Appeal details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 5227 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 year(s) 5 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-09-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
22-05-2017
Assessment Year
2009-2010
Appeal Filed On
04-04-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.1952/DEL/2013 ASSESSMENT YEARS 2009-10 ASSOCIATION OF STATE ROAD TRANSPORT UNDERTAKINGS. ASRTU BHAWAN, PLOT NO.4-A, PSP BLOCK, POCKET-14, SECTOR-8, DWARKA V. COMMISSIONER OF INCOME TAX (APPEALS)-XXI, NEW DELHI. TAN/PAN: AAAAA0233A (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI TARANDEEP SINGH, ADV. SHRI PULKIT VERMA, ADV. RESPONDENT BY: SHRI K.A MANU, SR.D.R. DATE OF HEARING: 18 08 2021 DATE OF PRONOUNCEMENT: 23 09 2021 O R D E R PER AMIT SHUKLA, A.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE A PPELLANT ASSESSEE AGAINST ORDER DATED 21 ST JANUARY, 2013, PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXI, N EW DELHI IN APPEAL NO.368/11-12 FOR THE QUANTUM OF ASSESSMEN T PASSED U/S 143 (3) FOR THE AY 2009-10. THE GROUNDS OF APPEALS RAISED IN THE APPEAL ARE AS UNDER :- 1. THAT ON FACTS AND IN LAW THE CIT(A) ERRED IN UPHOLDING AN ADDITION TO TOTAL INCOME OF RS.4,39,07 ,729/- BEING ACCUMULATION PERTAINING TO FY 2003-04 WHEN TH E I.T.A. NO.1952 /DEL/2013 2 APPELLANT WAS GOVERNED BY REGIME UNDER SECTION 11 A ND 12 OF THE ACT. 2. THAT ON THE FACTS AND IN LAW THE CIT(A) ERRED IN HOLDING THAT ACCUMULATION OF THE PAST WHEN NO EXEMP TION WAS CLAIMED OR ALLOWED UNDER SECTION 10(23C)(IV) AP PLIES. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDERS PASSED BY BOTH A.O. AND CIT(A) AR E 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 APPELL ANT ON 30 TH MARCH, 2010 HOWEVER, VIDE ORDER OF ASSESSMENT DATED 28 TH 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. AP PELLANT WAS ESTABLISHED WITH MAIN OBJECT OF IMPROVING PUBLIC TRANSPORT SYSTEMS IN THE COUNTRY AND TO ASSIST ITS MEMBERS STATE TRANSPORT UNDERTAKINGS BY PROVIDING AUTO MOBI LE PART AT THE MOST ECONOMICAL AND COMPETITIVE RATES. APPELLAN T IS REGISTERED U/S 12A OF THE ACT VIDE REGISTRATION ORD ER DATED 27 TH APRIL, 1982 AND FURTHER VIDE NOTIFICATION ORDER NO .1348 DATED 31 ST OCTOBER, 2007 IT IS ALSO REGISTERED UNDER THE PROVISION OF SECTION 10(23C)(IV). REGISTRATION GRAN TED U/S 10(23C)(IV) OF THE ACT IS VALID FROM ASSESSMENT YEA R 2007-08 ONWARDS. I.T.A. NO.1952 /DEL/2013 3 3. DURING THE COURSE OF ASSESSMENT, IT WAS OBSERVED BY THE LD. AO THAT APPELLANT HAD SET APART AND ACCUMULATED SURPLUS OF RS.4,39,07,729/- FOR FY 2002-03 WHICH WAS IN EXC ESS OF 15%. THIS AMOUNT WAS CARRIED FORWARD IN UTILIZATION IN ENSUING YEARS. AO HELD THAT, SINCE THE APPELLANT HA S NOT UTILIZED THE ABOVE AMOUNT WITHIN THE STIPULATED PER IOD THEREFORE, IT IS TAXABLE IN THE YEAR UNDER CONSIDER ATION. IN THIS REGARD, IN THE ORDER OF ASSESSMENT IT WAS HELD BY T HE LD. AO AS UNDER:- D URING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS S EEN THAT THE ASSESSEE HAS APPLIED 85% OF THE CURRENT IN COME TO THE ACTIVITIES AS PER ITS AIMS AND OBJECTS. HOWE VER, AN AMOUNT OF RS.4,39,07,729/- SET APART IN F.Y.2003-04 AND WAS ACCUMULATED AND CARRIED FORWARD TO BE UTILIZED IN THE NEXT FIVE YEARS AS PER CLAUSE (A) GIVEN AFTER 3 RD PROVISO TO SECTION 10(23C)(IV) OF THE IT ACT REMAINED UNUTILIZ ED. SINCE THE PERIOD OF FIVE YEARS IN THIS CASE HAS EXPIRED O N 31.03.2009 AND THE ACCUMULATED AMOUNT HAS NOT BEEN APPLIED FOR CHARITABLE PURPOSE, THE SAID AMOUNT OF RS.4,39,07,729/- IS FOUND TO BE TAXABLE AS THE INCO ME OF THE YEAR UNDER CONSIDERATION. THE REPRESENTATIVES W ERE CONFRONTED WITH THIS FACT VIDE PROCEEDINGS SHEET NO TING DATED 28.12.2011 THE REPRESENTATIVES ONLY STATED TH AT THE SAID SUM HAS BEEN UTILIZED IN THE SUBSEQUENT YEAR. THE SUBMISSIONS OF THE ASSESSEE IS NOT FOUND TO BE ACCE PTABLE IN VIEW OF THE SPECIFIC PROVISIONS OF THE ACT, IN T HIS REGARD. I.T.A. NO.1952 /DEL/2013 4 4. IN THE APPEAL BEFORE THE FIRST APPELLATE AUTHORI TY. LD. CIT (A) DISMISSED THE APPEAL BY OBSERVING AS UNDER :- 4.3 FROM THE ABOVE ANALYSIS IT IS APPARENT THAT SE C.11 TO 13 ARE GENERAL SECTIONS AND SEC. 10(23C)(IV) IS A S PECIFIC SECTION. THERE WERE VARIOUS FACILITIES AVAILABLE AS PER SEC.11 TO 13 OF THE IT ACT WITH APPELLANT BY VIRTUE OF REG ISTRATION U/S 12A, EVEN THOUGH APPELLANT HAS OPTED FOR NOTIFI CATION U/S 10(23C)(IV) AND IT HAS GOT IT VIDE ORDER OF DGI T DATED 31.10.2007, EFFECTIVE FROM A.Y.2007-08 AND FOR GETT ING NOTIFICATION U/S 10(23C)(IV) REGISTRATION U/S 12A I S MANDATORY. SO, APPELLANT HAS PREFERRED TO BE NOTIFI ED U/S 10(23C)(IV). SO, THIS IS A PROCEDURE OF THE IT ACT AS PER WHICH APPELLANT WAS AVAILING BENEFIT OF SEC. 11(3) AS WEL L AS PROVISIONS OF SEC.11(2) WAS AVAILABLE WITH THE APPE LLANT. BUT AFTER GETTING NOTIFIED U/S 10(23C)(IV) BY ORDER OF DGIT IT HAS CHOSEN TO BE TAXED U/S 10(23C)(VI) OF THE IT AC T. THE PROVISIONS OF SEC. 10(23C)(VI) ALLOW ACCUMULATION F OR 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, JOU RNALS IN THIS REGARD, I FOUND THAT APPELLANTS CASE FALLS UN DER 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 RELE VANT PORTION OF THE ACT SO AS TO CLARIFY THE ISSUE :- I.T.A. NO.1952 /DEL/2013 5 PROVIDED ALSO THAT THE FUND OR TRUST OR INSTITUTIO N [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-C LAUSE (VIA)]. (A APPLIES ITS INCOME OR ACCUMULATES IT FOR APPLIC ATION, WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT IS ESTABLISHED AND IN A CASE WHERE MORE THAN FIFTEEN P ERCENT OF ITS INCOME IS ACCUMULATED ON OR AFTER THE 1 ST DAY OF APRIL, 2002, THE PERIOD OF THE ACCUMULATION OF THE AMOUNT EXCEEDING FIFTEEN PER CENT OF ITS INCOME SHALL IN N O CASE EXCEED FIVE YEARS.] 4.4 FROM THE ABOVE READING OF SECTION AND AFTER ANALYZING THE FACTS IN DETAIL, I AM CONVINCED THAT AO HAS RIGHTLY APPLIED THE PROVISIONS OF SEC. 10(23C) ON T HE FACTS OF THE CASE AND HAS NOT ALLOWED ACCUMULATION BEYOND FI VE YEARS PERIOD BECAUSE HIS ACTION IS BASED ON THE PRO VISIONS OF IT ACT AND HIS ACTION FALLS UNDER THE CLAUSE (A) WHICH COMES AFTER 3 RD PROVISO TO SEC. 10(23C)(IV) OF THE IT ACT WHICH HAS BEEN DISCUSSED ABOVE. 5. BEFORE US IT WAS SUBMITTED BY LD. COUNSEL OF THE APPELLANT, MR. TARANDEEP SINGH THAT NOTIFICATION UN DER SEC. 10(23C)(IV) IS APPLICABLE FROM THE ASSESSMENT YEAR 2007-08 (PREVIOUS YEAR 2006-07) AND IS NOT APPLICABLE FOR T HE ASSESSMENT PROCEEDINGS PRIOR TO THE ASSESSMENT YEAR 2007- 08. IT WAS ALSO SUBMITTED THAT UTILIZATION OF ACCUM ULATED INCOME FOR FINANCIAL YEAR 2003-04 IS TO BE DEALT WI TH IN I.T.A. NO.1952 /DEL/2013 6 ACCORDANCE WITH SEC. 11(3)(C) OF THE ACT. THAT AS P ER SECTION 11(3)(C), THE ACCUMULATED INCOME IN EXCESS OF 15% I S TAXABLE IN THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE EXPI RY OF THE PERIOD FIVE YEARS. ACCORDINGLY, IT WAS HIS SUBMISSI ON THAT THE LD AO HAS MISAPPLIED THE PROVISIONS OF CLAUSE (A) G IVEN AFTER 3 RD PROVISO TO SEC. 10(23C)(IV) OF THE IT ACT, 1961 WH ICH STATES THAT IN A CASE WHERE MORE THAN 15% OF ITS INCOME IS ACCUMULATED, THE PERIOD OF THE ACCUMULATION OF THE AMOUNT EXCEEDING 15% OF ITS INCOME SHALL IN NO CASE EXCEED FIVE YEARS.IN ADDITION TO THE ABOVE, HE ALSO SUBMITTED T HAT THEUNDISPUTEDLY THE ACCUMULATED INCOME FOR THE FINA NCIAL YEAR 2003-04 HAS BEEN FULLY UTILIZED IN THE FY 2009 -10. 6. ON THE OTHER HAND, LD. SR. DR HAS SUPPORTED THE ORDERS PASSED BY THE LOWER AUTHORITIES. IN THIS REGARD, IT WAS SUBMITTED BY HIM THAT THE LD. AO AND LD. CIT(A) HAV E FOR APPROPRIATE REASONS REJECTED THE CLAIM RAISED BY TH E APPELLANT AND AS SUCH THE INSTANT APPEAL MERITS TO BE DISMISS ED. 7. WE HAVE CONSIDERED THE FACTS OF THE CASE AND MAT ERIAL PLACED ON RECORD. WE FIND THAT PART SURPLUS OF FY 2 003-04 (WHICH WAS IN EXCESS OF 15%) AMOUNTING TO RS.4,39,0 7,729/- WAS SET APART AND ACCUMULATED BY THE APPELLANT. IT IS ALSO NOT IN DISPUTE AS BY AO AND LD CIT (A) THAT THE ABOVE S URPLUS HAS BEEN FULLY UTILIZED IN FY 2009-10. BEFORE US THE CA SE OF APPELLANT IS THAT, SINCE THE ABOVE SURPLUS WHICH PE RTAINS TO FY 2003-04 (WHEN EXEMPTION U/S 11 & 12 OF THE ACT W AS CLAIMED) ITS UTILIZATION SHOULD BE TESTED ONLY IN A CCORDANCE I.T.A. NO.1952 /DEL/2013 7 WITH APPLICABLE PROVISION OF SECTION 11(3) OF THE A CT. ON THE OTHER HAND, IT IS THE CASE OF INCOME 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 PERTAININ G 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 WHE RE 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 SHAL L 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) W HICH (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 O F 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 . I.T.A. NO.1952 /DEL/2013 8 (D) IS CREDITED OR PAID TO ANY TRUST OR INSTITUTION REGISTERED UNDER SECTION 12AA OR TO ANY FUND OR INS TITUTION OR TRUST OR ANY UNIVERSITY OR OTHER EDUCATIONAL INS TITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION REFERR ED TO IN SUB-CLAUSE (IV) OR SUB-CLAUSE (V) OR SUB-CLAUSE (VI ) OR SUB- CLAUSE (VIA) OF CLAUSE (23C) OF SECTION 10 SHALL BE DEEMED TO BE THE INCOME OF SUCH PERSON OF THE PREVIOUS YEA R IN WHICH IT IS SO APPLIED OR CEASES TO BE SO ACCUMULAT ED OR SET APART OR CEASES TO REMAIN SO INVESTED OR DEPOSI TED OR [CREDITED OR PAID OR], AS THE CASE MAY BE, OF THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE EXPIRY OF THE PERIOD AFORESAID. IT APPARENT FROM PROVISIONS OF SECTION 11(3)(C) ABO VE THAT THE AMOUNT ACCUMULATED AND SET APART U/S 11(1) OF RS.4,39,07,729/- PERTAINING TO FY 2003-04 CAN BE UT ILIZED WITHIN 5 YEARS THERETO I.E. UP TO FY 2008-09 OR IN THE YEAR IMMEDIATELY FOLLOWING THE EXPIRY THEREOF I.E., FY 2009-10 AND IF THE SAME IS NOT UTILIZED THEN IT SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE EXPI RY OF THE PERIOD AFORESAID . THEREFORE, THE PROVISION OF SECTION 11(3) VERY CLEARLY STIPULATE THAT ANY AMOUNT ACCUMU LATED FOR FINANCIAL YEAR 2003-04 CAN BE UTILIZED UP TO FINANC IAL YEAR 2009-10 AND IF NOT UTILIZED BY THEN, THEN IT IS TAX ABLE IN AY 2010-11 (APPLICABLE FOR FY 2009-10). UNDISPUTEDLY I N THE PRESENT CASE, THE SUM OF RS.4,39,07,729/- HAS BEEN UTILIZED BY THE APPELLANT IN FY 2009-10 I.E., AY 2010-11. I.T.A. NO.1952 /DEL/2013 9 9. ON THE OTHER HAND, IN SECTION 10(23C) ONE OF THE STATED CONDITIONS FOR CLAIMING BENEFIT OF EXEMPTION AS PRO VIDED IN THIRD PROVISO TO THAT SECTION IS AS UNDER :- PROVIDED ALSO THAT THE FUND OR TRUST OR INSTITUTION [OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION] REFERRED TO IN SUB-CL AUSE (IV) OR SUB-CLAUSE (V) [OR SUB-CLAUSE (VI) OR SUB-CLAUSE (V IA)]- [(A) APPLIES ITS INCOME, OR ACCUMULATES IT FOR APPL ICATION, WHOLLY AND EXCLUSIVELY TO BE OBJECTS FOR WHICH IT I S ESTABLISHED AND IN A CASE WHERE MORE THAN FIFTEEN P ER CENT OF ITS INCOME IS ACCUMULATED ON OR AFTER THE 1 ST DAY OF APRIL, 2002, THE PERIOD OF THE ACCUMULATION OF THE AMOUNT EXCEEDING FIFTEEN PER CENT OF ITS INCOME SHALL IN N O CASE EXCEED FIVE YEARS; AND] UNDER THIRD PROVISO TO SECTION 10(23C), SURPLUS OF FY 2003-04 IN EXCESS OF 15% CAN BE ACCUMULATED FOR A PERIOD WH ICH SHALL IN NO CASE EXCEED FIVE YEARS, I.E., THE AMOUNT ACCUMULATED CAN THEREFORE BE UTILIZED FOR A PERIOD UP TO FIVE Y EARS I.E., FY 2008-09 I.E., AY 2009-10. WE FIND THAT WHEREAS PROV ISIONS OF SECTION 11(3) PROVIDE FOR AN ADDITIONAL YEAR OF GRA CE PERIOD WHEN UTILIZATION CAN BE DONE, HOWEVER, THERE IS NO SUCH LEVERAGE GIVEN IN SECTION 10(23C) OF THE ACT. IF PR OVISION OF SECTION 11 ARE APPLICABLE THEN APPELLANT IS CORRECT IN SUBMITTING THAT THE AMOUNT ACCUMULATED CAN BE UTILI ZED TILL AY 2010-11, WHEREAS IF PROVISION OF SECTION 10(23C) ARE APPLICABLE THEN THE REVENUE IS CORRECT IN HOLDING T HAT THE I.T.A. NO.1952 /DEL/2013 10 AMOUNT ACCUMULATED MUST BE UTILIZED ON OR BEFORE AY 2009- 10. 10. WE FIND FROM THE ORDERS OF AUTHORITIES BELOW TH AT THE REGISTRATION GRANTED U/S 10(23C) OF THE ACT IS APPL ICABLE FROM AY 2007-08 ONWARDS. WE ALSO FIND THAT PROVISIONS OF SECTION 11 AND 10(23C) ARE TWO PARALLEL REGIMES. THIS IS AL SO STIPULATED BY CBDT IN THEIR CIRCULAR NO.14 DATED 17 TH AUGUST, 2015 AS UNDER:- 2. NECESSITY FOR REGISTRATION U/S 12AA WHILE SEEKIN G 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, PROVISION S OF SECTION 11 AND 10(23C) ARE TWO PARALLEL REGIMES AND OPERATE INDEPENDENTLY IN THEIR RESPECTIVE REALMS ALTHOUGH SOME OF THE COMPLIANCE CRITERIA MAY BE COM MON TO BOTH. HENCE OBTAINING PRIOR REGISTRATION BEFORE GRANTING APPROVAL U/S 10(23C) CANNOT BE INSISTED UPON. 2.2 HOWEVER, IN CASE OF A TRUST OR AN INSTITUTION H AVING OBTAINED REGISTRATION U/S 12AA AS WELL AS APPROVAL U/S 10(23C)(VI), IF REGISTRATION IS WITHDRAWN AT SOME P OINT OF TIME DUE TO CERTAIN ADVERSE FINDINGS, THE WITHDRAWA L OF APPROVAL U/S 10(23C)(VI) SHALL NOT BE AUTOMATIC BUT WILL DEPEND UPON WHETHER THESE ADVERSE FINDINGS ALSO IMP ACT THE CONDITIONS NECESSARY TO KEEP APPROVAL U/S U/S 10(23C)(VI) ALIVE. I.T.A. NO.1952 /DEL/2013 11 11. HONBLE JURISDICTIONAL HIGH COURT IN CASE OF VENU CHARITABLE SOCIETY REPORTED IN 393 ITR 63 (DEL) HAS ALSO HELD AS UNDER :- THE REVENUES OTHER CONTENTION WAS THAT THE PETITI ONER HAD APPLIED FOR EXEMPTION UNDER SECTION 11 AS WELL AS SECTION 10(23C) IN THE SAME YEAR. SECTION 10(23C) D OES NOT PRESCRIBE ANY STIPULATION, WHICH MAKES REGISTRA TION U/S 12AA A MANDATORY CONDITION. THE PROVISIONS OF SECTIONS 11 AND 10(23C) ARE TWO PARALLEL REGIMES AND OPERATE INDEPENDENTLY IN THEIR RESPECTIVE REALMS. IN ORDER TO AVAIL EXEMPTION U/S 11, 12 AND 13, THE ENTITY SHOULD BE REGISTERED U/S 12AA. THE SECTI ONS 11, 12, 12A, 12AA AND 13 OF THE INCOME TAX ACT CONSTITUTE A COMPLETE CODE GOVERNING THE GRANT, CANCELLATION OR WITHDRAWAL OF REGISTRATION, PROVIDI NG EXEMPTION TO INCOME, AND ALSO THE CONDITIONS SUBJEC T TO WHICH A CHARITABLE TRUST OR INSTITUTION IS REQUIRED TO FUNCTION IN ORDER TO BE ELIGIBLE FOR EXEMPTION. THE PRIMARY OBJECTIVE OF PROVIDING EXEMPTION IN CASE OF CHARITA BLE INSTITUTION IS THAT INCOME DERIVED FROM THE PROPERT Y HELD UNDER TRUST SHOULD BE APPLIED AND UTILIZED FOR THE OBJECT OR PURPOSE FOR WHICH THE INSTITUTION OR TRUST HAS BEEN ESTABLISHED. IN MANY CASES IT HAD BEEN NOTED THAT T RUSTS OR INSTITUTIONS, WHICH ARE REGISTERED AND HAVE BEEN AVAILING BENEFITS OF THE EXEMPTION REGIME DO NOT AP PLY THEIR INCOME, WHICH IS DERIVED FROM PROPERTY HELD U NDER TRUST, FOR CHARITABLE PURPOSES. IN SUCH CIRCUMSTANC ES, I.T.A. NO.1952 /DEL/2013 12 WHEN THE INCOME BECOMES TAXABLE, A CLAIM OF EXEMPTI ON UNDER GENERAL PROVISIONS OF SECTION 10 IN RESPECT O F SUCH INCOME IS PREFERRED AND TAX ON SUCH INCOME IS AVOID ED. THIS DEFEATS THE VERY OBJECTIVE AND PURPOSE OF PLAC ING THE CONDITIONS OF APPLICATION OF INCOME ETC. IN RESPECT OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN TH E FIRST PLACE. THE PROVISION OF SECTION 10(23C) ALSO HAS SI MILAR CONDITIONS OF ACCUMULATION AND APPLICATION OF INCOM E, INVESTMENT OF FUNDS IN PRESCRIBED MODES ETC. THEREF ORE, THE ACT WAS AMENDED TO PROVIDE SPECIFICALLY THAT WH ERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATI ON 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 T O EXEMPTION OF AGRICULTURAL INCOME AND INCOME EXEMPT UNDER SECTION 10(23C) OF THE INCOME TAX ACT. SIMILA RLY, ENTITIES WHICH HAVE BEEN APPROVED OR NOTIFIED FOR C LAIMING 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 T HE ACT; WHICH MEANS THAT ONE CAN CLAIM EXEMPTION UNDER SECT ION 11 AND SECTION 20(23C). 12. FROM THE ABOVE, IT IS CLEAR THAT BOTH THE PR OVISION OF SECTION 11 AND 10(23C) ARE TWO PARALLEL REGIMES WHI CH DO NOT OVERLAP WITH EACH OTHER. WE THEREFORE, FIND SUBSTAN TIAL MERIT IN THE CASE MADE OUT BY THE APPELLANT THAT FOR EXAM INING I.T.A. NO.1952 /DEL/2013 13 UTILIZATION PERIOD OF AMOUNT SET ASIDE AND ACCUMULA TED IN EXCESS OF 15% PERTAINING TO FY 2003-04 WHEN IT WAS NOT REGISTERED U/S 10(23C) OF THE ACT WILL HAVE TO BE E XAMINED ONLY AS PER PROVISION OF SECTION 11(3) OF THE ACT A ND NOT AS PER PROVISION OF SECTION 10(23C). THE LEGISLATURE IN IT S WISDOM HAS VIDE FINANCE ACT, 2020 HAS NOW ELIMINATED THE SCOPE OF TWO PARALLEL REGIMES AS NOTED ABOVE. IT IS NOW VERY CLE ARLY PROVIDED THAT A TRUST CAN ONLY OBTAINED BENEFIT OF UNDER EITHER SECTION 11 OF THE ACT OR SECTION 10(23C) OF THE ACT . IN THIS REGARD, INITIALLY SECTION 11(7) WAS INSERTED BY FIN ANCE (NO. 2) ACT 2014 W.E.F 01-04-2015 AND NOW FIRST AND SECOND PROVISOS HAVE BEEN INSERTED TO SECTION 11(7) BY FINANCE ACT 2020 W.E.F 01-06-2020. THE MEMORANDUM EXPLAINING PROVISION OF FINANCE BILL 2020 REPORTED IN 381 ITR 326 (ST) RELE VANT AT 381-382 HAS STATED AS UNDER :- SECTION 11 OF THE ACT PROVIDES FOR GRANT OF EXEMPT ION IN RESPECT OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO W HICH SUCH INCOME IS APPLIED OR ACCUMULATED DURING THE PREVIOU S YEAR FOR SUCH PURPOSES IN ACCORDANCE WITH THE PROVISIONS CON TAINED IN SECTIONS 11, 12, 12A, 12AA AND 13 OF THE ACT. SUB-SECTION (7) OF SECTION 11 OF THE ACT, INSERTED BY THE FINANCE (NO.2) ACT, 2014 WITH EFFECT FROM 1 ST APRIL, 2015, PROVIDES THAT WHERE A TRUST OR AN INSTITUTION HAS OBTAINED REGIST RATION UNDER SECTION 12AA [AS IT STOOD IMMEDIATELY BEFORE ITS PR OPOSED AMENDMENT] OR UNDER SECTION 12A [AS IT STOOD IMMEDI ATELY BEFORE ITS AMENDMENT BY THE FINANCE (NO.2) ACT, 199 6] AND SAID REGISTRATION IS IN FORCE FOR ANY PREVIOUS YEAR , THEN I.T.A. NO.1952 /DEL/2013 14 EXEMPTION UNDER SECTION 10 [EXCEPT UNDER CLAUSES (1 ) AND (23C) SHALL NOT BE ALLOWED.. THIS SUB-SECTION WAS INSERTED ON THE BASIS THAT THE PROVISIONS CONTAINED IN SECTIONS 11, 12, 12A, 12AA AND 13 OF T HE ACT CONSTITUTE A COMPLETE CODE AND THAT ONCE ANY TRUST OR INSTITUTION HAS VOLUNTARILY OPTED FOR IT BY OBTAINI NG REGISTRATION REQUIRED FOR EXEMPTION OF INCOME, IT SHOULD COMPLY WITH THE CONDITIONS OF SUCH EXEMPTION AND IN CASE OF VIOLATI ON OF SUCH CONDITION, IF ITS INCOME OR PART THEREOF BECOMES IN ELIGIBLE FOR EXEMPTION, NO OTHER PROVISION OF THE ACT SHOULD OPE RATE SO AS TO EXCLUDE SUCH INCOME OR PART THEREOF FROM TOTAL I NCOME AND THAT WHETHER INCOME WHICH NEEDS TO BE APPLIED OR ACCUMULATED UNDER SECTION 11 OF THE ACT SHOULD INCL UDE INCOME WHICH IS EXEMPT UNDER SECTION 10 OF THE ACT. IT HAS BEEN NOTED THAT THERE IS SOME ANOMALY BY PRO VIDING EXCLUSION TO INSTITUTIONS OR FUND REGISTERED UNDER CLAUSE (23C) OF SECTION 10, BUT THE SAME EXCLUSION IS NOT AVAILA BLE TO ENTITIES CLAIMING EXEMPTION UNDER CLAUSE (46) OF SE CTION 10 WHICH ARE ESTABLISHED OR CONSTITUTED UNDER A CENTRA L OR STATE ACT OR BY A CENTRAL OR STATE GOVERNMENT. SUCH ENTIT IES ARE, THUS, NOT ABLE TO GET NOTIFIED UNDER CLAUSE (46) OF SECTION 10 IF THEY ARE HOLDING REGISTRATION UNDER SECTION 12A/12A A. THE ANOMALY POINTED OUT ABOVE, NEEDS TO BE ADDRESSE D. HOWEVER, AS THE PROVISIONS RELATING TO CHARITABLE E NTITIES CONSTITUTE A COMPLETE CODE AND THAT ONCE ANY TRUST OR INSTITUTION HAS VOLUNTARILY OPTED FOR IT BY OBTAINI NG THE REQUISITE REGISTRATION, IT FLOWS THAT THE CONDITION S IN RELATION THERETO SHOULD BE COMPLIED WITH AND THE OPTION OF S WITCHING AT CONVENIENCE SHOULD NOT BE AVAILABLE. ACCORDINGLY, W HILE I.T.A. NO.1952 /DEL/2013 15 REQUEST FOR EXCLUSION OF CLAUSE (46) MAY BE ACCEDED TO FOR EXEMPTION THEREUNDER EVEN IN THOSE CASES WHERE REGI STRATION UNDER SECTION 12AA OR 12A REMAINS N FORCE, THERE SH OULD BE ONLY ONE MODE OF EXEMPTION AVAILABLE AND ALSO, THAT THE SWITCHING MAY BE ALLOWED ONLY ONCE SO THAT SUCH SWI TCHING IS NOT DONE ROUTINELY AND ALSO IT REMAINS EFFICIENT TO BE ADMINISTERED. 13. WE ARE PRESENTLY CONCERN WITH A CASE FOR AY 2009-10 AND THE SURPLUS PERTAINS TO FY 2009-10 WHEN THE APP ELLANT WAS NOT REGISTERED UNDER PROVISION OF SECTION 10(23 C). THE SUBSEQUENT INSERTION OF SECTION 11(7) AND ITS FURTH ER AMENDMENT ARE THOUGH NOT APPLICABLE BUT ARE SUPPORT IVE TO OUR INTERPRETATION THAT EARLIER PROVISIONS OF SECTI ONS 11 AND 10(23C) WERE TWO PARALLEL REGIMES WHICH OPERATED INDEPENDENTLY IN THEIR RESPECTIVE REALMS. AS A RESU LT, THE ADDITION MADE OF RS. 4,39,07,729/-BY THE AO IS DELE TED. 14. ACCORDINGLY THE APPEAL FILED BY ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2021. SD/- SD/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 RD SEPTEMBER, 2021 PKK:
