2017 (8) TMI 183 - HC - Income Tax

Restoration of registration under Section 12A - Held that - In view of restoration of registration under Section 12A Assessing Officer has now to compute income as per Section 11 and 12 of Act 1961 and if Assesses is able to establish that 85 percent or more of the income of Assessee has been utilized for the purpose of Assessee then income of Assessee should be exempted.

Summary

Issues:
1. Exemption under Sections 11 & 12 of the Income Tax Act, 1961
2. Restoration of registration under Section 12A
3. Treatment of income as Income from business or profession
4. Disallowance of salary payment under Section 13(3) of the Income Tax Act, 1961
5. Disallowance of interest on TDS

Exemption under Sections 11 & 12 of the Income Tax Act, 1961:
The Tribunal considered issues raised by Revenue challenging the order of Commissioner of Income Tax (Appeals)-II, Kanpur. The key contention was regarding the exemption under Sections 11 & 12 of the Income Tax Act, 1961. The Revenue argued that the Commissioner erred in allowing the exemption without considering the withdrawal of registration under Section 12A. The Tribunal observed that after the restoration of registration under Section 12A, the Assessing Officer was required to compute the income as per Sections 11 and 12 of the Act. It was noted that if the Assessee could establish that 85 percent or more of its income was utilized for its purpose, the income should be exempted.

Restoration of registration under Section 12A:
The Tribunal addressed the issue of restoration of registration under Section 12A. It was highlighted that the Assessing Officer was now obligated to calculate the income under Sections 11 and 12 of the Act following the restoration of registration. The Tribunal emphasized that if the Assessee could demonstrate that a significant portion of its income was used for its intended purpose, the income should qualify for exemption.

Treatment of income as Income from business or profession:
Regarding the treatment of income as Income from business or profession, the Tribunal noted that the Assessing Officer had classified the income of the Assessee as such, treating the status of the society as an AOP. This issue was considered by the Tribunal in the context of the overall assessment.

Disallowance of salary payment under Section 13(3) of the Income Tax Act, 1961:
The Tribunal discussed the disallowance of salary payment under Section 13(3) of the Income Tax Act, 1961. It was pointed out that the Assessing Officer had disallowed a specific amount under this head, which the Commissioner of Income Tax (Appeals)-II, Kanpur had deleted. The Tribunal opined that the determination of the salary amount should be a matter between the concerned parties and not solely from the perspective of Revenue authorities.

Disallowance of interest on TDS:
The issue of disallowance of interest on TDS was also addressed by the Tribunal. It was decided that this matter needed further examination, and hence, the Tribunal remanded the issue back to the Assessing Officer for fresh consideration.

In conclusion, the High Court dismissed the appeal, stating that no substantial question of law, which is a pre-condition for admission of the appeal, had arisen in this case based on the facts and circumstances presented during the proceedings.