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2019 (4) TMI 361 - AT - Income TaxEligibility for exemption u/s 11 - registration u/s 12AA - HELD THAT - Tribunal has allowed registration u/s 12AA in favour of the assessee, vide order dated 29.04.2014. The order of the Tribunal has been confirmed by the Hon ble Allahabad High Court. The AO granted exemption u/s 11 to the assessee in AY 2010-11, vide order dated 16.11.2017 u/s 148/147. Merely because SLP of the Department is pending before Hon ble Supreme Court is no ground to deny exemption to assessee u/s 11. AO shall have to verify the condition of Section 11 of the Act before passing the assessment order afresh and shall have to grant exemption u/s 11 of the Act because of the orders passed by the Tribunal granting registration u/s 12AA of the Act in favour of the assessee. We, accordingly, set aside the orders of the authorities below and restore the matter in issue to the file of AO with direction to grant exemption to the assessee u/s 11 of the Act after satisfying the conditions of the same as per law by giving reasonable sufficient opportunity of being heard to the assessee. Addition made on account of infrastructure fund - HELD THAT - The assessee has now been granted registration u/s 12AA of the Act and thus, assessee is entitled for exemption from income u/s 11 of the Act as per law. Even if the infrastructure reserve fund may be treated as income of assessee, it will have to be examined, whether, assessee is entitled for exemption u/s 11 of the Act on the same income. Therefore, it would depend upon fundings with regard to exemption u/s 11 of the Act. We have already restored the issue of exemption u/s 11 of the Act to the AO for fresh decision as per law. No authorities below have not appreciated the fact that assessee claimed that infrastructure fund was received for development activities from the State Authorities, the assessee has to spend the amount on the same as per approval of the State Authorities. Thus, there may not be any profit element out of the same sources. It may also be noted here that whatever amount has been spent by assessee on the same issue, the AO has accepted that assessee spent the same amount as per the directions of the State Authorities. Then in that event it is difficult to believe that part amount is capital receipt and part would be Revenue in nature. Therefore, there was no justification for Ld. CIT(A) to hold that the impugned receipt is Revenue in nature. This issue also requires reconsideration in view of the fact that assessee is entitled for exemption u/s 11 of the Act - Appeal of assessee is allowed for statistical purposes.
Issues Involved:
- Denial of exemption under section 11 of the Act due to lack of registration under section 12AA for the assessee. - Dismissal of appeals by the Ld. CIT(A) based on the denial of registration. - Reconsideration of the matter at the level of the AO based on previous judgments and orders regarding registration and exemption. - Addition made on account of infrastructure fund and its treatment as income for the assessee. - Reexamination of the infrastructure fund issue in light of the granted registration under section 12AA and entitlement to exemption under section 11 of the Act. Analysis: - The appeals were filed against orders of Ld.CIT(Appeals) for different assessment years. The Tribunal initially dismissed all appeals of the assessee, but upon filing miscellaneous applications, the Tribunal recalled its order and directed fresh hearings. The appeals were listed again for reconsideration. - In the case of AY 2009-10, the AO denied exemption under section 11 as no registration under section 12A was granted to the assessee. The Ld. CIT(A) upheld the AO's decision. However, the Tribunal found that registration under section 12AA was granted to the assessee in a previous year, and the AO should verify the conditions of section 11 before passing a fresh assessment order, granting exemption. - Similar issues were found in AYs 2010-11 and 2012-13 where the AO denied exemption under section 11 due to lack of registration under section 12AA. The Tribunal directed the AO to reconsider the matter and grant exemption after satisfying the conditions of the law. - Regarding the addition made on account of the infrastructure fund, the Tribunal noted that the issue required reconsideration at the level of the AO. The Tribunal emphasized that the assessee being granted registration under section 12AA entitled them to exemption under section 11. The treatment of the infrastructure fund as income was to be reexamined considering the entitlement to exemption. - The Tribunal highlighted that the authorities had not fully considered the nature of the infrastructure fund and the fact that the assessee acted as a custodian of the funds for development activities. The Tribunal directed the AO to redecide the issue of the infrastructure fund in light of the granted registration and entitlement to exemption under section 11. - Ultimately, the Tribunal allowed all appeals of the assessee for statistical purposes, setting aside the orders of the authorities below and restoring the matters to the AO for fresh consideration in accordance with the law. Conclusion: The Tribunal's judgment focused on the denial of exemption under section 11 due to the lack of registration under section 12AA for the assessee. It emphasized the need for the AO to reconsider the matter in light of previous judgments and orders granting registration and entitlement to exemption. Additionally, the treatment of the infrastructure fund as income was to be reexamined considering the granted registration and entitlement to exemption under section 11.
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