2024 (2) TMI 687 - AT - Income Tax

Benefit of exemption u/s 11/12 - Effective date of grant of registration u/s 12A - Initially application was rejected by CIT(E), but the same was approval on the direction of ITAT w.e.f. 1.4.2017 - Assessee claimed the exemption u/s 11/12 for preceding AY 2016-17 and 2017-18 also - HELD THAT - As the Co-ordinate Bench of ITAT Indore M/S. BARKATULLAH VISHWAVIDYALAYA VERSUS DCIT (E) BHOPAL 2022 (6) TMI 1459 - ITAT INDORE following the decision of Shri Bhanushali Mitra Mandal Trust Vs. ITO 2016 (4) TMI 578 - ITAT AHMEDABAD has accepted in principle that going by the purposive interpretation of statues, an assessment proceeding which is pending in appeal before the appellate- authority should be deemed to be 'assessment proceedings pending before the assessing officer' within the meaning of that term as envisaged under the proviso to section 12A(2). Therefore, the condition (ii) is also satisfied. Now what remains is the last condition (iii) according to which the object and activities of the assessee should remain same for preceding assessment year i.e. AY 2016-17 and 2017-18 in these cases. AR submitted that the assessee is a Govt. owned society and its object and activities remained same year after year. We prima facie find merit in the submission of Ld. AR but still the AO should get an opportunity to verify this condition (iii). Moreover, the claim of exemption u/s 11/12 involves a different type of working based on application and accumulation of income which the AO has not verified till now because he did not grant exemption for want of registration u/s 12A. For these reasons, we feel it most appropriate to remand these matters back to the file of AO for carrying out verification of fulfillment of condition (iii) discussed above and if that is held to be satisfied, to verify and allow exemption u/s 11/12. Appeals of assessee are allowed for statistical purpose.

Summary

Issues Involved:

1. Denial of exemption under sections 11, 12, and 13 of the Income-tax Act, 1961.
2. Addition of Rs. 1,20,34,618/- as surplus for AY 2016-17.
3. Addition of liability of Rs. 76,36,365/- as income for AY 2016-17.
4. Addition of Rs. 1,01,77,928/- as income for AY 2017-18.
5. Treatment of surplus of Rs. 1,01,77,928/- as taxable income for AY 2017-18.
6. Condonation of delay in filing the appeal.

Summary:

Condonation of Delay:
The appeals were delayed by 25 days due to the sudden illness of the CA responsible for filing. The Tribunal condoned the delay, citing a reasonable cause and absence of any mala fide intention, referencing the Supreme Court decision in Collector, Land Acquisition Vs Mst. Katiji.

Denial of Exemption under Sections 11, 12, and 13:
The assessee, a society formed by the State Government of Madhya Pradesh, applied for registration under section 12A, which was initially rejected. The assessee argued that pending registration, it should be allowed exemption under sections 11 and 12. The Tribunal noted that the assessee was eventually granted registration under section 12A w.e.f. 01.04.2017, and thus, the primary issue was whether the assessee could claim exemption for AY 2016-17 and 2017-18 based on the first proviso to section 12A(2).

Addition of Rs. 1,20,34,618/- as Surplus for AY 2016-17:
The Tribunal observed that the assessee's registration was pending and subsequently granted, which should allow for the exemption under sections 11 and 12. The matter was remanded to the Assessing Officer (AO) to verify the conditions and allow the exemption if the conditions were met.

Addition of Liability of Rs. 76,36,365/- as Income for AY 2016-17:
The Tribunal directed the AO to re-examine the liability addition, ensuring that the conditions under sections 11 and 12 were satisfied post-registration.

Addition of Rs. 1,01,77,928/- as Income for AY 2017-18:
The Tribunal held that the assessee should be eligible for exemption under sections 11 and 12, considering the registration was granted w.e.f. 01.04.2017. The AO was instructed to verify and allow the exemption if applicable.

Treatment of Surplus of Rs. 1,01,77,928/- as Taxable Income for AY 2017-18:
The Tribunal remanded the issue to the AO to verify the conditions of section 12A(2) and allow the exemption if the conditions were met, ensuring the objects and activities of the trust remained the same for the preceding assessment years.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, remanding the matters back to the AO for verification and appropriate action in accordance with the law. The AO was instructed to provide necessary opportunities to the assessee and not be influenced by previous orders.