Double Deduction on Accumulated Income Unsustainable: ITAT Rejects ₹3.32 Cr Claim of State Examination Board [Read Order]

The Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench, has established that no double deduction is permissible in respect of the same accumulated income. In this decision, the tribunal allowed the appeal of the Income Tax Department and confirmed the addition of ₹3.32 crore as application of income in the Assessment Year (AY) 2017–18.

The assessee state examination board had accumulated ₹5.60 crore under Section 11(2) of the Income Tax Act in AY 2012–13. Further in AY 2017–18 the assessee claimed an amount of ₹3.32 crore as application of income out of such accumulated amount as per which the amount of ₹3.32 crore was used in charitable activities during the relevant year.

However, the Assessing Officer observed that since the amount of ₹5.60 crore was already exempted in AY 2012–13 the amount of ₹3.32 crore claimed by the assessee amounts to a double deduction.

The Commissioner of Income Tax (Appeals), NFAC Delhi allowed the claim which led the Revenue to file an appeal before the Tribunal.

Revenue raised objection to the claim for exemption under Section 11(2) of the Act on account of the fact that the assessee had claimed similar exemption in relation to the accumulated fund in AY 2012-13 and that further such claim amounted to claiming exemption twice. Furthermore, the revenue submitted that the claim was not sustained on the ground that the relevant amount was not used and remained part of general reserves.

The assessee supported its case with the point that the funds were used for both capital as well as revenue purposes during the relevant assessment year.

The Bench consisting of Sanjay Garg [Judicial Member] and Annapurna Gupta [Accountant Member] ruled against the claim for two reasons. The first reason was that the assessee had claimed exemption in respect of the accumulated fund in the earlier AY 2012-13 and thus the present claim was double deduction. Secondly, the amount of ₹3.32 crore remained as a part of general reserves as it was not utilized during AY 2017-18.

Further, the Tribunal observed that since the accumulated funds were not utilized during the stipulated period of five years it should be considered as income as per Section 11(3) of the Act.Consequently, the Tribunal set aside the order of the CIT(A) and upheld the addition made by the Assessing Officer.

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