2019 (3) TMI 1348 - AT - Income Tax

Course of action by Tribunal - Additional ground raised first time before Tribunal - Denial of exemption u/s 10(23C)(iiiad) - additional ground submitting that the appellant society has been granted registration u/s 12AA subsequently w.e.f. 1.4.2013 and the income of the appellant society would be exempt u/s 11 & 12 for the preceding years also including the year under appeal - HELD THAT - From perusal of Form No.35 filed by the assessee before CIT(A) we observe that the additional ground raised before us has not been raised before CIT(A). The reason for not raising this additional ground is that the assessee was granted registration u/s 12AA on 11.7.2014 effective from 1.4.2013 whereas the appellate order framed by CIT(A) is dated 23.5.2014, therefore CIT(A) had no occasion to adjudicate this issue as it did not arise till the time of finalisation of appellate order. Before us the revenue has not disputed the objects of the society as mentioned in the bye-laws placed at page 3 to 6 which remain unchanged since its inception. Registration u/s 12AA of the Act have been granted by Ld.CIT, Bhopal on the basis of the objects mentioned in the bye-laws. Therefore following the judgment of CIT V/s Tolaram Somal 2006 (3) TMI 136 - MADHYA PRADESH HIGH COURT are bound to hold that the additional legal ground which has been taken before us for the first time and which goes to the root of the matter needs to be set aside to the file of Ld. CIT(A) for adjudication in the light of various judgments referred by Ld. Counsel for the assessee as well as the provisions of law and decide accordingly as to whether the assessee in view of being registered u/s 12AA of the Act is eligible for benefit of Section 11 & Section 12 from retrospective effect. We accordingly set aside the additional ground as well as Ground No.2 to 6 relating to denial of exemption u/s 10(23C)(iiiad) of the Act to the file of Ld. CIT(A) for afresh adjudication.- Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
1. Re-opening of assessment and order under section 143(3) read with section 147 challenged.
2. Denial of exemption under section 10(23C)(iiiad) of the Income Tax Act.
3. Benefit of exemption under section 11 & 12 based on subsequent registration under section 12AA.

Issue 1: Re-opening of assessment and order under section 143(3) read with section 147:
The appeal challenged the re-opening of the assessment and the order under section 143(3) read with section 147 of the Income Tax Act. However, the appellant did not press this ground, leading to its dismissal as not pressed.

Issue 2: Denial of exemption under section 10(23C)(iiiad) of the Income Tax Act:
The appellant contested the denial of exemption under section 10(23C)(iiiad) of the Act. The Assessing Officer had added the cash surplus of the society to the income, stating that the society did not exist solely for educational purposes due to the presence of other objectives in its bye-laws. The Commissioner of Income Tax (Appeals) upheld this decision. The appellant argued that its activities were confined to educational purposes only. The Tribunal observed that the appellant had been granted registration under section 12AA of the Act, and considering the unchanged objects of the society, set aside the matter for fresh adjudication by the Commissioner of Income Tax (Appeals).

Issue 3: Benefit of exemption under section 11 & 12 based on subsequent registration under section 12AA:
The appellant, having been granted registration under section 12AA of the Act subsequently, contended that the income derived from educational activities should be exempt under sections 11 & 12 retrospectively. The Tribunal noted that the additional ground raised before them had not been presented before the Commissioner of Income Tax (Appeals) due to the timing of registration. Referring to relevant case law and the provisions of the law, the Tribunal directed the Commissioner of Income Tax (Appeals) to reconsider this issue in light of the registration under section 12AA. The Tribunal set aside the matter for afresh adjudication, emphasizing the need to provide the appellant with a fair opportunity to present their case.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, setting aside the issues related to denial of exemption under section 10(23C)(iiiad) and directing a fresh adjudication based on subsequent registration under section 12AA.