ACC Diamond Jubilee Education Trust Vs ITO (ITAT Mumbai)
Summary: ACC Diamond Jubilee Education Trust, a charitable public trust claiming exemption under sections 11 and 12 of the Income-tax Act, 1961, filed its return for A.Y. 2019-20 on 01.10.2019 declaring total income of ₹23,40,580/-. The assessee stated that it had complied with the audit requirement under section 12A(1)(b), with the audit report uploaded on 30.09.2019. It claimed accumulation/set apart of ₹9,34,116/- under section 11(1)(a), within the permissible 15% limit, and ₹52,90,000/- as deemed application under clause (2) of Explanation 1 to section 11(1) on account of a shortfall in application of 85% of income.
The CPC, while processing the return under section 143(1), disallowed both claims. The assessee’s subsequent rectification application under section 154 was also rejected, and the CIT(A) sustained the disallowances. In relation to ₹52,90,000/-, the CIT(A) accepted that the return due date had been extended to 31.10.2019 but held that Form No. 9A had to be furnished at least two months before that date. Before the Tribunal, the assessee submitted that this requirement was introduced by the Finance Act, 2023 and did not apply retrospectively to A.Y. 2019-20.
The Tribunal held that, for A.Y. 2019-20, the applicable provision required the option to be exercised before expiry of the time allowed under section 139(1), and that the requirement of exercising the option at least two months prior to the due date was introduced only subsequently by the Finance Act, 2023, effective from 01.04.2023 and applicable from A.Y. 2023-24 onwards. Since Form No. 9A was furnished on 01.10.2019, before the extended due date of 31.10.2019, the Tribunal found no basis to deny the ₹52,90,000/- claim merely because the form was not furnished two months before the due date.
The Assessing Officer/CPC was directed to allow the claim, subject to the other conditions of section 11 being satisfied. As regards ₹9,34,116/-, the Tribunal held that statutory accumulation up to 15% under section 11(1)(a) does not depend upon exercising the option in Form No. 9A. The CIT(A) had not given any independent reason for denying this amount or found that it exceeded the permissible statutory limit. The Tribunal therefore directed the Assessing Officer/CPC to allow the ₹9,34,116/- claim under section 11(1)(a). The appeal was accordingly allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
This appeal is filed by the Assessee against the order of Ld. CIT(A), NFAC vide DIN: ITBA/NFAC/S/250/2025-26/1086172365(1) dated 18-Feb-2026 for the Assessment Year 2019-20. The Assessee has raised the following grounds of appeal:
1) On fact and in law, the learned Commissioner of Income tax (Appeals) (hereinafter referred to as Ld. CIT-A) had failed to appreciate that the learned assessing officer (hereinafter referred to as LAO) had erred in disallowing of Rs.52,90,000/- which claimed by the appellant as deemed application of income as per clause 2 of explanation to section 11(1). Under the facts and circumstance of the matter, the Ld. CIT-A ought to have directed the LAO not to disallow the said amount.
2) On fact and in law, the Ld. CIT-A had failed to appreciate that the LAO had erred in disallowing of income accumulated OR set-off of Rs.9,34,116/- u/s section 11(1)(a). Under the facts and circumstances of the matter, the said sum of Rs.9,34,116/- ought not to have been disallowed as the appellant had filed the return of income within the due date/ extended due date as specified u/s 139(4A) r.w.s 139(1).
3) The Appellant craves leave to add, alter, vary, omit, substitute OR amend the above grounds of appeal, at any time before OR at, the time of hearing of the appeal, so as to enable the learned Commissioner (Appeals) to decide this appeal according to law.
2. The brief facts of the case are that the assessee, ACC Diamond Jubilee Education Trust, is a charitable public trust claiming exemption under sections 11 and 12 of the Income-tax Act, 1961 (“the Act”). For A.Y. 2019-20, the assessee filed its return of income on 01.10.2019 declaring total income of ₹23,40,580/-. The assessee also claimed that it had complied with the audit requirement prescribed under section 12A(1)(b) of the Act and its auditor had uploaded the audit report on 30.09.2019. The assessee claimed accumulation/set apart of income of ₹9,34,116/- under section 11(1)(a)of the Act, was within the permissible limit of 15% of its income, and also claimed ₹52,90,000/- as deemed application of income under clause (2) of Explanation 1 to section 11(1) of the Act, on account of shortfall in application of 85% of its income during the relevant previous year.
3. The Centralised Processing Centre (“CPC”) processed the return under section 143(1) of the Act. While processing the return, the CPC did not allow the assessee’s claim of ₹52,90,000/- towards deemed application of income under Explanation 1 to section 11(1)of the Act. The CPC also disallowed the assessee’s claim of ₹9,34,116/- towards accumulation or set apart of income under section 11(1)(a)of the Act. Thus, the CPC denied exemption in respect of the aggregate amount of ₹62,24,116/-, comprising of ₹52,90,000/- which was claimed as deemed application and ₹9,34,116/- which was claimed as permissible accumulation.
4. The assessee thereafter filed an application under section 154 of the Act on 13.01.2025 seeking rectification of the intimation issued under section 143(1)of the Act. The assessee submitted that it had filed its return of income as well as Form No.9A on 01.10.2019 and the CBDT had extended the due date for filing the return for A.Y. 2019-20 to 31.10.2019. The assessee therefore submitted that it had exercised the option for deemed application within the prescribed time and had also filed the return within the time permitted under section 139(4A) read with section 139(1)of the Act. The CPC, however, passed the rectification order under section 154 on 28.04.2025 without granting relief in respect of the disallowance of ₹52,90,000/- or the disallowance of ₹9,34,116/-. The assessee accordingly challenged the rectification order before the learned CIT(A).
5. As regards the principal issue relating to deemed application of ₹52,90,000/-, the learned CIT(A) accepted that the due date for filing the return of income for the relevant assessment year had been extended to 31.10.2019. The learned CIT(A), however, held that mere filing of the return within the extended due date did not satisfy the requirement for exercising the option under Explanation 1 to section 11(1) of the Act. According to the learned CIT(A), the relevant provision required the assessee to exercise the option for deemed application at least two months prior to the due date specified under section 139(1) of the Act. Since the learned CIT(A) treated 31.10.2019 as the due date, he held that the assessee was required to exercise the option at least two months before that date. The learned CIT(A) found that the assessee had exercised the option only on 01.10.2019 and, therefore, according to him, the assessee had not complied with the time requirement prescribed in Explanation 1 to section 11(1). On this reasoning, the learned CIT(A) upheld the deemed application of income of ₹52,90,000/-.
6. The learned CIT(A) further observed that the assessee itself did not disputed that there was a shortfall in application of 85% of its income for charitable purposes during the relevant previous year. According to the learned CIT(A), the assessee could obtain the benefit of treating such shortfall as deemed application only by strictly satisfying the conditions prescribed in Explanation 1 to section 11(1). Since the learned CIT(A) held that the assessee had not exercised the option at least two months prior to the due date, the CIT(Appeals) held that the assessee could not claim the benefit of the deeming provision.
7. As regards the assessee’s claim of ₹9,34,116/- towards accumulation or setting apart of income under section 11(1)(a)of the Act, the learned CIT(A) did not give any finding explaining why the statutory accumulation of up to 15% of the income should be denied. The learned CIT(A) dismissed the appeal as a whole and thereby sustained the CPC’s disallowance of both ₹52,90,000/- towards deemed application and ₹9,34,116/- towards accumulation under section 11(1)(a).
8. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.
9. We have heard the rival submissions and perused the material available on record. As regards the claim of ₹52,90,000/-, the learned Counsel submitted that the assessee had duly furnished Form No.9A on 01.10.2019. He submitted that the learned CIT(A) rejected the claim only on the ground that the assessee had not exercised the option in Form No.9A “at least two months prior to the due date” prescribed under section 139(1) of the Act. According to the learned Counsel, the learned CIT(A) applied the law as amended by the Finance Act, 2023 retrospectively to A.Y. 2019-20. He submitted that, under the law applicable to A.Y. 2019-20, the assessee was only required to exercise the option before expiry of the time allowed under section 139(1) of the Act. Since the CBDT had extended the due date for filing the return for A.Y. 2019-20 from 30.09.2019 to 31.10.2019 and the assessee had filed Form No.9A as well as its return on 01.10.2019, the assessee had fulfilled the statutory requirement. As regards the amount of ₹9,34,116/- accumulated under section 11(1)(a)of the Act, the learned Counsel submitted that the learned CIT(A) had not given any reason whatsoever for upholding the disallowance.
10. We find merit in the submissions of the learned Counsel. Clause (2) of Explanation 1 to section 11(1) of the Act, as it stood applicable to A.Y. 2019-20, allowed a charitable or religious trust, where application of income fell short of 85%, to exercise an option for treating the specified income as deemed application. The provision applicable to the year under consideration required the option to be exercised “before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income”. The requirement that such option should be exercised “at least two months prior to the due date specified under sub-section (1) of section 139” did not form part of the provision applicable to A.Y. 2019-20.
11. The Legislature replaced the earlier expression “before the expiry of the time allowed” with the expression “at least two months prior to the due date specified” by the Finance Act, 2023. The explanatory material to the Finance Act, 2023 also states that, prior to the amendment, Form No.9A was required to be furnished on or before the due date specified under section 139(1), and the Finance Act, 2023 advanced this time limit to at least two months before such due date. The amendment became effective from 01.04.2023 and applies from A.Y. 2023-24 onwards.
12. Therefore, in our considered view, the learned CIT(A) committed an error in applying to A.Y. 2019-20 a procedural time limit which the Legislature introduced only subsequently. The assessee’s compliance has to be seen with reference to the statutory provision as relevant to assessment year under consideration and not with reference to a subsequent amendment.
13. The assessee furnished Form No.9A on 01.10.2019. Thus, the assessee exercised the option well before the extended due date of 31.10.2019. Once the law applicable to A.Y. 2019-20 required the assessee to exercise the option before expiry of the time allowed under section 139(1)of the Act, we find no basis for denying the claim merely because Form No.9A was not furnished two months before the due date.
14. We accordingly set aside the finding of the learned CIT(A) on this issue and direct the Assessing Officer/CPC to allow the assessee’s claim of ₹52,90,000/- as deemed application of income, subject to the other conditions of section 11 being satisfied.
15. Coming to the second component of ₹9,34,116/-, we find that the assessee claimed the said amount as accumulation or setting apart of income within the permissible limit of 15% under section 11(1)(a)of the Act. Section 11(1)(a), as applicable to the year under consideration, itself permits a charitable or religious trust to accumulate or set apart income for application to charitable or religious purposes in India to the extent such accumulation does not exceed 15% of the income from the property held under trust.
16. The filing of Form No.9A relates to the option for deemed application under Explanation 1 to section 11(1) of the Act. The statutory accumulation up to 15% under section 11(1)(a) does not depend upon the exercise of such option in Form No.9A. We also notice that the learned CIT(A) has not given any reason for denying the assessee’s claim of ₹9,34,116/-. The learned CIT(A) gave his reasoning only to the delay in exercising the option for deemed application and thereafter dismissed the appeal as a whole. In the absence of any finding that the amount of ₹9,34,116/- exceeded the permissible statutory limit under sections 11 and 12, the denial of this amount cannot be sustained.
17. Accordingly, we direct the Assessing Officer/CPC to allow the assessee’s claim of ₹9,34,116/- under section 11(1)(a)of the Act.
18. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 27.08.2026.
