2015 (6) TMI 556 - AT - Income Tax

Denial of exemption u/s. 10(21) - the assessee has failed to furnish the Form 10 within time and get the delay condoned from the Competent Authority - assessee has been granted registration u/s 12A - CIT(A) allowed exemption - Held that - CIT(A) held that the AO was not correct in denying the benefit to the assessee merely on the ground that the assessee has not filed the Form No. 10 within time before the prescribed authority, because it was approved for the purposes of section 35 of the I.T. Act, and there is nothing on record to suggest that it violated any of the other conditions for exemption, its eligibility for exemption u/s. 10(21) of the I.T. Act is otherwise not in dispute. Ld. CIT(A) has also held that the assessee was registered u/s. 12AA of the I.T. Act w.e.f. 7.4.2006 and its income is exclusively by way of grants/ aids and interest on bank deposits, neither of which accrued in the first week of April, 2006. As regards its income accruing after 7.4.2006, it was also eligible for exemption u/s. 11 of the I.T. Act. Thus, it was eligible for exemption in respect of its income under section 10(21) as well as 11 of the I.T. Act and was not required to furnish the declaration in Form No. 10 in respect of part of the income accumulated by it. Ld. CIT(A) has granted the relief to the assessee, as requested by it by passing an elaborate impugned order. Therefore, no interference is called for in the well reasoned order passed by the Ld. CIT(A) - Decided against assessee.

Summary

Issues:
1. Exemption under section 10(21) of the Income Tax Act based on Form 10 submission timeline.
2. Eligibility for exemption under sections 10(21) and 11 of the Income Tax Act.

Issue 1: Exemption under section 10(21) based on Form 10 submission timeline:

The appellant contested the denial of exemption under section 10(21) by the Assessing Officer (AO) due to the late submission of Form 10. The AO argued that the appellant failed to fulfill the conditions of section 10(21)(a) as the form was submitted after the prescribed time limit. However, the Commissioner of Income Tax (Appeals) (CIT(A)) disagreed with the AO's reasoning. The CIT(A) held that since the appellant was registered under section 12AA of the Income Tax Act and its income was derived solely from grants and interest on bank deposits, it was eligible for exemption under section 10(21) and section 11. The CIT(A) emphasized that the appellant's eligibility for exemption was not in question, and the late submission of Form 10 did not invalidate its claim. The CIT(A) concluded that the appellant's income post-registration was also eligible for exemption under section 11. Ultimately, the CIT(A) granted the requested relief to the appellant, citing various High Court decisions in support of the decision. The Tribunal upheld the CIT(A)'s decision, stating that the order was well-reasoned and legally sound, leading to the dismissal of the appellant's appeal.

Issue 2: Eligibility for exemption under sections 10(21) and 11 of the Income Tax Act:

The appellant institution, fully aided by government grants, was granted registration under section 12A of the Income Tax Act and approval under section 35(1)(ii) by the Central Government. The appellant's income was primarily from grants and interest on bank deposits, managed in accordance with government directives. Despite delays in compliance with certain tax provisions, the appellant's eligibility for exemptions under sections 10(21) and 11 was affirmed by the CIT(A) based on the nature of its income sources and registration status. The Tribunal concurred with the CIT(A)'s analysis, highlighting the appellant's compliance with registration requirements and the specific nature of its income streams as key factors in determining eligibility for tax exemptions under the Income Tax Act. The Tribunal found no grounds for interference in the CIT(A)'s well-supported decision and consequently dismissed the appellant's appeal.

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