The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the appeal of the assessee ruling that accumulated income can be applied towards the acquisition of fixed assets under Section 11(6) of the Income Tax Act,1961.
Gujarat Safety Council,the appellant-assessee,was a trust that conducted safety training programs. For the assessment year 2014-15, it filed a return showing no income and claimed an exemption of Rs. 1,18,11,274 under Section 11. The Assessing Officer ( AO ) questioned an accumulation of Rs. 5,92,352 from assessment year 2008-09, which was not utilized within five years.
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The assessee stated this amount was spent on capital expenditures totaling Rs. 7,96,543. The AO rejected this explanation and treated the unutilized amount as income. The Senior Counsel argued that the issue was not examined properly and requested the case be sent back to the AO for verification and appropriate relief.
The assessee’s appeal was delayed by 13 days due to the National Faceless Appeal Centre ( NFAC ) order being sent to the spam folder. With no objection from the Revenue, the delay was condoned.
The tribunal reviewed the rival submissions and noted that the AO had not verified the assessee’s claim that the accumulation of Rs. 5,92,352 from A.Y. 2008-09 was used for capital expenditure. The AO incorrectly found that the capital expenditure could not be applied against the accumulation under Section 11(2) of the Act.
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The bench found this finding inconsistent with the Act’s provisions, specifically Section 11(6), which allows application of income towards fixed assets without double deduction for depreciation. Although Section 11(6) was introduced from 01.04.2015, it was clarificatory and applicable to the current year. The Commissioner of Income Tax (Appeals) [CIT(A)] had also dismissed the assessee’s claim without proper verification.
The appellate tribunal set aside the matter to the AO for verification of the assessee’s claim regarding the use of accumulated income for fixed assets. The AO was instructed to decide the matter after giving the assessee a proper hearing and reviewing the necessary evidence. The assessee was also directed to provide the required evidence to support the claim.
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The two member bench comprising T.R Senthil Kumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member) allowed the appeal filed by the assessee.
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