M/S MTSMC W CHARITABLE TRUST,LUDHIANA V. CIT(E), CHANDIGARH

ITA 36/CHANDI/2021

AI Insights

The case involves M/s MTSMC W Charitable Trust, which appealed against the order of the Commissioner of Income Tax (CIT) setting aside their assessment order for the assessment year 2016-17. The CIT had invoked Section 263 of the Income Tax Act, believing the original assessment order was erroneous and prejudicial to the interests of the revenue. The Trust argued that the CIT's order was unjustified. The Tribunal examined the CIT's application of Section 263, particularly whether the assessment order was indeed erroneous and whether it caused any prejudice to the revenue. The Tribunal concluded that the CIT misapplied the law, leading to the quashing of the CIT's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360631 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2016-2017
• Other Referred Cases: Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, Malabar Industries vs. CIT, CIT Vs Max India, Veena Shah Vs PCIT Rohtak, Director of Income Tax (Exemption) Vs. Trustees Singhania Charitable Trust, CIT vs. Shree SeetharamaAnjaneya Veda Kendra, CIT Vs Market Committee, Tohana
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Assessee Lawyers: PANKAJ BHALLA; HUNNY BAJAJ
• Keywords: Set aside; Capital asset; Opportunity of being heard; Question of law; Period of limitation; Charitable institution; Revision of order
• Section: 263; 12AA; 28; 260A

Judgement Text

"आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ 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 Ǔनधा[रण वष[ / Assessment Year: 2016-17 M/s MTSMC W Charitable Trust, MTSM College for Women, Mata Rani Chowk, Old Sabzi Mandi, Ludhiana. Vs The CIT (Exemptions), Room No.1, 5th Floor, CR Building, Sector 17, Chandigarh. èथायी लेखा सं./PAN NO: AABTM0284B अपीलाथȸ/Appellant Ĥ×यथȸ/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 O R D E R 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 return 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 Memorial Public School etc. at Ludhiana. This case was selected for scrutiny assessment and notice u/s 143(2) was issued and served upon the assessee. Thereafter, ld. AO has accepted the return of the assessee. The ld. CIT has gone through the record and formed an opinion that assessment 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 accumulating 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 accumulated for future year. Thus, in the opinion of the CIT, 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, CIT 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 agitated before 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 Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. ITA No.36/CHD/2021 A.Y.2016-17 4 [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant 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 conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) “record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after 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 always 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) after the expiry of two years from the end of the financial 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 may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. 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 section 129 and any period during which any proceeding under this section 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 Commissioner have four compartments. 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 examination, 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 Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record 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 assistance 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 stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order 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. Commissioner. 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 arise from the record, then inspite of the assessment order being challenged before the ld. CIT(A), the ld. Commissioner would have jurisdiction on such items, 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 pertinent to take note of the fundamental 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 must record satisfaction that the order 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 every 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 requirement 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 assessment, the AO examines the accounts, makes enquiries, 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 substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-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 the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course 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 reference 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 merit. 10. We have duly considered the contention of ld. CIT DR but we do not find any merit in this contention. 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 pronouncement of Hon'ble Supreme Court as well as of the Hon'ble High Court, 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 Industries. 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 remedy of appeal would become 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 present case. We find that ld. CIT has taken note of Section 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 substantive provisions contained in. section “11(1) of the Act is that the assessee has to utilize 85% of the income for the objects during the year in which it is earned. Accumulation of funds of more than 15% 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 the Act regarding accumulation of funds. Relevant sub sections (2), (3) and (3A) of section 11 of the Act need to be revisited here as under: 'Sub-section (2) of section 11 requires the assessee to furnish a statement in the prescribed form and in the prescribed manner 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. This sub-section provides an exception to the general rule that 85% of the income is to be utilized during the same year. This sub-section allows accumulation/ setting apart of more than 15% of the funds during the year but this exception is subject to certain conditions. For claiming exemption u/s 11 of the Act, the assessee is anyway required to apply its income for its objects. However, in order to claim the benefit of this exception, the assessee has to give a specific purpose within the objects of the assessee and also state how many years the funds are being accumulated/set apart (not exceeding 5 years). Further, sub-section (3) of section 11 in clause (c) says that if income referred to in section 11(2) is not utilized for the ITA No.36/CHD/2021 A.Y.2016-17 13 purpose for which it is so accumulated or set apart 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 following the expiry of the period aforesaid. This means that the funds accumulated in excess of 15% have to be utilized for the specific purpose during the period for which it is accumulated or the year immediately following that i.e. the assessee has a maximum of 6 years to utilize these accumulated funds for the specific purpose. Furthermore, sub-section (3A) of section 11 says that, \"Notwithstanding anything contained in sub-section (3), where due to circumstances beyond the control of the person in receipt of the income, any income invested or deposited in accordance with the provisions of clause (b) of sub- section (2) cannot be applied for the purpose for which it was accumulated or set apart, the Assessing Officer may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub-section (3) shall apply as if the purpose specified by such person in the application under this sub-section were a purpose specified in the notice given to the Assessing Officer under clause (a) of sub- section (2).\" Sub-section (3A) of section 11 further gives option to the assessee in extraordinary circumstances beyond his control to apply to the Assessing Officer requesting him to allow application of these accumulated funds for some other purpose other than the one for which the funds were initially accumulated/ set apart but which are in conformity with the objects of the trust and gives power to the Assessing officer to decide on this application. The assessee can utilize the funds for the new/ changed purpose only if the Assessing Officer allows it. This subsection absolutely binds and clarifies what is meant in section 11(2). 3.3 Above sections envisage that If a trust or institution is unable to apply 85% of its income from 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 applied, the trust is allowed to accumulate such unapplied portion of income under specified conditions to claim the exemption. So far as accumulation of 85% of income of trust/institution is concerned, if a minimum of 85% of the income of trust or institution has not applied or deemed to have been ITA No.36/CHD/2021 A.Y.2016-17 14 applied as above, it is allowed to accumulate or set aside. And such income shall be exempt, if following conditions are satisfied: (i) Such trust or institution furnishes Form No. 10 - notice of accumulation of income by charitable trust or institution electronically on or before the due date for filing the return of income, (ii) Mention the purpose for which income is being accumulated or set aside, (iii) Income shall not be accumulated for more than 5 years and years in which income accumulated or set aside due to order or injunction of any court to be excluded in computing'5 years, (iv) Money so accumulated or set aside is invested or deposited in specified mode. However, if income is not acumulated/applied as above, it is taxable as follows : 3.4 On in-depth reading sub-section (2), (3) and (3A) of section 11 together, following picture emerges i.e. (i) the assessee can accumulate/ set apart more than 15% of funds of the year by specifying in the prescribed form the specific purpose for which the funds are accumulated and the period for which the funds are accumulated, (ii) the assessee has to utilized these funds for the specific purpose within the period of accumulation mentioned in the prescribed form or in the immediately following year, and (iii) in case of extraordinary circumstances beyond the control of the assessee, it has the option of applying to the Assessing Officer to allow it to use the funds for purpose other than the purpose specified earlier in the prescribed form. This new purpose has to be in conformity with the objects of the trust. Only if the Assessing Officer allows, the assessee can lawfully utilize the same for the new/ changed purpose. Moreover, the Act in clause (2)(b) of Explanation to section 11(1) allows the appellant to benefit of Category of violation Year of taxation If income is applied for purpose other than charitable or religious Year of such application Income ceases to be invested as specified Year in which it ceases to be invested as specified Not utilized for the purpose for which it was accumulated or set aside upto 6 years 6th year Donated to trust registered under Section 12AA or10(23C) Year in which income is so donated ITA No.36/CHD/2021 A.Y.2016-17 15 deemed application of income derived during the year if this option is availed in the prescribed form and if the income is utilized in the immediately following year. Here, the appellant is not required to give any specific purpose but the funds have to be utilized in the next year for the objects of the appellant. Besides, the Act already provides accumulation/ set apart of 15% of income of the year for contingencies, expansion, emergencies, etc. in order to ensure smooth functioning of the organization. If the appellant wants to accumulate over and above this u/s 11(2), it has to be a specific purpose and a specific time period and has to be stated to the Assessing Officer in the prescribed form. 3.5 The Hon'ble Kerela High Court in the case of CIT vs. Shree SeetharamaAnjaneya Veda Kendra (2008) reported as 174 Taxman 523 has held that accumulation under section 11(2) of the Act should not be adopted in a routine basis and if it is done, then the very purpose of trust will be defeated. The relevant extracts of the judicial pronouncement are as under: - \"Learning Standing Counsel for the department rightly pointed out that the approach of the Tribunal is technical and the Assessing Officer is justified in going 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 the view that the carry forward of income up to 75% though permitted under section 11(2) of the Act, should not be adopted on a routine basis and if it is done, the very purpose of the trust will be defeated. In fact, section 11(2) of the Act providing for carrying over up to 75 per cent is an exception and if it is followed from year to year, then the genuineness of the activities of the trust itself should be examined by the Assessing Officer.................. In fact, we are of the view that a detailed investigation is required about the activities of the trust and the expenditure it incurred so far to achieve the objects of the trust and diversions, if any made. We therefore set aside 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 subsequent assessments and after conducting enquiry and if necessary, after conducting a local inspection in the premises of the assessee about the activity being carried on by the trust.\" 3.6 In the instant case, the assessee has not been providing specific objects in respect of accumulation u/s 11(2) of the Act. As per the provisions of the Act, the assessee has to give specific purpose in respect of accumulation. Therefore, the assessee has ITA No.36/CHD/2021 A.Y.2016-17 16 not mentioned any specific purposes in Form no. 10 in respect of the accumulation but mentioned \"To maintain and develop educational institutions\". It has been decided in the various case laws that for the purpose of accumulation, there should be specific purposes which should be mentioned in Form no. 10. Merely prescribing the objects in a blanket manner is not liable for accumulation benefit 'under section 11 (2) of the Act. The case law of 'Director of Income Tax (Exemption) Vs. Trustees Singhania Charitable Trust (1993) 199 ITR 819 Calcutta' squarely applies with the case of the assessee as under: - 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 discussion 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 construed the meaning of expression “Maintain and Develop Educational Institution” in a meaning as if under this head, expenditure could be incurred in capital field, 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 Institution is being not run, then how it is being maintained. To ‘maintain’ does not mean for creating capital infrastructure only. It is also pertinent to note that in the ITA No.36/CHD/2021 A.Y.2016-17 17 Accounting Year for the current assessment 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 ‘development’ has been explained by the Hon'ble jurisdictional 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 field, then day-to-day expenditure cannot be incurred out of that accumulated 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 upon 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. Order pronounced on 19.05.2025. Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” आदेश कȧ ĤǓतͧलͪप अĒेͪषत/ Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आयुÈत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "