Asst. Director of Income Tax (Exemptions)-II Vs Action For Welfare And Awakening In Rural Environment (AWARE) (ITAT Hyderabad)
Section 11(3) Addition Partly Sustained – Only ₹1.24 Cr Accumulation from A.Y. 1994-95 Survives; Earlier Years’ Accumulations Held Non-existent – Matter Restored to CIT(A) for Limited Verification – ITAT Hyderabad
The dispute concerned taxation u/s 11(3) of alleged accumulated income of a charitable society for A.Y. 1995-96. The AO had taxed ₹13.76 crore treating it as misutilised accumulated funds, whereas CIT(A) deleted the entire addition holding that no valid accumulation u/s 11(2) existed from earlier years.
ITAT undertook detailed year-wise verification. It held that accumulations relating to A.Ys. 1988-89 & 1989-90 were fully utilised by A.Y. 1994-95 and therefore did not survive. For A.Ys. 1990-91 to 1992-93, exemption u/s 10(23C) was granted (see Government notification reproduced on page 15), hence no accumulation u/s 11(2) could arise. For A.Y. 1993-94, exemption was denied and entire receipts were taxed as confirmed by Andhra Pradesh High Court, again leaving no accumulation.
However, examining the computation statement and accumulation working shown on pages 25-26, the Tribunal found that for A.Y. 1994-95 the assessee had applied only ₹5.88 crore against required application of ₹7.12 crore, resulting in a legally recognisable accumulation of ₹1,24,09,748. Therefore, ITAT partly disagreed with CIT(A) and held that only this limited amount could be considered for possible taxation u/s 11(3). Since CIT(A) had not verified whether this accumulation was actually utilised in accordance with charitable objects during A.Y. 1995-96, the matter was restored to CIT(A) for fresh adjudication on this limited issue. Revenue’s appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
