2023 (6) TMI 809 - AT - Income Tax

Exemption u/s 11 - Deemed income - Permissible Adjustment to be made by the CPC while processing the return u/s 143(1) - assessment of trust - assessee in the present case is a public charitable trust and registered under the provisions of section 12AA - CIT(A) NFAC Delhi confirming the assessment of the returned income of Rs. NIL at a taxable income whilst processing us 143(1) - HELD THAT - As per CBDT Instruction bearing No. 1814/1989 no adjustment can be made by denying the deduction or relief claimed by the assessee based on the decision of Hon ble High Court or the Tribunal. It is equally important to refer the judgement of Ahmedabad Tribunal in the case of Gujarat State Lions Conservation Society 2018 (6) TMI 1833 - ITAT RAJKOT We note that the benefit of deduction of the deemed income specified under section under section 11(3) is available to the assessee and therefore such adjustment cannot be made in the return of income under the provisions of section 143(1) of the Act. Accordingly, we set aside the finding of the learned CIT(A) and direct the AO to delete the adjustment made - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of assessment of returned income at a taxable income of Rs. 25,60,000.
2. Legality of adjustment made under section 143(1) of the Income Tax Act.

Summary:

1. Confirmation of Assessment of Returned Income:
The assessee, a public charitable trust registered under section 12AA of the Income Tax Act, filed a return declaring income at Rs. Nil, including deemed income under section 11(3) amounting to Rs. 25,60,000, which was accumulated under section 11(2) and claimed as a deduction. The Centralized Processing Center (CPC) denied this deduction, treating it as an inaccurate claim. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the CPC's intimation, leading the assessee to appeal to the ITAT.

2. Legality of Adjustment Made Under Section 143(1):
The assessee argued that the deemed income under section 11(3) is covered by the Tribunal's decision in the case of Gujarat State Lions Conservation Society vs. CIT and the Calcutta High Court's judgment in Natwarlal Chaudhary Trust, which supports the claim that no adjustment for deemed income under section 11(3) can be made under section 143(1). The ITAT noted that Paragraph No. 9 of the CBDT Instruction No. 1814/1989 prohibits the disallowance of claims based on decisions of any High Court or Appellate Tribunal, even if contrary views exist.

The ITAT referenced the Ahmedabad Tribunal's decision in Gujarat State Lions Conservation Society v. CIT, which upheld that charitable trusts could accumulate up to 25% of their income, including deemed income under section 11(3), without formalities. The Tribunal emphasized that the wisdom of lower courts must yield to higher courts, affirming that non-jurisdictional High Court decisions are binding unless contradicted by jurisdictional High Courts.

Conclusion:
The ITAT concluded that the deduction of deemed income under section 11(3) is permissible and cannot be adjusted under section 143(1). The Tribunal set aside the CIT(A)'s findings and directed the Assessing Officer to delete the adjustment made by the CPC. The appeal of the assessee was allowed.

Order Pronounced:
The order was pronounced in the Court on 14/06/2023 at Ahmedabad.