9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (3) TMI 1035 - AT - Income TaxDetermination of the correct income for the current year chargeable to tax under the Act - AO has regarded the assessee as not a charitable trust - Held that - There is no basis for allowing exemption to the assessee on its income u/s. 11 to whatever extent. We may accordingly answer the two aspects of the impugned assessment that we discern as arising for our consideration/ adjudication. The voluntary contributions to the assessee-society qualify as income u/s. 2(24)(iia) of the Act, and is therefore, subject to the provisions of the Act, eligible for exemption u/s. 11 on application. Two, the assessee is not entitled to exemption u/s. 11 in-as-much as it is admittedly not registered u/s. 12AA of the Act, which issue stands settled by the decision by the Apex Court in U.P. Forest Corporation v. Dy. CIT 2007 (11) TMI 303 - SUPREME Court . That apart, it may be appreciated that not so holding, i.e., that the assessee is not entitled to any exemption u/s. 11 on account of non-registration u/s. 12AA, on which aspect there is no ambivalence in law (refer section 12A(1)), would render our own order as internally inconsistent, i.e., the same malady that inflicts the orders by the Revenue authorities, besides laying down a wholly unacceptable legal proposition/judicial precedent, inconsistent with the decision in U.P. Forest Corporation v. Dy. CIT (supra). We are also, we may add, conscious of the provision of s. 12A(2), which essentially seeks to extend the benefit of sections 11 and 12 to years for which registration u/s. 12AA is not available subject to the non-change of the objects of the trust during the intervening period, i.e., at the time of grant of registration and that obtaining during the relevant previous year. The same, however, would get triggered only upon grant of registration u/s. 12AA, which has admittedly not even been applied for by the assessee. The matter accordingly shall travel back to the file of the AO for adjudication afresh in accordance with law, in light of the foregoing findings/ observations. The assessee shall be allowed deduction qua any expenditure incurred, if any, including administrative expenditure, for the purposes of the running the institution or organizing its activities. The burden of proof or the onus to prove the said expenditure would be on the assessee, whose accounts are presumably audited, i.e., under the provisions of its charter read with its governing law, i.e., Society Registration Act, 1860. A charitable trust, we may though clarify, is to apply its accounting income, so that the expenditure need not necessarily satisfy the mandate of sec. 37(1) or sec. 57.
Issues Involved:
1. Determination of correct income chargeable to tax. 2. Applicability of exemption under Section 11 of the Income Tax Act. 3. Status and recognition of the assessee as a charitable or religious trust. 4. Implications of non-registration under Section 12AA of the Income Tax Act. 5. Applicability of the principle of mutuality. Detailed Analysis: 1. Determination of Correct Income Chargeable to Tax: The primary issue is the determination of the correct income for the current year chargeable to tax under the Income Tax Act. The assessee claimed its income to be nil, whereas the Revenue assessed its income at ?23,84,731/-, which was the surplus of receipts over payments as per the assessee's accounts. 2. Applicability of Exemption under Section 11 of the Income Tax Act: The assessee, a society registered under the Society Registration Act, 1860, claimed exemption under Section 11 of the Income Tax Act on the surplus amount. The Revenue denied this exemption due to the assessee's non-registration under Section 12AA, which is a prerequisite for claiming exemption under Sections 11 and 12. The Tribunal noted that the assessee's receipts of ?90.41 lacs by way of voluntary contributions and ?3.91 lacs as interest income are considered as 'income' under Section 2(24)(iia) of the Act. However, without registration under Section 12AA, the benefit of exemption under Section 11 is not applicable. 3. Status and Recognition of the Assessee as a Charitable or Religious Trust: The Tribunal observed that the purposes for which the assessee society is formed are clearly charitable and religious in nature. The activities include managing meals at a temple, arranging accommodations for pilgrims, conducting public welfare programs, and organizing religious events. Despite these charitable and religious objectives, the AO did not recognize the assessee as a charitable trust for the purpose of the beneficiary provision of the Act due to the lack of registration under Section 12AA. 4. Implications of Non-Registration under Section 12AA of the Income Tax Act: The Tribunal emphasized that the benefit of exemption under Section 11 is contingent upon the registration of the trust under Section 12AA. Since the assessee was not registered under Section 12AA, it was not entitled to claim the exemption. The Tribunal also noted that even if the assessee were to apply for registration after the relevant assessment year, the registration would only be granted prospectively. 5. Applicability of the Principle of Mutuality: The assessee argued for the applicability of the principle of mutuality, which the Tribunal rejected. The Tribunal clarified that the assessee is a separate legal entity distinct from its management, trustees, and patrons. The donations received are voluntary contributions referred to in Section 2(24)(iia) and form the trust property to be applied for its purposes. Conclusion: The Tribunal concluded that the voluntary contributions received by the assessee qualify as income under Section 2(24)(iia) of the Act and are subject to tax provisions. The assessee is not entitled to exemption under Section 11 due to non-registration under Section 12AA. The matter was remanded back to the AO for fresh adjudication in accordance with the law, allowing for any expenditure incurred for running the institution or organizing its activities to be deducted. The burden of proof for such expenditure lies with the assessee. Order Pronounced: The assessee's appeal was disposed of on the aforesaid terms, and the order was pronounced in the open Court on March 15, 2018.
|
