that for the pur pose of a ccumulation , t here s houl d be specific purposes which should be mentioned i n Fo rm no. 10 . Merely prescribing the obj ects in a blanket manner is not liable for accumulation ben efit 'u nder section 11 (2) of t he Act. Th e case law of 'Director of Inco me Tax (Exempt ion ) Vs. T rus tees Singhania Ch aritable Trust (1993) 199 ITR 819 Calcutta' squarely applies with the case of the assessee as u nder: -
x x x "
12. As far as propounding the meaning of Section 11(2) and its conditions are concerned, there is no dispute with the disc ussion made by the ld. CIT. However, in paragraph No. 6, the ld. CIT failed to apply the correct position of law on the facts of the present case. The ld. CIT constr ued the meaning of expression "Maintain and Develop Educational Institution"
in a meaning as if under this head, expenditure could be incurred in capital f ield, namely, for construction of building or erection of some capital asset and it cannot incur the expenditure on day-to-day running of the Society. We do not subscribe this view of the CIT. To our mind, ld. CIT has erred in construing this meaning. To 'maintain and develop Educational Institution' means how to run this Institution. If an I nstitution is being not run, then how it is being maintained. To 'maintain' does not mean for creating capital infrastr ucture only. It is also pertine nt to note that in the ITA No.36/CHD/2021 A.Y.2016-17 17 Accounting Year for the current asses sment year in Form No. 10, assessee has specifically mentioned "To maintain and develop Educational Institution run by Society including payment of salaries'. The scope of expression 'developm ent' has been explained by the Hon'ble jur isdictional High Court in its judgement rendered in CIT Vs Market Committee, Tohana reported in 201 taxmann 235. It is a very brief judgement and we deem it appropriate to take note of this complete judgement, which read as under :
Adarsh Kumar Goel, J.
This Appeal has been preferred by the revenue u/s 260A of the income tax Act, 1961 (hereinafter referred to as "the Act") against order dated 18-6-2009 passed by the income tax Appellate Tribunal, Delhi Bench ''F'', New Delhi in ITA No. 1410/Del./09, for the assessment year 2006- 07, raising following substantial question of law:--
Whether on the facts and circumstances of the case, the learned ITAT was justified in holding that the assessee has fulfilled the mandatory requirements of section 11(2) without specifically mentioned the definite propose or purposes of accumulation in form No. 10?
2. The assessee is a statutory body under the provisions of Punjab Agriculture Produce Marketing Act, 1961 (hereinafter referred to as the "PAPM Act"). The Assessing Officer made addition to the declared income on account of accumulation of funds without compliance of conditions u/s 11(2) of the Act. On appeal the said addition was deleted by the CIT(A) holding that the accumulation was as per the statutory provisions. The said view has been upheld by the Tribunal as follows:--ITA No.36/CHD/2021
A.Y.2016-17 18 Mere because the assessee has mentioned development works in general manner, in Form No. 10, it cannot be said that the primary condition of section 11(2) has not been fulfilled as so observed by the Hon''ble Delhi High Court in the case of Director of income tax v. Mitsui & Co. Environmental [2008] 167 Taxman
43. We, therefore, uphold the order of ld. CIT(A) on this issue, which has been decided by the ld. CIT(A) by saying that in Form No. 10, the assessee has mentioned that accumulation of the funds has been made for development of works and this mentioning of development of works in Form No. 10 cannot be said to casual because the assessee could not utilize the fund other than the purposes mentioned in section 28 of Punjab Agriculture Produce Marketing Act, 1961. The purposes listed in section 28 of Punjab Agriculture Produce Marketing Act, 1961 are undoubtedly in the nature of development works. Therefore, the order of ld. CIT(A) in directing the Assessing Officer to allow the exemption in respect of the fund accumulated for development works is justified.
We have heard learned counsel for the appellant.
3. The condition for excluding accumulated income of a charitable institution from total income is specification of the purpose for which the income was accumulated and deposit in the specified mode. Exemption was disallowed on the ground that the assessee failed to specify the purpose of accumulation. The CIT(A) as well as the Tribunal have clearly held that the purpose stood specified and was statutory purpose for utilizing the amount i.e. development as per section 28 of PAPM Act. Section 11(2) of the Act to the extent relevant is as under:--
11(2) Where eighty five per cent of the income referred to in clause (a) or 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 specifies, by notice in writing given to the Assessing Officer in the prescribed manner, 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 ITA No.36/CHD/2021 A.Y.2016-17 19 in no case exceed ten years;
(b) ***
4. Learned counsel for the revenue has not been able to show any error in the view taken by the CIT(A) as affirmed by the Tribunal. No substantial question of law arises.
5. The appeal is dismissed."
12.1 The requirement u/s 11(2) is that after accumulation was made for the purpose of capital f ield, then day-to-day expenditure cannot be incurred out of that accum ulated amount. Apart from this condition, there is no other provision provided in Section 11(2). The only area of dispute between the assessee and the revenue is, whether expression "to maintain and develop Educational Institution' would also include expenditure incurred in the revenue field. As observed earlier, 'to maintain and develop Educational Institution' means to create infrastructure and to run the Institution. Hence, expenditure has rightly been incurred by the assessee from the accumulated funds. The AO has rightly accepted the stand of the assessee. There was no error in that assessment order and if for argument sake, there was an error, then it was one of the possible view upo n whom action u/s 263 is not ITA No.36/CHD/2021 A.Y.2016-17 20 possible. Accordingly, we quash the impugned order passed u/s 263 of the Act and allow the appeal of the assessee.
13. In the result, appeal is allowed.
O r d e r p ro n o un ced o n 19 . 0 5. 2 02 5 .
Sd/- Sd/-
(KRINWANT SAHAY) (RAJPAL YADAV)
ACCOUNTANT MEMBER VICE PRESIDENT
"Poonam"
आदे श क त ल प अ े षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु त/ CIT
4. वभागीय त न ध, आयकर अपील य आ धकरण, च डीगढ़/ DR, ITAT, CHANDIGARH
5. गाड फाईल/ Guard File
आदे शानुसार/ By order,
सहायक पंजीकार/ Assistant Registrar