Section 11(2)

Section 11(2) — the law in short

What the courts have decided on section 11(2), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Nagpur Hotel Owners Association Supreme CourtHelps department
  My trust never filed the accumulation notice for the year. Can I file it now, after the assessment was completed, and still get the exemption?
  No. The Supreme Court held that the notice under section 11(2) must reach the Assessing Officer before he completes the assessment. The requirement is mandatory, and without the particulars the officer cannot know what income is being accumulated or for what purpose, so he cannot exclude it. Even if no valid time limit had been prescribed by the rules, it is reasonable to presume that compliance must come at some point before the assessment proceedings end. Allowing the notice afterwards would mean reopening the assessment, which the Act does not contemplate.
• S.Rm.M.Ct.M. Tiruppani Trust v CIT Supreme CourtHelps taxpayer
  My trust filed Form 10 to accumulate income but then spent the money on a hospital building instead of buying government securities. Have I lost the exemption altogether?
  No. The Supreme Court held that a trust which fails the conditions of section 11(2) still keeps the whole of the exemption section 11(1)(a) gives it. Income actually applied to charitable purposes in India is exempt whether or not a declaration was filed, and buying a building to be used as a hospital is such an application. On top of that the trust may accumulate up to 25 per cent of its total income - the limit then in force - and claim exemption on that accumulation without investing it in government securities. Section 11(2) only lifts the ceiling; it does not cut down section 11(1).
• Columbia Global Center in India v ITO (Exemptions), Ward-1(2), Mumbai High CourtHelps taxpayer
  My trust filed Form 10 only after the scrutiny notice came — 338 days after the due date. The Commissioner refused to condone under s.119(2)(b). Is that the end of the accumulation claim?
  No. Where the substantive conditions of s.11(2) are met — the accumulation is disclosed in the return, the Board resolution and the Form 10B audit report before the s.139(1) due date, the money is invested in a s.11(5) mode and is actually applied within the permitted period — the Bombay High Court held that a liberal view must be taken and the delay in filing Form 10 condoned. The refusal order under s.119(2)(b) was quashed and the delay condoned by the Court itself.
• People's Mobile Hospitals v CIT (Exemption) High CourtHelps taxpayer
  Form 10 was 51 days late because our accountant left mid-year, but it was on the file before the return was processed. The Commissioner still refused to condone. What now?
  The Bombay High Court quashed the refusal and condoned the delay itself. Where the delay is short, unexplained by any wilful default, and the Form was on record when the return was processed, refusing condonation is a pedantic rather than a justice-oriented approach and produces genuine hardship within the meaning of s.119(2)(b).
• Bar Council of India v CIT (Exemption) High CourtHelps taxpayerNo later treatment found
  Our professional body has always claimed s.10(23A). We realised mid-assessment that we needed s.11 and filed Form 10 late. Can the Commissioner refuse to condone the delay?
  Not on the reasoning used here. The Delhi High Court set aside the Commissioner's refusal, holding that the explanation offered — that the body's officials had not noticed the amendments to ss.11 and 13 made by the Finance Act 2015 with effect from 1 April 2016 — was not one there was reason to disbelieve, and that no benefit could accrue to the body from delaying. The failure to claim accumulation in the return cannot itself be read as showing an intention not to file Form 10.
• Trust for Reaching the Unreached v CIT High CourtHelps taxpayer
  Our audit report was not e-filed with the return and exemption was denied. Can the delay be condoned?
  Yes. The requirement to furnish the audit report with the return is procedural and directory, so exemption under ss.11 and 12 cannot be refused merely for late filing. The Commissioner's refusal to condone was set aside because the s.119(2)(b) discretion must be exercised equitably and judiciously, not on an exclusively pro-revenue view.
• Saguna Rural Foundation v Exemption Ward 2(3), Mumbai ITATHelps taxpayerNo later treatment found
  CPC denied my s.11(2) accumulation because Form 10 was filed after the s.139(1) due date, and the CIT(A) said s.13(9) settles it. Can the Tribunal still help me?
  Yes. Following the jurisdictional High Court in CIT v Sakal Relief Fund, the Mumbai Tribunal held that filing Form No. 10 before completion of assessment satisfies s.11(2), so a s.143(1) denial founded only on the s.139(1) due date cannot stand. The matter was restored to the Assessing Officer for the limited purpose of checking that the stated purpose of accumulation matches the objects and is backed by a trustees' resolution, with an express direction not to deny exemption on merely technical grounds.
• DCIT (Exemptions) v Society of the Servants of the Holy Spirit ITATHelps taxpayerNo later treatment found
  CPC has taxed our AY 2017-18 accumulation in AY 2023-24 saying the Finance Act 2022 took away the sixth year. We spent the money in FY 2022-23. Is the amendment good against an old accumulation?
  No, on this Tribunal's view. Where the accumulation was made in AY 2017-18 under a law that allowed utilisation within five years and also in the immediately following year, the Finance Act 2022 amendment to s.11(3) — though applicable from AY 2023-24 — cannot be read so as to take away the vested right accrued at the time of accumulation. The addition of Rs.29,04,39,083 made in the s.143(1) intimation was deleted and the Revenue's appeal dismissed.
• IMC Trust v ITO (Exemption) Ward 1(3), Mumbai ITATCuts both waysNo later treatment found
  My Form 10 described the purpose of accumulation in the words of the trust's objects. The Assessing Officer says that is not a 'specific purpose'. Is he right?
  On these facts the Tribunal agreed with him: a purpose stated as 'hold seminars/workshops/conferences/buyers sellers meets/etc. to promote trade and develop knowledge' was not specified with the required clarity and precision, and the trust had not demonstrated the specific purpose for which the accumulated funds were to be used. But the Tribunal did not tax the accumulation — following the Gujarat High Court in Bochasanwasi Shri Akshar Purushottam it restored the matter to the Assessing Officer to verify how the money was actually spent within the five years.
• CBDT Circular 16/2024 CBDT Circulars & InstructionsHelps taxpayer
  Our Form 10B is years late. Who can condone the delay, and how long do I have to apply?
  Apply within three years from the end of the assessment year concerned. Delays up to 365 days are decided by the Principal Commissioner or Commissioner; delays beyond 365 days go to the Principal Chief Commissioner, Chief Commissioner or Director General. The circular covers Forms 9A, 10, 10B and 10BB for assessment year 2018-19 onwards.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.