Section 11 r.w.s 12A — Whether the accumulated funds along with all the assets and liabilities transferred to a new institution or section 25 company formed shall be taxable as deemed income u/s.11(3)(d). Held, No.

Section 11 r.w.s 12A — Whether the accumulated funds along with all the assets and liabilities transferred to a new institution or section 25 company formed shall be taxable as deemed income u/s.11(3)(d). Held, No.

The assessee a sports association working for the promotion of sports was granted a registration u/s.12A. In the year 2005, the assessee passed a resolution to create a new company u/s.25 of the Companies Act, 1956 and to thus dissolve the existing society by transferring all the assets and liabilities. As on the date of transfer the society had accumulated funds of Rs.5.48 crore which were also transferred. These funds were deemed to be the income u/s.11(3)(d). The CIT(A) held that the funds transferred by the assessee were not covered by section 11(3A) because the new company had invested the accumulated balance in accordance with the provisions. The Department preferred a second appeal.

Held:

The scope of transfer has been extended to by section 11(3A) to not only societies but also to institutions. The new company being a charitable institution registered u/s.12A had taken over the functions of the society as also the assets and liabilities as per its Memorandum of Association. The Revenue had also not placed any material to prove it otherwise, hence the order of the CIT(A) was restored.