The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that split up of TDS Rule 37BA(3)(ii) is allowable when corresponding income is assessable to tax.
Larsen & Toubro Public Charitable Trust, the assessee charitable trust registered u/s 12A of the Actchallenged the order dated 18-03-2022 passed by CIT(A), National Faceless Appeal Centre, New Delhi.
The assessee claimed the exemption of Rs.4,97,45,885/- u/s 11(1)(a) of the Act which was not allowed by the AO. The said claim relates to the amount accumulated to the extent of 15% of income u/s 11(1)(a) of the Act.The assessee filed a rectification application u/s 154 of the Act and the same was also rejected.
The assessee had offered certain income during the year under consideration and accordingly claimed the corresponding TDS there on which was also not allowed. Commissioner of Income Tax (A), rejected the appeal of the assessee on the reasoning that the assessee has not followed the conditions prescribed for making investments.
It was argued that the provisions of sec.11(1)(a) allow an exemption to the extent of 15% of the income and claimed a sum of Rs.4,97,45,885/-. Further contended that the said conditions apply to the amount accumulated under section 11(2) of the income tax Act and not the amount accumulated under section 11(1)(a) of the income tax Act.
The assessee has applied a sum of Rs.18,64,01,654/- for charitable purposes and, the amount applied by the assessee for charitable purposes has exceeded the amount of other income. The assessee did not have to accumulate income to the extent of 15% u/s 11(1)(a) of the Act.
Further contended that certain income received by the assessee is split between two or more years under accounting principles which are permitted under Rule 37BA of Income-tax Rules.
It was observed that the exemption of 15% allowed u/s 11(1)(a) of the Act is not a standard deduction allowed. It only allows the accumulation of income without any conditions, if there is any shortfall in the application of income, i.e., if the application of income falls short of 85% of the income.
A Coram of Shri B.R. Baskaran (AM) & Shri Pavan Kumar Gadale (JM) observed that Rule 37BA(3)(ii) allows splitting up of TDS amount when the corresponding income is assessable over several years. It is stated that the credit for TDS shall be allowed across those years in the same proportion in which the income is assessable to tax. The issue was restored to the file of AO for allowing proportionate tax credit in terms of Rule 37BA(3)(ii) of I T Rules. The appeal filed by the assessee is treated as partly allowed.
Ms Usha Gopalan appeared for the assessee and Shri Manoj Sinha appeared for the department.
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