A charitable trust must specify a clear and specific purpose for accumulating income under Section 11(2) of the Income Tax Act; a clarificatory resolution can meet this criterion and departmental non-application of mind in rejection warrants judicial intervention.

ORDER

This Writ Petition has been filed, challenging the order of the 1st Respondent in DIN:ITBA/AST/S/143(3)/2023-24/1063425411 (1) dated 26.03.2024 for the assessment year 2022-23 in PAN:AAACCS9035J and direct the 1st Respondent to accept the application filed in Form 10 on 29.09.2022 for accumulation of income u/s.11(2) of the Act in terms of Clarificatory Resolution passed by the Board on 08.03.2024.

2. The learned counsel for the petitioner would submit that petitioner is a Religious and Charitable Institution and since the petitioner was not able to utilise 85% of the income in the Assessment Year 2017-2018 which comes to Rs.64,00,00,000/-, they filed Form 10 under Section 11 (2) of the Income Tax Act, 1961 (in short 'the Act') on 26.10.2017, seeking to carry forward the surplus unutilised amount for the purpose of construction of college building. He further submitted that as per Section 11 (2) of the Act, even if the petitioner was not able to utilise 85% of the any amount, the said amount can be carried forward for future application.

3. Further, he would submit that as the petitioner was not able to utilise the said amount within five years, they filed an application under 11 (3A) of the Act, on 22.03.2022 seeking permission for the utilisation of 64 crores on the regular activities and to set apart this amount against the expenditure incurred by it on its religious and charitable activities during the Assessment Year 2022-23, by referring to the resolution of the Board of Directors dated 02.08.2022, wherein the manner of utilisation of the said accumulation of Rs.64 crores was mentioned. Thereafter, approval was granted by the Assessing Officer on 22.03.2022. The Petitioner filed income computation and Application in Form 10 for accumulation of income of Rs.63,26,57,000/- under Section 11 (2) for the Assessment Year 2022-2023 along with Board resolution on 29.09.2022. While so, for the Assessment Year 2022-2023, the petitioner filed return of income on 07.11.2022 declaring total income of Rs.77,130/- after claiming exemption u/s. 12A of the Act. The return of the income was processed under Section 143 (1) of the Act on 05.04.2023 accepting the returned income. The case was selected for scrutiny and a notice under Section 143(2) of the Act was issued to the petitioner on 01.06.2023. Thereafter, a show cause notice came to be issued to the petitioner on 06.03.2024 to show cause as to why the sum of Rs.63,26,57,000/- shall not be treated as non application of funds for charitable or religious purposes and brought to tax. The petitioner filed a reply on 10.03.2024 along with the clarificatory resolution passed by the trust on 08.03.2024,wherein the manner of utilisation of Rs.64 crores was mentioned. The objectives of the said resolution is extracted hereunder:

1) Salaries, Stipend, Contribution to Funds payable to/for employees/trainees.

2) Repairs and maintenance including church maintenance and towards various religious activities of the church around the country.

3) Capital expenses including purchase of fixed assets for use towards objectives of SERVSDA.

4. But the 1st Respondent, without considering the explanation submitted by the petitioner passed the impugned order on 26.03.2024 under Section 143 (3) r/w Section 144B of the Act, accepting the explanation offered by the petitioner in respect of the income accumulated in Assessment Year 2017-18 for a sum Rs.64 crores and utilis