2023 (3) TMI 760 - AT - Income Tax

Revision u/s 263 - Accumulation of income u/s 11(2) - Deemed income accumulation - debatable issue - whether income once accumulated u/s. 11(2) of the Act for capital expenditure was added to revenue u/s. 11(3) of the act can accumulate once again be claimed u/s. 11(2)? - HELD THAT:- The Hon'ble Calcutta High Court in the case of CIT vs. Natwarlal Chowdhury Trust [1989 (8) TMI 19 - CALCUTTA HIGH COURT] has held that the assessee is entitled to accumulate 15% of the total income which is inclusive of the deemed income specified under Section 11(3) of the Act. Thus, from the above judgment, it is transpired that the assessee can claim the benefit of accumulation even on the deemed income specified under the provisions of Section 11(3) of the Act.

Assessee has already claimed the benefit of exemption under Section 11(2) of the Act with respect to the deemed income specified under Section 11(3) of the Act and if the same is allowed to accumulate again, then the assessee will be claiming the benefit twice and if the same continues, perennially.

We find that the issue has been examined in Circular No. 29; R. No. 20/22/CS-IT(AI), dated 23.08.1360 and Circular 5P (LXX-6) of 1968 dated 19.06.1968. In the former Circular it is categorically mentioned that when the amounts are taxed u/s. 11(3) the benefit which would have been available to trust in respect of 25% of its income or Rs. 10,000/- u/s. 11(1) (a) would also be lost. In the later circular issue has been re-examined and legal position has been clarified stating that only the Income disclosed in the account will be eligible for exemption u/s. 11(1) and will be eligible for permitting accumulation of 25%. As categorically explained that deemed income charged u/s. 11(3) is in excess of income shown in its account. Thus, from both these circulars it can be seen that the exemption u/s. 11(1) is not available for the deemed income u/s. 11(3).

The Bombay High Court in the case of Bajaj Auto Finance Ltd. [2018 (2) TMI 1716 - BOMBAY HIGH COURT] has also held that Once, reliance is placed upon a decision of a Court and/or Tribunal to make a claim, then even if the Assessing Officer has a different view and does not accept the view, yet the claim itself becomes debatable.

As decided in MAX INDIA LTD. [2007 (11) TMI 12 - SUPREME COURT] where there are two views on an issue, if LD AO takes one of the views, it could not be said that order passed by him is erroneous and prejudicial to the interest of revenue.

Therefore, the view taken by LD AO is debatable therefore, the powers u/s. 263 of the act of the Ld. PCIT are ousted - Decided in favour of assessee.