2010 (4) TMI 811 - AT - Income Tax

Retrospective exemption under 12AA - Trust formed on 1.6.2007 - Registration applied from 01.04.2001 -Held that - CIT was right in respect of the application made on or after 1.6.2007 he has no power of condonation so as to grant registration from earlier date other than the first day of the financial year in which the application for registration is made. Thus retrospective application for registration under 12AA not allowed. Taxability of interest where assessee has no control on the principal amount - Held that - In view of the case of CIT(A) vs Delhi Industrial Development (2007 - TMI - 2464 - HIGH COURT DELHI) if principal amount does not belong to the assessee because of overriding title of the Government then interest income on principal amount would not belong to the assessee.

Summary

Issues:
1. Condonation of delay in application for registration u/s 12AA with retrospective effect.
2. Taxability of interest earned on investment from Infrastructure Development Fund.

Analysis:

Issue 1: Condonation of delay in application for registration u/s 12AA with retrospective effect:
The appellant filed an application for registration u/s 12AA with a request for retrospective effect from 1.4.2001. However, the CIT rejected the request citing the amendment by the Finance Act, 2007, which removed the power to condone delay for applications filed after 1st June 2007. The Tribunal noted that the provision of condoning delay was no longer applicable for applications made after 1.6.2007. As a result, the Tribunal upheld the CIT's decision to reject the appellant's request for condonation of delay in filing the registration application u/s 12AA.

Issue 2: Taxability of interest earned on investment from Infrastructure Development Fund:
The AO noticed that the appellant did not credit interest amount of Rs.20,49,239 in the income and receipt account for the Asstt. Year 2005-06. The AO added this amount as taxable income, similar to the previous assessment year. The CIT(A) upheld this decision. However, during the appeal, the Tribunal considered a previous decision where it was established that interest earned on the infrastructure development fund did not belong to the appellant but to the Delhi Administration. The Tribunal ruled in favor of the appellant, stating that the interest amount was not to be included as income in the appellant's hands. The Tribunal referenced a case law where interest income did not belong to the development agency but to the government entity, leading to the deletion of the addition of Rs.18,05,515. The Tribunal reversed the orders of the authorities below and decided the issue in favor of the appellant.

In conclusion, the Tribunal dismissed ITA No.131/Del/2009 related to the delay in registration application and allowed ITA No.132/Del/2009 concerning the taxability of interest earned on the investment from the Infrastructure Development Fund.