National Foundation for Corporate Governance Vs ITO (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal Delhi concerned the taxability of a trust’s accumulated income and the applicability of amended provisions of Sections 11(2) and 11(3) of the Income-tax Act, 1961 for Assessment Year (AY) 2023–24. The assessee is a charitable trust registered under Sections 12A and 80G, claiming exemption under Section 11 since inception. Its return for AY 2023–24 was processed under Section 143(1) by the Centralized Processing Centre (CPC), which observed that the assessee had accumulated income exceeding 15% in AY 2017–18 and had allegedly failed to utilize the same within the prescribed period. Consequently, CPC disallowed exemption under Section 11 on the unutilized amount.
On appeal, the first appellate authority upheld the disallowance, interpreting the amendments introduced by the Finance Act, 2022 as applicable from AY 2023–24. According to the appellate authority, the amended law required utilization of accumulated funds within five years and, therefore, the assessee had already exhausted the permissible period. The appeal was dismissed on this reasoning.
Before the Tribunal, the assessee contended that the amendments to Sections 11(2) and 11(3), effective from 01.04.2023, were prospective and could not curtail the time window available for utilization of accumulations made prior to the amendment. Reliance was placed on decisions of coordinate benches which held that existing accumulations continued to be governed by the law prevailing at the time of accumulation.
