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Deemed income u/s 11(3) is also entitled to 15% basic accumulation under section 11(1)(a): HC

Citation- CIT(E) v. Jamnalal Bajaj Foundation

HC: Delhi

ITA No: 808/ 2017

Assessment Year: 2009-10

Date of Order- May 17, 2024

Brief Facts:


  • The assessee had filed a nil return of income for AY 2009-10. However, it noticed that a sum of Rs. 20 crores which was accumulated under section 11(2) had been utilised to give corpus donations to other charitable trusts, thereby attracting tax on such amount as per section 11(3)(c)/(d).

  • Consequently, the donations so given were reversed and collected back within two months.

  • Out of abundant caution, the assessee also filed a revised return, offering to tax the deemed income under section 11(3) and requested that exemption under 11(2) not be withdrawn.

  • However, the AO held that the entire deemed income amounting of Rs. 20 crores was liable to be added to the total income and the claim of the assessee to accumulate 15% u/s 11(1)(a) was rejected.

Observations of the High Court:


(i)          In the instant case, the donations were reversed and had been advanced only for an extremely short duration.

(ii)        Section 11(3)(c)/(d) essentially dealt with situations where the income accumulated was either not utilised or not applied for a charitable purpose.

(iii)      For completeness, the HC also examined if such amount would be hit by Explanation 2 to section 11 which disallows application of income in case of corpus donations given out of income to other charitable trusts. It held since the same applied only to amounts credited or paid to certain categories of institutions accompanied by a direction that the amounts extended would form part of the corpus of those entities, Explanation 2 to section 11 would not be attracted.

Hence, it could not be said that the money was lost or became unavailable to be applied. Consequently, the High Court upheld the decision of ITAT, allowing the assessee the benefit of deduction of 15% u/s 11(1)(a) on deemed income u/s 11(3).

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