2015 (10) TMI 1404 - AT - Income Tax

Rectification of mistake - rectification of the order on the ground that in para 4 of the order passed under section 12AA of the Act, the Director of Income-tax (Exemption) has observed that the registration is granted with effect from March 31, 2008 onwards, whereas, as per proviso 1 to section 12A(1) of the Income-tax Act, the registration granted shall be effective from 1st day of the financial year in which the application is made - Held that - assessee will be entitled for exemption under section 11 of the Act for the assessment year following the financial year in which he has made the application for registration under section 12A of the Act. In the present case, there is no dispute to the fact that the assessee has applied for registration on March 31, 2008 i.e., in financial year 2007-08. Therefore, as per section 12A(2) the provisions of sections 11 and 12 of the Act will be applicable to the assessee from the assessment year 2008-09. In the order passed under section 12AA of the Act, Director of Income-tax (Exemption) has not made any observation with regard to the applicability of the provisions under section 11 of the Act from a particular assessment year. This aspect has to be examined by the Assessing Officer keeping in view the relevant statutory provisions. In these circumstances, we fail to understand the need for the assessee to file the application under section 154 of the Act. Be that as it may, considering the relevant statutory provisions as contained under section 12A(2) of the Act, we are inclined to hold that the provisions of sections 11 and 12 of the Act would apply to the assessee from the assessment year 2008-09 and not financial year 2008-09 as observed by the learned Director of Income-tax (Exemption). Accordingly, grounds of the assessee are allowed.

Summary

Issues:
1. Registration under section 12AA of the Income-tax Act, 1961 - Effective date of registration.

Analysis:

Issue 1: Registration under section 12AA of the Income-tax Act, 1961 - Effective date of registration.

The case involved an appeal against the order of the Director of Income-tax (Exemption) rejecting the application for registration under section 12A of the Act. The Appellate Tribunal had previously set aside the rejection orders and directed the grant of registration. However, a subsequent issue arose regarding the effective date of registration. The Director of Income-tax (Exemption) had granted registration with effect from March 31, 2008, which was contested by the assessee under section 154 of the Act. The contention was that registration should be effective from April 1, 2007, as per the proviso 1 to section 12A(1) of the Act.

The Director, in response, analyzed the provisions of section 12A(1) and 12A(2) of the Act. He noted that the application for registration was filed on March 31, 2008, and as per section 12A(2), the provisions of sections 11 and 12 would apply from the assessment year immediately following the financial year in which the application was made. Therefore, he concluded that the registration was rightly granted from March 31, 2008, the date of application filing.

Upon appeal, the Tribunal examined the statutory provisions and held that as per section 12A(2), the assessee would be entitled to exemption under sections 11 and 12 from the assessment year 2008-09, following the financial year in which the application was filed. The Tribunal disagreed with the Director's interpretation that the exemption would apply from the succeeding financial year. It was emphasized that the Director did not address the applicability of provisions under section 11 from a specific assessment year in the registration order.

Ultimately, the Tribunal allowed the appeal, stating that the provisions of sections 11 and 12 would apply to the assessee from the assessment year 2008-09, in line with section 12A(2) of the Act. The Tribunal found no need for the assessee to file a rectification application under section 154, as the Director's interpretation was incorrect.

In conclusion, the Tribunal allowed the appeal, clarifying the effective date of registration under section 12AA of the Act and emphasizing the correct application of statutory provisions for exemption under sections 11 and 12.