|Question And Answer|
|Subject:||Whether income accumulation under section 11 (2) for capital expenditure was added to total revenue and surplus once again accumulated , whether total accumulation be taxed ?|
|Answered by:||Advocate Shashi Ashok Bekal|
|Tags:||accumulation, charitable trust, Deemed income|
|Date:||May 15, 2021|
A charitable trust set apart certain amounts u/s 11(2) for FY 2012-13 for investment in Capital expenditure on Buildings. In years thereafter the trust kept incurring Capital expenditure on buildings but did not set off the accumulated amount against such capital expenditure. In FY 2017-18 the accumulated amount was added to the other revenue and its utilisation towards revenue and capital expenditure was adjusted against total revenue. Some surplus was again accumulated u/s 11(2) for FY 17-18. The AO wishes to tax the total accumulation for FY 12-13 u/s 11(3) and denying the benefit of expenditure on revenue and capital account in FY 17-18. What should be our stand in this regard.
The Hon’ble ITAT Mumbai Bench in the case of B.N. Gamadia Parsi Hunnarshala v. Asstt. DIT (E)  77 TTJ 274 (Mum) (Trib) observed that under section 11 of the Act, exemption is available only on the income within the meaning of section 11 and not on the ‘deemed income’ under section 11(3) of the Act. Consequently, the assessee could not accumulate deemed income either under section 11(1)(a) or 11(2) of the Act.
Therefore, the entire amount which has not been applied for the purpose for which it has been accumulated would be taxable in AY 2018-19.
However, there is no reason to disallow any application or accumulation of income which was derived in AY 2018-19.