2023 (9) TMI 1510 - AT - Income Tax

Exemption u/s 11 - Disallowance of expenses incurred for trust objects and administrative expenses - Assessee was registered u/s 12A - HELD THAT - After the order of the ITAT in 2018 (10) TMI 1896 - ITAT MUMBAI the assessee has been granted registration u/s 12A of the Act. As soon as the assessee is registered u/s 12A of the Act, there is no reason that why assessee should not be allowed benefit of Section 11 and 12 of the Act. This benefit has been conferred by the learned CIT (A). No infirmity in the order of the CIT (A) and therefore, we hold that assessee is eligible for benefit u/s 11 and 12 of the Act as it is a registered trust u/s 12A of the Act. Therefore, we dismiss the appeal filed by AO. Coming to the appeal of the assessee, we find that when the assessee is entitled to the benefit of section 11 and 12 of the Act, application of such income by incurring the expenses for the object of the trust are necessary to be allowed to the assessee. CIT (A) is not correct in holding that same does not arise from the assessment order. The assessment order has completely denied the benefit of Section 11 and 12 of the Act. Therefore, the application of the income of the trust is also part of Section 11 and 12 of the Act. Therefore, to that extent, the order of the learned CIT (A) is reversed and learned Assessing Officer is directed to grant the deduction of application of income being expenses incurred on the object of the trust. In the result, the appeal of the assessee is allowed. The appeal of the assessee is allowed directing the learned Assessing Officer to grant the deduction of expenditure incurred for the object of the Trust as its application u/s 11 and 12 of the Act.

Summary

Issues:
- Disallowance of expenses incurred for trust objects and administrative expenses
- Eligibility for exemption under Section 11 and 12 of the Income-tax Act
- Denial of benefit of Section 11 and 12 of the Act by the Assessing Officer
- Application of income for the object of the trust

Issue 1: Disallowance of Expenses
The Assessee raised grounds of appeal regarding the disallowance of expenses incurred for trust objects and administrative expenses. The Assessing Officer had stated that the expenditure was not allowable, but the CIT(A) did not decide on this matter, leading to the appeal. The Assessee argued that the trust being recognized under Section 12A of the Act should allow the expenditure. The Assessing Officer questioned the charitable purpose of the trust's objects under Section 2(15) of the Act. The Tribunal held that the Assessee, being registered under Section 12A, should be allowed the benefit of Section 11 and 12, dismissing the Assessing Officer's appeal.

Issue 2: Eligibility for Exemption
The Assessee, a trust governed by a bank's retired employees' medical assistance scheme, was initially denied registration under Section 12A of the Act. However, after appealing, the registration was granted. The Assessing Officer reopened the case, denying the Assessee the benefit of Section 11 and 12. The CIT(A) acknowledged the Assessee's eligibility post-registration under Section 12A, granting exemption for certain income but not allowing certain expenses. The Tribunal upheld the CIT(A)'s decision, allowing the Assessee's appeal and dismissing the Assessing Officer's appeal.

Issue 3: Application of Income for Trust Object
In both A.Y. 2010-11 and 2013-14, the Assessee was allowed benefits under Section 11 and 12 of the Act post-registration under Section 12AA. However, the Assessing Officer contested the deduction of expenditure incurred for the trust's object. The Tribunal held that the Assessee was entitled to the benefits and directed the Assessing Officer to grant the deduction of expenses incurred for the trust's object. The Tribunal dismissed the Assessing Officer's appeal and allowed the Assessee's appeal in both years.

The Tribunal concluded that all four appeals were disposed of based on the Assessee's eligibility for exemption under Section 11 and 12 of the Act and the allowance of expenses incurred for the trust's object.