TMI Blog2023 (3) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was not erroneous within the meaning of section 263 of the Act; and (ii) In any case, the assessment order was not prejudicial to the interest of the revenue within the meaning of section 263 of the Act. 2.4 It is submitted that in the facts and the circumstances of the case, and in law, no revision u/s. 263 of the Act was called for. WITHOUT FURTHER PREJUDICE TO THE ABOVE 3. ON MERITS 3.1 Otherwise also, it is submitted that in the facts and the circumstances of the case, and in law, on merits also, no revision u/s. 263 of the Act was called for. LIBERTY 4. The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing. 4. For A.Y. 2016-17 also assessee has raised identical grounds of appeal. 5. Brief fact of the case shows that assessee is organizing exhibition on every four years on the latest developments and advancement of technology in the field of textile machinery. The assessee is a Trust registered under Section 12A of the Act as well as holding recognition under Section 80G of the Act. By virtue of registration under Section 12A of the Act, the trust has claimed exemption under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The AO has passed order without the basic verification of the above facts stated above and therefore the order is prejudicial to the interest of revenue. 8. Accordingly, notice was issued to the assessee. In response to the notice, assessee submitted a reply that assessee has accumulated the surplus in accordance with law, provisions of Section 11(2) (b) are satisfied and the Provisions of Section 11(3) of the Act are not applicable. It was stated that advance received back on cancellation of property is after applying the provisions of Section 11(3) of the Act and the money received back cannot be treated as income under Section 11(3) of the Act. 9. The learned PCIT examined the explanation of the assessee and held that the learned Assessing Officer has failed to make necessary enquiries and therefore, it is erroneous and prejudicial to the interest of the Revenue and directed the learned Assessing Officer to re-do the assessment. Against this order, assessee is in appeal before us. 10. The facts shows that assessee has made accumulation of income in earlier years, subsequently that money could not be utilized and therefore offered the same as income in the year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o by 15 March 2021. He submitted that the notice was issued after more than 3 years from the date of the assessment order. He stated that in the notice explanation (2) of Section 263 of the Act was neither referred and nor invoked. For this, proposition he referred to the order of the Hon'ble Gujarat High Court in case of PCIT vs. Shreeji Prints (P) Ltd. (2021) 130 taxmann.com 293 (Guj.)(HC). 13. He further stated that there is no reference or discussion on the issue in the order under Section 263 of the Act for which the revision proceedings were initiated. Therefore, the order without linking that what should have been done by the learned Assessing Officer that is not been done, the order passed under Section 263 of the Act cannot be sustained. 14. It was stated that 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) of The Act. It is covered in favour of the assessee by the decision of Honourable Calcutta High court in Natwarlal Chaudhary case 189 ITR 656 [Cal]. There is an also a view that u/s. 11(3) the amount of accumulation not utilized become deeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(a) and 11(2) of the Act, 25 per cent of the income can be accumulated or set apart for an application to some specified purposes in India, which means such amount should be available with the assessee for application. In the case of deemed income where the amount is already spent by an assessee (for the purposes other than charitable purposes) it cannot be said that the assessee accumulates with an intention to apply it for a rightful purpose. Thus, even on the limited count the assessee cannot claim the benefit of accumulation because the accumulation is allowed only if the intention of the assessee is to apply the same for a specific purpose. Thus, assessee cannot claim the benefit of accumulation with respect to the deemed income. In the case of Director of Income-tax v. G. Shewnarain Tantia MANU/WB/0145/1991 : (1993) 199 ITR 215 (Cal), the Hon'ble High Court of Calcutta analyzed the meaning of the word 'income' used in Section 11 of the Act. The Hon'ble Calcutta High Court observed that the 'income' contemplated by the provisions of Section 11 is the real income and not income as assessed or assessable. They have also followed the earlier decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is taxable under Section 11(3) of the Act. 12. The assessee relied upon certain decisions in support of its contention that a legal fiction has to be carried to its logical conclusion. We fully agree with this proposition that a legal fiction no doubt has to be carried to its logical conclusion but at the same time, it cannot be stretched to an extent that frustrates the object of the particular provision. In the instant case, we have highlighted one possibility where an assessee might have applied the income for the purposes other than charitable purposes and thus there is no money available with the assessee in which event it cannot be said that the assessee can accumulate deemed income for some specified purposes. Such an interpretation would lead to anomalous situation, which is not contemplated under Section 11(1) (a) and 11(2) of the Act because an assessee is entitled to exemption only on such income, which is either applied for charitable purposes or intended to be applied for charitable purposes and not otherwise. 13. The circular issued by the CBDT (supra) is in consonance with the intention of the legislature and the plain meaning that can be ascribed to Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the Income Tax Officer is unsustainable in law. According to the learned Additional Solicitor General, on an interpretation of the provision of Section 80HHC(3) as it then stood the view taken by the assessing officer was unsustainable in law and therefore the Commissioner was right in invoking Section 263 of the Income Tax Act. In this connection, he has further submitted that in fact the 2005 amendment, which is clarificatory and retrospective in nature itself, indicates that the view taken by the assessing officer at the relevant time was unsustainable in law. We find no merit in the said contentions. Firstly, it is not in dispute that when the order of the Commissioner was passed there were two views on the word profits in that section. The problem with Section 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover, the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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