Krishnanagar Vaishnvsamaj Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) Ahmedabad has ruled in favor of Krishnanagar Vaishnvsamaj, a trust, in its dispute with the Income Tax Officer (ITO) regarding the utilization of accumulated income. The tribunal set aside an adjustment made by the Central Processing Centre (CPC) and upheld by the National Faceless Appeal Centre (NFAC), which had disallowed a deduction claimed by the trust for funds utilized beyond a newly shortened statutory period.
The case, Krishnanagar Vaishnvsamaj Vs. ITO (ITAT Ahmedabad), centered on the interpretation of Section 11(2) and 11(3) of the Income Tax Act, 1961, particularly concerning amendments introduced by the Finance Act 2022.
Background of the Dispute
Krishnanagar Vaishnvsamaj, a trust eligible for deduction under Section 11 of the Income Tax Act, had filed its return for Assessment Year (A.Y.) 2023-24, declaring an income of Rs. 5,38,930/-. The core of the dispute originated from an accumulation of Rs. 4,60,000/- in Financial Year (F.Y.) 2016-17. Under the provisions of Section 11(2), trusts are allowed to accumulate income for five years if they cannot apply 85% of their income to charitable or religious purposes in a given year.
The trust had utilized Rs. 2,32,073/- from this accumulated fund in F.Y. 2022-23 and offered the remaining unutilized amount of Rs. 2,27,927/- for tax in its A.Y. 2023-24 return. However, the CPC, while processing the return, flagged an error. According to the CPC, the accumulated income from F.Y. 2016-17 was required to be utilized by March 31, 2022, a five-year period. Since the Rs. 2,32,073/- was utilized beyond this date, it was deemed ineligible for deduction, leading to an adjustment under Section 143(1) of the Act.
