The Tribunal held that if accumulated income is not used within 5 years, it is treated as income for the year in which it is not utilised, and the same becomes taxable under Section 11(3) of the Income Tax Act.
Nidhi | Apr 16, 2026 |
Unutilised Accumulated Funds of State Examination Board Become Taxable if Not Used Within 5 Years: ITAT
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has ruled in favour of the Income Tax Department, holding that accumulated funds become taxable if they are not used within 5 years.
The revenue had filed an appeal against an order of CIT(A) which had deleted the disallowance of Rs 3,32,91,973. The assessee, State Examination Board, had accumulated an amount of Rs 5.60 crore in Assessment Year 2012-13 under Section 11(2). The assessee had claimed a deduction on this amount.
The AO noticed that the assessee had again claimed an amount of Rs 3.32 crores out of the accumulated amount of Rs 5.60 crores in AY 2017-18. The AO held that this was a double deduction and made an addition of this amount to the assessee’s income.
The assessee claimed that out of the accumulation, Rs 3.32 crore was applied for charitable purposes.
The ITAT observed that the Rs 5.60 crore had already been treated as exempt in 2012-13. It was noted that the Rs 3.32 crore was not actually utilised in the year and was carried forward in the closing balance of the general reserves of the Board.
The Tribunal further held that if accumulated income is not used within 5 years, it is treated as income for the year in which it is not utilised, and the same becomes taxable under Section 11(3) of the Income Tax Act.
The Tribunal held that the AO was right in disallowing the amount of Rs 3.32 crore. It set aside the CIT(A)’s order.
In case of any Doubt regarding Membership you can mail us at [email protected]
Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"
