2017 (8) TMI 1243 - AT - Income Tax

Rectification petition u/s 154 - declining the claim of exemption to the assessee u/s 10 & 11(1)(a) - Held that - From a bare reading of Section 297(2)(k) of the Act is evident that any agreement entered into appointment made approval given recognition granted direction instruction notification order or rule issued under any provision of the repealed Act shall so far it is not inconsistent with the corresponding provisions of this Act be deemed to have been entered into made granted given or issued under the corresponding provision aforesaid and shall continue in force accordingly. AO was required to examine whether firstly exemption granted under the repealed Act was saved by Section 297 of the Act and secondly whether it was consistent with the corresponding provisions of Law under the new Act. Thus we are of the considered view that by not adverting these issues. The AO has committed mistake apparent from the record and needs fresh consideration. According the AO is directed to decide the issue of availability of exemption afresh. The Assessee also argued that the rent was accrued when this was ordered by the Hon ble Supreme Court in the year 2002 we find no such issue was raised before the Assessing Officer hence could not be rectified. We find even no such ground was raised before the Ld. CIT(A). Therefore this issue is not arising out of the order under Section 154 of the Act. Under these facts this plea of the assessee that the receipts cannot be taxed under the year under appeal is devoid of any merit hence rejected. - Appeal of the Assessee is partly allowed for statistical purpose

Summary

Issues Involved:
1. Application under Section 154 against intimation under Section 143(1)(a).
2. Exemption of income under Sections 10 and 11 of the Income Tax Act, 1961.
3. Taxation of rental income accrued from 1976 to 1992.
4. Validity of exemption granted by the Ministry of Home Affairs in 1958.

Detailed Analysis:

1. Application under Section 154 against Intimation under Section 143(1)(a)
The core issue revolves around whether the application under Section 154 filed by the assessee against the intimation under Section 143(1)(a) was within the scope of Section 154. The assessee argued that the rejection of the exemption claim was a "mistake apparent from the record" and could be rectified under Section 154. The Tribunal noted that the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the issues raised were beyond the scope of Section 154, which is intended for rectifying obvious and patent mistakes. The Tribunal cited the Supreme Court's interpretation in MEPCO Industries Ltd. Vs. CIT, emphasizing that a "rectifiable mistake" must be obvious and not dependent on elaborate arguments.

2. Exemption of Income under Sections 10 and 11 of the Income Tax Act, 1961
The assessee claimed exemption under Sections 10 and 11, arguing that the trust was constituted in 1957 and was exempt from income tax as per a 1958 letter from the Ministry of Home Affairs. The AO rejected this claim, stating that the trust was not registered under Section 12AA at the time of assessment. The Tribunal upheld this view, referencing the Supreme Court's ruling in U.P. Forest Corporation & Anr Vs. DCIT, which mandates registration under Section 12A as a prerequisite for claiming benefits under Sections 11 and 12.

3. Taxation of Rental Income Accrued from 1976 to 1992
The assessee contended that the rental income, which accrued from 1976 to 1992 and was awarded by the Supreme Court in 2002, should not be taxed in the assessment year 2011-12. The Tribunal noted that this issue was not raised before the AO or CIT(A) and thus could not be rectified under Section 154. The Tribunal dismissed this argument, stating that the income accrued in 2002 and could not be taxed on a receipt basis in 2011-12.

4. Validity of Exemption Granted by the Ministry of Home Affairs in 1958
The assessee argued that the trust was granted exemption from income tax by the Ministry of Home Affairs in 1958. The AO and CIT(A) found that the letter did not explicitly mention the Income Tax Act, 1922, or its provisions. The Tribunal examined Section 297 of the Income Tax Act, 1961, which deals with repeals and savings, and found that any exemption granted under the repealed Act (1922) should be deemed to continue under the new Act (1961) if not inconsistent. The Tribunal directed the AO to re-examine whether the exemption granted in 1958 was consistent with the provisions of the new Act and thus still valid.

Conclusion:
The Tribunal concluded that the AO had committed a mistake by not considering whether the exemption granted under the repealed Act was saved by Section 297 of the new Act. The AO was directed to re-examine the issue of exemption afresh. The appeal was partly allowed for statistical purposes, and the issue of rental income taxation was dismissed as it was not raised in the original proceedings.