Sant Sitarambua Walawalkar Charitable Trust Vs ITO (ITAT Mumbai)
ITAT Mumbai: Section 11(5) Shortfall from Earlier Years Cannot Be Taxed; Only Current Year Violation Taxable
The ITAT Mumbai held that shortfall in investments under Section 11(5) relating to earlier years cannot be taxed in the current assessment year, even after the amendment by Finance Act, 2021.
The Tribunal observed that the amendment mandating strict compliance of investment in specified modes is prospective (applicable from 01.04.2022) and cannot be applied retrospectively to disturb past accumulations or deficiencies.
Key findings:
- The assessee-trust had a shortfall of ₹1.39 crore, largely arising from earlier years.
- Such past shortfall cannot trigger taxation in the current year, despite non-compliance continuing.
- However, current year violation must be taxed—the voluntary contribution of ₹5 lakh not invested as per Section 11(5) was rightly taxable.
The Tribunal rejected the Revenue’s argument that exemption automatically fails due to shortfall, clarifying that timing of default is crucial and only fresh non-compliance during the year can be taxed.
Result:
- Addition restricted to ₹5 lakh (current year default)
- Balance ₹1.34 crore deleted
A strong ruling for trusts-Section 11(5) violations are year-specific, and past shortfalls cannot be taxed retrospectively under amended law.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
