2022 (6) TMI 1366 - AT - Income Tax

Exemption u/s 10(23C)(v) - denial of exemption as funds of the trust were not properly utilized/supervised assessee failed to furnish Audit report in Form No. 10BB u/s 10(23C)(v) r.w.r. 16CC and assessee trust does no enjoy the registration under the provisions of section 12AA - Whether CIT(A) has erred in granting exemption u/s 11 by accepting Form No. 10 filed during the course of assessment proceedings even though the Trust is not registered u/s 12A? - HELD THAT - As gone through the provisions of section 10(23C)(v) which does not prescribe any stipulation which makes the registration u/s 12AA as a condition precedent for availing the exemption u/s 10(23C)(v) of the Act. In fact the provisions of section 11 and section 10(23C)(v) are two parallel regimes and operate independently in their respective realms. This position was clarified by CBDT Circular No.14 of 2015 dated 17.08.2015 - it is well-known canon of construction of the Statute no words can be added to in Act or a new stipulation which is not prescribed in the statute can be read into the Act as held by the Hon ble Supreme Court in the case of CIT vs. Vadilal Lallubhai 1972 (8) TMI 1 - SUPREME COURT As regards to the delay in filing the audit report in the prescribed form the Courts have taken a consistent view that filing of audit report in the prescribed form before completion of the assessment proceedings would constitute a sufficient compliance under the provisions of the Act as held in the case of Nagpur Hotel Owner s Association 2000 (12) TMI 99 - SUPREME COURT also by the Hon ble Punjab Haryana High Court in the case of National Horticulture Board 2008 (8) TMI 476 - PUNJAB AND HARYANA HIGH COURT and in the case of Association of Corporation Apex Societies of Handlooms 2013 (1) TMI 317 - DELHI HIGH COURT Even the CBDT Circular No.19 of 2020 w.e.f. 03.11.2020 as amended by the CBDT Circular No.6 of 2021 dated 26.03.2021 had authorized the Commissioner of Income Tax to entertain the application belatedly upto the assessment year 2018-19. No illegality and unreasonableness in the order of the CIT(A) in reversing the findings of the AO denying the exemption u/s 10(23C)(v) - none of reasons assigned by AO while denying the claim of exemption u/s 10(23C)(v) can be sustained in the eyes of law - No merits in the grounds of appeal filed by the Revenue.

Summary

Issues:
1. Exemption u/s 10(23C)(v) of the Income Tax Act.
2. Granting exemption u/s 11 of the Act based on Form No. 10 submission and registration u/s 12A.

Issue 1: Exemption u/s 10(23C)(v) of the Income Tax Act:

The case involved an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The Revenue raised grounds of appeal related to the exemption u/s 10(23C)(v) of the Act and exemption u/s 11. The respondent-assessee, a religious and charitable trust managing a Sikh Gurdwara, filed for exemption under section 10(23C)(v) but faced denial by the Assessing Officer due to surplus funds and lack of registration u/s 12AA. The appeal contended that filing an audit report before the authorities was sufficient compliance for exemption u/s 10(23C)(v). The Commissioner allowed the exemption, citing relevant case laws and lack of evidence supporting the Assessing Officer's claims. The Revenue appealed this decision.

Issue 2: Granting exemption u/s 11 based on Form No. 10 submission and registration u/s 12A:

The Revenue argued that the trust's surplus funds indicated improper utilization, and the audit report should have been filed within the due date as per the Act. They also highlighted the absence of registration u/s 12AA until a later date. The respondent's representative countered these claims by stating that the trust's affairs were properly managed under the District Collector's supervision. They argued that filing the audit report before the completion of assessment proceedings was sufficient compliance, and the generation of surplus did not negate the charitable nature of the trust. The Tribunal, after considering the arguments and relevant legal precedents, dismissed the Revenue's appeal, emphasizing that the lack of evidence supporting the Assessing Officer's conclusions and the absence of a requirement for registration u/s 12AA for claiming exemption u/s 10(23C)(v) under the Act. The Tribunal upheld the Commissioner's decision to grant the exemption.

This detailed analysis of the judgment provides insights into the issues surrounding the exemption claims under the Income Tax Act, the arguments presented by both parties, the legal precedents cited, and the final decision reached by the Tribunal.