2021 (4) TMI 107 - AT - Income Tax

Exemption u/s 11(1A) - CIT(A) held the assessee Trust as disentitled to the exemption u/s.11(1 A) on the capital gains merely because it was posted under a wrong head in the return of income is arbitrary, erroneous, unfair and unjust and must be quashed with directions for the relief - assessee stated that due to inadvertent mistake in filing the return of income electronically, the claim as regards investment of sale proceeds in acquisition of new capital asset in mutual funds in terms of section 11(1A) of the Act could not be made properly - as per assessee that during the course of scrutiny assessment proceedings, the said claim was made but was denied by the Assessing Officer stating that such claim was never made in the return of income nor by way of revised return of income - HELD THAT - It is true that the claim was not made in the return of income. It is equally true that revised return of income was also not filed. In our considered view, a legal claim can be made at any stage and the decision of the Hon'ble Supreme Court supra relied upon by the ld. CIT(A) does not put any fetter on the appellate authorities. CIT(A) ought to have considered the claim regarding investment in mutual funds. Since no such verification has been done, we deem it fit to restore the issue to the file of the Assessing Officer. The assessee is directed to demonstrate that the sale proceeds have been invested in acquisition of new capital assets in nature of mutual funds. The Assessing Officer is directed to verify the same, and when satisfied, allow the claim of the assessee. Whether income of the society are not covered under amended proviso to section 2(15)? - HELD THAT - The assessee society is registered u/s. 12A of the I.T. Act. The trust was formed on 27.09.1966 with the primary aims of carrying out public charitable objects and purposes including relief of the poor, education, medical relief and advancement of any other object of general public utility not involving the carrying on any activity for profit. In accordance with the object of the trust, it is providing free education upto preparatory kindergarten to children from poor and economically weaker section of society. In furtherance of its objects, the assessee has also given donation of ₹ 2 lakhs and claimed the same as application of income. There is no dispute that the assessee trust is carrying on its activities since its inception and has never been denied the claim of exemption u/s. 11 of the Act. We find that the ld. CIT(A) has correctly appreciated the facts of the case and allowed the claim of exemption - Decided in favour of assessee.

Summary

Issues:
1. Exemption u/s. 11(1A) of the Income-tax Act, 1961 on capital gains.
2. Denial of exemption for reinvested capital gains.
3. Interpretation of legal claim submission timeline.
4. Application of amended proviso to section 2(15).
5. Eligibility for exemption u/s. 11 and 12 based on charitable activities.

Issue 1: Exemption u/s. 11(1A) on capital gains:
The appellant's appeal challenged the denial of exemption u/s. 11(1A) due to a mistake in filing the return of income. The CIT(A) upheld the Assessing Officer's decision based on the Goetze India Ltd. case. However, the ITAT Delhi held that a legal claim can be made at any stage, and the CIT(A) should have considered the claim regarding investment in mutual funds. The ITAT directed the Assessing Officer to verify the investment and allow the claim if satisfied, restoring the issue for further assessment.

Issue 2: Denial of exemption for reinvested capital gains:
The ITAT found the denial of exemption for reinvested capital gains by the CIT(A) to be erroneous. The appellant's claim of reinvestment in capital assets was not properly considered, leading to the restoration of the issue to the Assessing Officer for verification and subsequent allowance of the claim upon satisfaction.

Issue 3: Interpretation of legal claim submission timeline:
The ITAT clarified that a legal claim can be made at any stage, contrary to the CIT(A)'s reliance on the Goetze India Ltd. case. The decision emphasized that the absence of the claim in the return of income did not preclude its consideration and submission at a later stage, directing the Assessing Officer to verify the claim.

Issue 4: Application of amended proviso to section 2(15):
The Revenue's appeal contested the CIT(A)'s decision regarding the applicability of the amended proviso to section 2(15). However, the ITAT upheld the CIT(A)'s findings, noting the charitable activities conducted by the trust and the correct application of exemptions under sections 11 and 12 based on the trust's objectives and activities.

Issue 5: Eligibility for exemption u/s. 11 and 12 based on charitable activities:
The ITAT reviewed the trust's activities and objectives, emphasizing its charitable endeavors, including providing free education to economically weaker sections of society. The ITAT affirmed the CIT(A)'s decision to allow the exemption under sections 11 and 12, finding no error in the evaluation of the trust's charitable activities and the application of relevant provisions.

In conclusion, the ITAT allowed the appellant's appeal and dismissed the Revenue's appeal, maintaining the decisions made by the CIT(A) regarding the exemption claims and charitable activities of the trust for the Assessment Year 2013-14.