Case Law Details
Academy for Technical & Management Excellence Vs DCIT (ITAT Bangalore)
Mere Filing of Form 10 Cannot Create Taxable Income: Bangalore ITAT Deletes ₹2 Crore Addition Against Educational Trust
The Bangalore ITAT held that merely because a charitable trust filed Form No. 10 for accumulation under section 11(2), it cannot be presumed that the trust earned undisclosed income of ₹2 crore. In the absence of any evidence showing actual receipt of such income, the addition was unsustainable.
The assessee-trust, which runs educational institutions, had filed its return claiming exemption under section 11. During assessment, the Assessing Officer noticed that Form No. 10 had been filed showing accumulation of ₹2 crore for construction and expansion of educational buildings up to 31.03.2023. Since the trust later stated that no such accumulation had actually arisen during the year, the AO concluded that the trust must have received an unaccounted donation of ₹2 crore and added the amount as income. The AO also treated ₹88.51 lakh representing opening capital work-in-progress as shortfall in application of income and denied the claim of excess application of earlier years.
The Tribunal observed that filing Form No. 10 may have been done out of abundant caution, but such filing by itself does not establish that the trust earned ₹2 crore of undisclosed income. Since neither the AO nor the CIT(A) possessed any evidence showing receipt of such income outside the books, the addition was based purely on presumption and was directed to be deleted.
On the issue of capital work-in-progress, the Tribunal accepted the trust’s contention that the opening WIP of ₹88.51 lakh had never been claimed as application of income. The trust had claimed application only when the corresponding capital assets were completed and capitalised. Accordingly, the addition relating to opening WIP was also deleted.
As regards the claim of excess application of earlier years amounting to ₹27.44 crore, the Tribunal upheld the CIT(A)’s direction to the Assessing Officer to verify the claim and grant the benefit if found correct.
Accordingly, the trust succeeded on the principal issues and the appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
1. ITA No. 7/Bang/2026 is filed by Academy for Technical & Management Excellence (the assessee/appellant) for assessment year 2018 – 19 against the appellate order passed by the National Faceless Appeal Centre Delhi (the learned CIT – A) dated 16 December 2025 wherein the appeal filed by the assessee against the assessment order passed under section 143 (3) r.w.s. 143 (3)(3A) & 143(3B) of the Income Tax Act, 1961 [the Act] was partly allowed.
2. The assessee is aggrieved with the same raising several grounds of appeal, however the main concern of the appeal is that assessee has not been allowed the accumulation of ₹ 2 crores wherein form No. 10 was filed by the assessee and further the addition of ₹ 8,850,592 claimed as application of income towards capital expenditure was also not granted as it was stated that it is opening work-in-progress. Further the claim of the assessee is that sum of ₹ 8,850,592 would be available as a carryover of application of earlier year and therefore the addition could not have been made. The assessee also claimed the set-off of carryover unutilised excess application of earlier years amounting to ₹ 274,489,562 which should have been granted to the assessee.
3. The brief facts of the case show that the assessee is an educational institute running engineering colleges. It filed its return of income on 19 September 2018 at Rs. Nil which was selected for scrutiny for verification of receipt of the trust. It was found that assessee is registered under section 12 A and is availing exemption under the Income Tax Act wherein the total receipts of the assessee is ₹ 143,009,207 and the assessee trust has applied an amount of ₹ 121,557,826. The assessee was asked to furnish form No. 10 and details of income set apart for last six years. The assessee submitted that it has not made any accumulation under section 11 (2) in current year in and in the last six years. The trust has not furnished form No. 10 is there is no accumulation. However the ld. AO on verification of the e-filing portal of the assessee observed that assessee has filed form No. 10 for assessment year 2018 – 19 on 19 September 2018 along with its return of income wherein the assessee has accumulated a sum of ₹ 2 crores under section 11 (2) of the Act. The assessee was questioned on the same. The assessee submitted that assessee has filed such form No. 10 along with the resolution passed. However the ld. AO found that assessee has not received any such sum and therefore there is no possibility of filing such form. Therefore the ld. AO noted that assessee has received a donation of ₹ 2 crores which was not shown in the books of account and therefore the amount of ₹ 2 crores was treated as deemed income of the assessee and brought to tax. The AO further noted that capital expenditure incurred by the assessee to meet the application of 85% of the income, assessee has taken an amount of ₹ 8,850,592 being opening capital work in progress as capital expenditure incurred during the year. However the amount is only opening capital work in progress and same has not been actually incurred during the year, the amount of the above sum of ₹ 8,050,592 is treated as shortfall in the application of the income of the current year. The ld. AO further noted that assessee has submitted a statement claiming an access application of income of ₹ 274,489,562 of earlier years which was claimed as allowable under section 11 (1) (a) of the Act. The ld. AO noted that no verification of such claim was conducted by the Department in the first year of operation when the assessee has applied an amount of ₹ 155,115,833 out of the gross receipts of ₹ 10,653,473. The assessee could not produce any evidence in this regard and therefore the ld. AO did not accept the contention of the assessee. Accordingly the assessment order was passed at a total income of Rs.2,80,50,592 on 10 March 2021.
4. The assessee aggrieved with the same preferred an appeal before the learned CIT – A, who confirmed the addition of ₹ 2 crores, disallowed the capital work in progress of ₹ 8,850,592 and also denied the benefit of ₹ 274,489,562 of excess of application of income over income in earlier years but directed the assessing officer to verify the same. Accordingly appeal of the assessee was partly allowed for statistical purposes.
5. The assessee is aggrieved with the above fact of the appellate order and is in appeal before us. The ld. AR furnished paper book containing 103 pages. He submitted that no doubt the assessee has filed form No. 10B on 19 September 2018 which is placed at page No. 14 – 42 of the paper book wherein the assessee has shown correctly the amount of income earned as well as applied. He further referred to page No. 44 of the paper book which is form No. 10 under Rule 17 (2) for accumulation of income under section 11(2) of the Act. Assessee submitted that this form No. 10 was filed wherein the funds were accumulated for use of addition to the building for educational purposes. The period of accumulation was 31stof March 2023 a sum of ₹ 2 crores were accumulated. It is stated that the sum has not been received by the assessee but inadvertently such form No. 10 B was filed. It was stated that merely because form No. 10 was filed by the assessee, it could not have been the income of the assessee. Therefore the addition of ₹ 2 crores made by the ld. AO deserves to be deleted.
6. With respect to the sum of ₹ 8,850,592, the ld. AR referred to the annual accounts of the assessee as on 31stof March 2017 wherein capital work in progress of ₹ 8,850,592 is shown in the balance sheet. Such balance sheet was placed at page No. 50 of the paper book. He further referred to the computation of total income for the year ended on 31st of March 2018 placed at page No. 23 of the paper book wherein the assessee has shown the computation of total income. He stated that capital expenditure incurred during the year as per the fixed assets schedule of Rs.1,94,68,843 was claimed as application of income. He referred to schedule of fixed assets and depreciation for the impugned year placed at page No. 34 of the paper book wherein he submitted that a sum of Rs.1,62,26,840 is added in the first half of the year and the balance sum of ₹ 3,242,003 was added in the second half of the assessment year and therefore the total depreciation schedule shows that the addition made to the capital asset has been considered as application of the total income. He therefore submitted that assessee has not claimed earlier the opening capital work in progress as an application of income but whenever the asset is entering into the fixed assets schedule, the same is shown as application of income.
7. With respect to the claim of the assessee of excess application of earlier years, he submitted that assessee deserves the same deduction if there is an excess of sum received as income than the application of expenditure. Therefore his claim was that when there is an income surplus available, assessee is entitled to deduction of the excess utilisation of the funds over its income for earlier years.
8. The ld. DR vehemently supported the order of the learned lower authorities and submitted that how the assessee could have filed form No. 10 without receiving the sum and accumulating the same for the purpose of the business of the trust. He submitted that the assessee has earned the receipt of ₹ 2 crores but same are not disclosed in the books of account and therefore the addition made by the learned lower authorities is correct. With respect to the capital work in progress of 88,50,592/– it was his claim that same has already been claimed by the assessee as an application of income. With respect to the earlier years claim he submitted that the learned CIT – A has remitted the issue back to the file of the learned assessing officer with a direction to verify.
9. We have carefully considered the rival contention and perused the orders of the learned lower authorities. Here the facts show that the assessee has filed form No. 10 on 19 September 2018 wherein it is stated that a sum of ₹ 2 crores is set apart which could be utilised up to 31stof March 2023 for addition to the building for the use of educational purposes. It is a fact that a sum of ₹ 2 crores was not the excess of income or expenditure for that year. However, it may be possible that assessee has filed such a form for accumulation of income out of abundant caution, but it cannot be said that assessee has earned income of ₹ 2 crores which has not been recorded in the books of accounts of the assessee. There is no evidence available with the assessing officer or the learned CIT – A to confirm the same. The assessee has challenged the same by ground No. 3 of the appeal that in absence of any other evidences available before the assessing officer that assessee has received income of ₹ 2 crores and has not accounted for in the books of accounts of the assessee, such addition could not have been made in the hands of the assessee trust. However without any evidence, making such an addition is not warranted. Accordingly the ld. AO is directed to delete the addition of ₹ 2 crores. Ground No. 3 of the appeal of the assessee is allowed.
10. Ground No. 4 is with respect to the application of income towards capital expenditure of ₹ 8,850,592 which was shown to be an opening capital work in progress in the balance sheet of the assessee. We find that the assessee has shown to us the fixed assets schedule wherein the addition of Rs.1.91 crores is made to the fixed assets of the assessee which is claimed by the assessee as an application of income. The work in progress is shown by the assessee of ₹ 8,850,592 has not been claimed by the assessee as an application of income. The assessee has claimed application of income of the assets which has been put to use by the trust. It is not the claim of the assessee that capital work in progress which is outstanding of ₹ 8,850,592 is also an application of income. As the assessee has not claimed the above sum as an application of income, the addition made by the ld. AO of the above sum deserves to be deleted. The Id. AO is directed to delete the addition of ₹ 8,850,592. Ground No. 4 of the appeal is allowed.
11. With respect to ground No. 5 of the appeal of the excess application of earlier years amounting to ₹ 27,44,89,562, the learned CIT has also directed the assessee to allow the claim of the assessee after proper verification. We do not find any infirmity in the direction of the learned CIT – A. Therefore, the direction given by the learned CIT – A is upheld and the AO may grant the benefit of the excess utilisation of fund of the earlier years to the assessee against the current year income. Thus ground No. 5 of the appeal of the assessee is also allowed as indicated above.
12. All other grounds of appeal of the assessee are either supportive or general in nature and therefore in view of our decision on other grounds, those becomes infructuous and hence dismissed.
13. In the result appeal filed by the assessee is allowed as indicated above.
Order pronounced in the open court on 10th June, 2026.
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