2023 (4) TMI 891 - AT - Income Tax

Denial of exemption u/s 10(26BBB) - assessee is not formed under Central, State or Provincial Act but formed under a resolution passed by the Government of Maharashtra and thereby not eligible for exemption u/s 10(26BBB) - HELD THAT - NFAC correctly held that as evident from the said provision i.e. sec. 10(26BBB) of the Act that any income of corporation which is established either by Central, State or Provincial Act only is exempted u/s 10(26BBB) of the Act. In this case, the assessee-corporation has come into existence by a Resolution of Government of Maharashtra and not by any Act of Central, State or Province. We are of the considered view that whenever a financial legislation is interpreted, it has to be interpreted literally or in other words there has to be literal interpretation of the said provision. Meaning thereby what exactly is the intention of the legislature in respect of that particular provision, that exactly has to be read into it and one cannot improvise through judicial activism or otherwise extending or reducing the scope of such financial legislation In order to claim exemption, the corporation has to be established only through the Act and not by any other means. Therefore, the NFAC has given a correct interpretation of the said section. Denying grant of registration/s 12AA of the Act to the assessee - assessee has taken a ground that the issue of grant of registration u/s 12AA is pending before the ld. CIT Exemption as per the basis of directions of Pune Tribunal vide 2021 (6) TMI 811 - ITAT PUNE in assessee s own case. Having considered this development and the chain of events in assessee s own case, we find it deem and appropriate in the interest of justice to remand this matter also to the file of the ld. A.O to re-adjudicate as per law based on the outcome of the decision in the earlier matters of the assessee as has been examined in the preceding paras. Also both the provisions i.e. sec. 12AA and sec. 10(26BBB) of the Act are independent and separate provisions having been incorporated in the Act for specific purposes. There is no bar cast on one provision by the other. Meaning thereby, the corporation may be registered u/s 12AA and at the same time it can apply for exemption u/s 10(26BBB) of the Act but both the issues have to be examined independently on the basis of specific requirement and eligibility of the said provisions

Summary

Issues:
The judgment involves the denial of exemption under section 10(26BBB) of the Income-tax Act, 1961, based on the formation of the corporation by a resolution passed by the Government of Maharashtra instead of under a Central, State, or Provincial Act. Additionally, the pending application for registration under section 12AA of the Act is also a key issue.

Exemption under Section 10(26BBB):
The assessee, a corporation established by the Government of Maharashtra, claimed exemption under section 10(26BBB) for the welfare of ex-servicemen. The NFAC correctly interpreted the provision, stating that only corporations established by a Central, State, or Provincial Act are eligible for exemption. The literal interpretation of the legislation was emphasized, requiring establishment through an "Act" specifically, without scope for improvisation. The Tribunal remanded the matter back for re-adjudication based on the outcome of previous cases and the pending application for registration under section 12AA, highlighting the independence of sections 12AA and 10(26BBB) for separate examination based on specific requirements and eligibility.

Pending Application for Registration under Section 12AA:
The Tribunal considered the previous order remanding the matter for re-adjudication regarding the grant of registration under section 12AA of the Act. The chain of events in the assessee's case led to a decision to remand the matter for further consideration by the assessing officer, ensuring compliance with the law and previous findings. The independence of sections 12AA and 10(26BBB) was reiterated, allowing for separate examination of registration and exemption eligibility.

Conclusion:
The appeal of the assessee was allowed for statistical purposes, with the Tribunal emphasizing the need for separate examination of registration under section 12AA and exemption under section 10(26BBB) based on specific provisions and eligibility criteria. The matter was remanded for re-adjudication in line with previous decisions and pending applications, ensuring compliance with the law and the specific requirements of each section.