2023 (10) TMI 16 - AT - Income Tax

Exemption u/s 11 - assessee Trust is registered u/s 12A of the Act and is running a Dharamshala at Shimla and Palampur besides carrying out other charitable activities - Reasons on denial of benefit of exemption u/s 11 to the assessee trust as during the appellate proceedings, the assessee trust could not submit copy of its registration u/s. 12A originally granted on basis of which the past assessment were completed allowing exemption u/s section 11 - HELD THAT - As in the assessment order for assessment year 1984-85, there is a clear mention of the assessee Trust being granted registration u/s 12A vide ld. CIT, Patiala letter dated 30.01.1986 and following the same, the assessment orders for assessment year 2010-11, 2011-12, 2012-13 and 2015-16 have been passed wherein the exemption u/s 11 has been allowed by the AO. Being an old matter, the assessee trust may not have produced copy of the registration originally granted u/s 12A, however, the factum of the assessee s trust being duly registered u/s 12A and such a registration not being withdrawn is borne out of the assessment records for the earlier assessment years and in view of the same, mere non-furnishing of copy of registration u/s 12A cannot be held as a valid and justifiable reason for denial of exemption u/s 11 where such registration continues to exist and the assessee trust duly stand registered u/s 12A for the year under consideration. Requirement of fresh registration u/s 12AB for existing trusts - HELD THAT - As per the provisions of sub-section (5) to section 12AA, the registration granted to the assessee trust continue to exist and in any case has not been withdrawn for the impugned assessment year 2020-21. Further, there are corresponding amendments/insertion of new provisions in section 12A(1)(ac) by the Taxation and other laws (Relaxation and Amendment of certain Provisions) Act, 2020 w.e.f 01/04/2021 which has again escaped the attention of the ld CIT(A). In view of the same, we agree with the contention of the ld AR that the new registration provisions have no impact as far as registration of the assessee trust for the impugned assessment year 2020-21 and its existing registration u/s 12A continues to hold good. In view of the same, we set-aside the order of the ld CIT(A) and direct the AO to allow the exemption u/s 11 as so claimed by the assessee trust while filing its return of income. Appeal of the Assessee allowed.

Summary

Issues Involved:
The issues involved in the judgment are:
1. Disallowance of exemption claimed under section 11.
2. Applicability of new registration provisions under section 12AB.
3. Denial of exemption under section 11 for the assessment year 2020-21.
4. Validity of registration under section 12A.

Issue 1: Disallowance of Exemption Claimed under Section 11:
The appellant appealed against the disallowance of exemption claimed under section 11 amounting to Rs. 61,77,016. The appellant argued that the disallowance was unjustified as it is a Charitable Trust registered under section 12A and had been consistently allowed the exemption in previous years without dispute. The appellant's return of income for the year in question was processed by CPC Bangalore, which disallowed the exemption claimed under section 11, bringing the surplus amount to tax.

Issue 2: Applicability of New Registration Provisions under Section 12AB:
The appellant contended that the new provisions of Section 12AB, introduced from the assessment year 2022-23, were not applicable to the impugned assessment year 2020-21. The appellant highlighted that the Central Board of Direct Taxes had issued Circulars, including Circular No. 22/2022, which allowed for a delay in filing Form No. 10A under Section 12A(1)(ac)(1) of the Act. The appellant argued that the new registration provisions were not relevant for the assessment year in question.

Issue 3: Denial of Exemption under Section 11 for AY 2020-21:
The CIT(A) denied the benefit of exemption under section 11 to the appellant trust for the assessment year 2020-21. The CIT(A) based the denial on the absence of valid registration under Section 12AB for the appellant for that assessment year. The CIT(A) referred to the amended provisions of section 12AA and the introduction of section 12AB for registration of trusts, stating that without valid registration under section 12AB, exemption under section 11 was not available.

Issue 4: Validity of Registration under Section 12A:
The Tribunal found that the appellant trust had a valid registration under Section 12A, as evidenced by assessment records for previous years. The Tribunal noted that the mere non-furnishing of a copy of the registration originally granted under Section 12A could not be a valid reason for denying exemption under section 11, especially when the registration continued to exist. The Tribunal held that the appellant trust was duly registered under Section 12A for the year in question, and the denial of exemption was not justified.

This judgment highlights the importance of maintaining valid registrations under relevant sections of the Income Tax Act for claiming exemptions and benefits. It clarifies the applicability of new registration provisions and emphasizes the significance of past registration history in determining eligibility for exemptions.