Case Law
Subject : Taxation - Income Tax
Pune, Maharashtra
- The Income Tax Appellate Tribunal (ITAT) Pune Bench, comprising Shri
The decision came in the case of Yashwantrao Chavan Maharashtra Open University (YCMOU), Nashik vs. CIT, Exemption Circle, Aurangabad (ITA No.505/PUN/2025) for AY 2023-24. The Tribunal allowed YCMOU's appeal, deleting an addition of Rs. 90.70 crore made by the Centralized Processing Centre (CPC) and upheld by the Addl / JCIT(A).
Yashwantrao Chavan Maharashtra Open University (YCMOU), an educational institution registered under Section 12AA of the Income Tax Act, had accumulated Rs. 90,70,20,511 during the Financial Year (FY) 2016-17 (AY 2017-18). The University utilized this entire amount for its charitable objects during FY 2022-23 (i.e., by March 31, 2023).
However, the CPC, in its intimation under Section 143(1) for AY 2023-24, treated the said amount as deemed income under Section 11(3) of the Act, contending it was not utilized within the prescribed five-year period. This view was subsequently confirmed by the Ld. Addl / JCIT(A)-2, Gurugram, who held that the funds should have been utilized by March 31, 2022 (end of AY 2022-23).
YCMOU's Contentions (Represented by Shri Sharad Shah): * The law prevailing at the time of accumulation (AY 2017-18) allowed for utilization of accumulated funds within five years, or in the year immediately following the expiry of such five years . Thus, YCMOU had until March 31, 2023 (end of the 6th year, FY 2022-23) to utilize the funds, which it did. * The amendment to Section 11(3) by the Finance Act, 2022 (effective April 1, 2023, for AY 2023-24 onwards), which removed the additional one-year grace period for utilization, is prospective in nature and cannot apply to funds accumulated prior to AY 2023-24. * The issue was debatable, and therefore, the CPC exceeded its jurisdiction by making an adjustment under Section 143(1). * Reliance was placed on judicial precedents, including the Supreme Court's decision in CIT vs. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 (SC) , supporting the prospective application of new, onerous tax provisions.
Revenue's Contentions (Represented by Shri Ajay Kumar Keshari - CIT-DR): * The accumulated funds were required to be utilized within a maximum period of five years, i.e., by March 31, 2022. * Failure to utilize the funds within this five-year timeframe rendered the amount taxable as deemed income in AY 2023-24, even if utilized in FY 2022-23. * The amendment by Finance Act, 2022, did not alter the position for funds whose five-year period expired before April 1, 2023.
The ITAT Pune Bench meticulously examined the provisions of Section 11(2) and 11(3) as they stood at the time of accumulation (FY 2016-17) and after the amendment by the Finance Act, 2022.
The Tribunal noted:
"A perusal of the above shows that the words “or in the year immediately following the expiry thereof” [in Section 11(3)(c)] was omitted by the Finance Act, 2022 w.e.f. 01.04.2023 which is applicable for assessment year 2023-24 onwards. It is an admitted fact that when the trust accumulated an amount of Rs.90,70,20,511/- during the financial year 2016-17 it was required to utilize the same within a period of 5 years from the end of the relevant assessment year or in the year immediately following the expiry thereof. In other words, the assessee was required to utilize the same before the end of the 6th year i.e. financial year 2022-23. The assessee in the instant case undisputedly has utilized the amount before 31.03.2023." (Para 17)
Referring to the Memorandum explaining the provisions of the Finance Bill, 2022, the Tribunal highlighted that the amendments to Section 11(3) were intended to "take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years."
Crucially, the Tribunal applied the principles laid down by the Supreme Court in CIT vs. Vatika Township Pvt. Ltd. , which established that legislation imposing a new burden or disability is presumed to be prospective unless a contrary intention is clear. The Tribunal observed:
"In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation." (Quoting Vatika Township, Para 19)
The Tribunal found merit in the assessee's argument, stating:
"In light of the above discussion, we are of the considered opinion that since the assessee in the instant case has utilized the accumulated surplus funds in the year immediately following the prescribed period of 5 years i.e. before 31.03.2023 and the amendment to the provisions of section 11(3) are held to be prospective in nature, therefore, the Ld. Addl / JCIT(A) in our opinion is not justified in upholding the intimation of the CPC making adjustment of Rs.90,70,20,511/- u/s 11(3) as deemed income..." (Para 21)
The Tribunal also acknowledged an alternative argument: if the five-year period strictly ended on March 31, 2022, any unutilized amount could have been taxed in AY 2022-23, not AY 2023-24.
The ITAT Pune Bench allowed YCMOU's appeal, setting aside the order of the Ld. Addl / JCIT(A) and directing the Assessing Officer/CPC to delete the adjustment of Rs. 90.70 crore.
This ruling provides significant relief and clarity for charitable trusts regarding the utilization of income accumulated prior to AY 2023-24. It reaffirms the principle that amendments imposing new obligations are generally prospective and that the law existing at the time of accumulation governs the conditions for such accumulation and utilization, unless expressly stated otherwise by the legislature. Trusts that had accumulated funds under the older regime (pre-Finance Act, 2022) can rely on the "5 years plus one additional year" window for utilization.
#IncomeTax #Section11 #CharitableTrusts
Appeal Limitation in 1991 Police Rules Yields to Uttarakhand Police Act 2007 on Inconsistency: Uttarakhand HC
28 Apr 2026
Nashik Court Reserves Verdict on Khan's TCS Bail Plea
29 Apr 2026
Delhi Court Grants Bail to I-PAC Director in PMLA Case
30 Apr 2026
No Historic Record of Saraswati Temple Demolition, Muslim Body Tells MP High Court in Bhojshala Dispute
30 Apr 2026
No Absolute Bar on Simultaneous Parole/Furlough for Co-Accused Under Delhi Prisons Rules: Delhi High Court
30 Apr 2026
Rejection of Jurisdiction Plea under Section 16 Arbitration Act Not Challengeable under Section 34 Till Final Award: Supreme Court
30 Apr 2026
'Living Separately' Under Section 13B HMA Means Cessation Of Marital Obligations, Regardless Of Residence: Patna High Court
30 Apr 2026
Belated Challenge by Non-Bidders to GeM Tender Conditions for School Sports Equipment Not Maintainable: Delhi High Court
30 Apr 2026
Interim Bail Extended Till May 25 or Judgment Delivery in Rape Conviction Appeal: Rajasthan High Court
01 May 2026
Login now and unlock free premium legal research
Login to SupremeToday AI and access free legal analysis, AI highlights, and smart tools.
Login
now!
India’s Legal research and Law Firm App, Download now!
Copyright © 2023 Vikas Info Solution Pvt Ltd. All Rights Reserved.