Sarangpur Talia’s Pole Punch Trust Vs ITO (Exemption) (ITAT Ahmedabad)
Background
- Assessee: Sarangpur Talia’s Pole Punch Trust (public trust).
- Issue: Exemption u/s 11 denied in respect of ₹2,00,000 accumulated income u/s 11(2).
- CPC disallowed, holding that accumulation from FY 2016-17 had to be used within 5 years (i.e., by FY 2021-22).
- Since spent only in 6th year (FY 2022-23), CPC taxed it u/s 115BBI @ 30%.
- Demand raised: ₹78,660.
- CIT(A) confirmed disallowance.
Assessee’s Arguments
- Finance Act 2022 amended s.11(3)(c), removing the extra 1-year window, effective 01.04.2022.
- But for accumulations made earlier (FY 2016-17), law then allowed 5 years + 1 additional year (i.e., till 31.03.2023).
- Amendment cannot operate retrospectively to curtail vested right.
- Implementation impossible as amendment received Presidential assent on 30.03.2022, leaving no time.
- Relied on ITAT rulings:
Meshri Mahajan Vanda (2025) – six-year window still applies for pre-2022 accumulations.
Shri Krishnanagar Vaishvsamaj, Dadar Digamber Jain Mumukshu Mandal, Yashwantrao Chavan Maharashtra Open University – all
confirming prospective effect of 2022 amendment.
Tribunal’s Findings/Order
- For accumulations made in FY 2016-17, assessee had time till 31.03.2023 to utilize funds.
- Amendment by Finance Act 2022 applies prospectively for fresh accumulations (from 01.04.2022 onwards).
- Law cannot be interpreted to create an impossible or absurd situation (doctrine of impossibility – lex non cogit ad impossibilia).
- Since assessee spent ₹2,00,000 in FY 2022-23, within the original six-year period, exemption u/s 11(2) stands allowed.
- Addition of ₹2,00,000 deleted.
- Appeal allowed in favour of assessee.
ITAT Ahmedabad held that the Finance Act 2022 amendment restricting accumulation to 5 years applies prospectively. For accumulations made in FY 2016-17, trusts had time till 31.03.2023 to utilize funds. Since Sarangpur Talia’s Pole Punch Trust used the amount in FY 2022-23, exemption u/s 11 was valid and disallowance unsustainable.
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