Meshri Mahajan Vanda Vs ITO (ITAT Ahmedabad)
Prospective Effect of Finance Act 2022 – amendment to Section 11(3)(c) removing the one-year extension applies prospectively. For accumulations prior to FY 2022-23, trusts can validly utilise funds in the sixth year
The Trust filed return declaring income of ₹2,51,699. While processing return, CPC made an adjustment of ₹1,58,301, treating it as deemed income u/s 11(3) taxable u/s 115BBI, on the ground that accumulation made in FY 2016-17 u/s 11(2) was not utilised by 31.03.2022. According to CPC, since utilisation was made in FY 2022-23, it was beyond the permitted period.
Trust argued that as per pre-amended law, accumulation of FY 2016-17 could be utilised within five years or in the immediately following year i.e., up to 31.03.2023. The Finance Act, 2022 amendment removing the additional year applies prospectively from 01.04.2023, not retrospectively. Retrospective application would make utilisation impossible, violating the principle of lex non cogit ad impossibilia. Even otherwise, if taxable, it should have been considered in AY 2022-23, not in AY 2023-24.
CIT(A) held that since utilisation happened after 31.03.2022, it was rightly taxable in AY 2023-24. The appeal was dismissed.
ITAT found merit in assessee’s submissions & noted that the issue was directly covered by ITAT Ahmedabad in Shri Krishnagar Vaishvsamaj (03.07.2025), which held that accumulations of earlier years could still be utilised in the 6th year. The 2022 amendment is prospective, applicable only for accumulations made from FY 2022-23 onwards. Applying it retrospectively would deny trusts their vested right to utilise funds within the original time window. Similar view was taken in Dadar Digamber Jain Mumukshu Mandal (Mumbai ITAT, 15.07.2025) & Yashwantrao Chavan Maharashtra Open University (Pune ITAT, 23.06.2025).
