2019 (3) TMI 1912 - AT - Income Tax

Exemption u/s 11 or u/s 10(23C)(iiid) - assessee was not registered u/s 12A - gross receipt of the assessee was less than Rupees One Crore - HELD THAT - Assessee by mistake had claimed exemption u/s 11 of the Act to which it was not entitled as it was not registered u/s 12AA of the Act but the assessee was eligible to avail exemption u/s 10(23C)(iiid) of the Act as the gross receipts of the assessee is less than Rupees One Crore. The basic exemption limit has also not been considered in the case of the assessee and tax has been calculated on the gross receipts which is not justified. Therefore, we deem it appropriate to remit the issue back to the file of Assessing Officer who should look into the issue and should pass appropriate order after considering the eligibility of the assessee u/s 10(23C(iiid) of the Act - Appeal of the assessee stands allowed for statistical purposes.

Summary

Issues involved:
1. Eligibility of the assessee for exemption under section 10(23C)(iiid) of the Act.
2. Consideration of basic exemption limit in tax calculation.
3. Correct interpretation of the provisions of the Income Tax Act.

Detailed Analysis:
1. The appeal was filed by the assessee against the order of the CIT(A)-I, Kanpur for the assessment year 2015-2016. The assessee had initially claimed exemption under section 11 of the Act but later realized that it was not registered under section 12A. The assessee contended that being engaged in running a school, it was eligible for exemption under section 10(23C)(iiid) as its gross receipts were less than Rupees One Crore. The ITAT found that the assessee's gross receipts were indeed below the threshold and that it was erroneously denied the correct exemption. Therefore, the issue of eligibility for exemption under section 10(23C)(iiid) was considered, and the ITAT directed the Assessing Officer to re-examine the matter and pass an appropriate order.

2. The ITAT noted that the basic exemption limit of Rupees 2,50,000 was not considered in the tax calculation. Even if the assessee was to be treated as an Association of Persons (AOP), no tax would have been payable due to the basic exemption limit. The failure to consider this limit led to an incorrect tax calculation on the gross receipts. Hence, the ITAT emphasized the importance of taking into account the basic exemption limit while determining the tax liability, highlighting the error in the tax assessment.

3. The ITAT carefully analyzed the provisions of the Income Tax Act and the submissions made by both parties. It observed that the assessee's mistake in claiming exemption under section 11 instead of section 10(23C)(iiid) was due to a lack of registration under section 12AA. By correctly interpreting the relevant provisions, the ITAT clarified the assessee's eligibility for a specific exemption and the correct tax treatment based on the gross receipts. The judgment focused on ensuring the proper application of the law and directing the Assessing Officer to rectify the errors in the assessment process.

In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, highlighting the importance of accurate interpretation and application of the Income Tax Act provisions to determine tax liability and exemptions correctly.