9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (11) TMI 84 - AT - Income TaxDenial of benefit of exemption u/s 11 12 - excess of income over expenditure - CIT(A) endorsed the action of the AO and denied any relief towards taxability of surplus having regard to absence of registration available u/s 12AA - HELD THAT - As emanating from records, the assessee-trust in the present case was formed on 02.09.2014 and thus was in existence from the date of formation. The assessee trust however, has been granted formal registration u/s 12AA of the Act vide order dated 27.12.2018 w.e.f. AY 2016-17. Thus, for the AY 2015-16, the assessee was admittedly not registered under the provisions of the Act resulting in denial of exemption u/s 11 of the Act. The issue is no longer res integra. The coordinate bench in the case of Prem Prakash Mandal Sewa Trust 2021 (8) TMI 744 - ITAT RAIPUR and Sree Sree Ram Krishna Samity 2015 (11) TMI 119 - ITAT KOLKATA have taken note of the position of law in the light of CBDT Circular and held that where during the pendency of appeal of the assessee, the registration was granted u/s 12A/12AA of the Act, the case of the assessee would be covered under deemed registration and thus assessee would be entitled to claim benefit under s. 11 of the Act on the strength of registration obtained in the subsequent year. In consonance with the view taken by the co-ordinate benches, the AO is not justified in denying the benefit of registration albeit obtained subsequently, to the year under consideration. Applicability of mischief of Section 13 to the loans/advances given to Pradeep Sood and Naveen Sood for purchase of Land - The plea of the assessee are three fold (i) the observations made towards applicability of Section 13 to transactions carried out in other years are wholly unnecessary and outside the scope of powers conferred under Section 251 of the Act (ii) The observations of the CIT(A) with reference to Section 13 are generic without specification of particular sub-clause of Section 13 (3). The recipients of the loans/ advances namely Naveen Sood and Pradeep Sood are spouses of the Principal or Administrator of school held in Trust. The assessee has taken support of the judgment rendered by Hon'ble Supreme Court in Thanthi Trust to submit that the expressions 'Trust' and 'Institutions' referred in Section 13(3)(cc) and elsewhere are differently constituted and are not the same. The assessee also refers to the decision of Inclen Trust International 2021 (7) TMI 1143 - ITAT DELHI to submit that Manager of an Institution is not the manager of a Trust. We find force in such legal plea. In the light of decisions rendered, we hold that the provisions of Section 13(3)(cc) would not extend to manager( or her spouse) of the Trust.The observations so made with reference to Section 13 of the Act are thus expunged from the first appellate order and would not apply. Denial of exemption towards excess of income over expenditure and expunction of observations in the context of s. 13 of the Act are allowed. Enhancement of income by the CIT(A) credited in Amalgamation Fund and Building Fund - Having regard to the exposition of law by way of binding precedents governing the field, we are of the view that CIT(A) has traveled beyond the bandwidth provided in respect of enhancement powers in as much as it has the effect of directing the AO to make assessment on an entirely new footing resulting in assessment based on new source of income. The competence vested by way of enhancement being somewhat restrictive, do not permit the CIT(A) to do so. Notwithstanding, the enhancement of chargeable income towards receipts in building funds and amalgamation funds is not permissible on facts of the case. The assessee has demonstrated on facts that the assessee herein has applied more than 85% of its receipts for charitable objects. Receipts in aggregate including receipts in funds stands at Rs. 4.33 Cr. whereas corresponding application of income stands at Rs. 4.58 Cr. Hence, conditions for claiming exemption u/s 11 stands satisfied. The CIT(A) for the purposes of enhancement, has only looked at the receipt of funds and overlooked the corresponding application thereof and thus fell in error. The exercise of power of enhancement to make enhancement thus requires to be set aside and quashed.
Issues Involved:
1. Denial of exemption under Sections 11 and 12 of the Income Tax Act. 2. Enhancement of income by the CIT(A) under Section 251(1)(a) of the Act. 3. Applicability of Section 13 regarding loans/advances to specified persons. 4. Jurisdiction and powers of the CIT(A) regarding enhancement of income. 5. Observations made by the CIT(A) for unrelated assessment years. Issue-wise Detailed Analysis: 1. Denial of Exemption under Sections 11 and 12: The primary issue was the denial of exemption under Sections 11 and 12 of the Income Tax Act, which led to the taxation of the surplus income of Rs. 10,74,513/- for the Children Welfare Trust and Rs. 65,30,315/- for the Children Welfare Society. The Tribunal noted that the assessee trust was formed on 02.09.2014 and was granted registration under Section 12AA of the Act from AY 2016-17 onwards. The Tribunal relied on judicial precedents and CBDT Circular No. 01/2015, which allows retrospective exemption from the date of formation if the registration is granted in subsequent years, provided the objects remain unchanged. Consequently, the Tribunal reversed the additions made by the AO, allowing the exemption under Section 11 for the AY 2015-16. 2. Enhancement of Income by the CIT(A): The CIT(A) enhanced the income by Rs. 58,84,070/- for the Trust and Rs. 61,68,381/- for the Society by treating amounts received under 'Building Fund' and 'Amalgamation Fund' as revenue receipts. The Tribunal held that the CIT(A) exceeded its jurisdiction by introducing a new source of income not considered by the AO, which is impermissible under the law. The Tribunal emphasized that the CIT(A)'s powers of enhancement are limited to the subject matter of assessment and cannot extend to new sources of income. The Tribunal also noted that the assessee applied more than 85% of its receipts for charitable purposes, satisfying the conditions for exemption under Section 11. Thus, the enhancement was set aside. 3. Applicability of Section 13: The CIT(A) had observed that advances given to Pradeep Sood and Naveen Sood were in contravention of Section 13, treating them as specified persons under Section 13(3). The Tribunal found that these observations were unnecessary and outside the scope of the CIT(A)'s powers, as the transactions did not pertain to the AY 2015-16. The Tribunal clarified that the provisions of Section 13(3)(cc) do not extend to the manager (or her spouse) of the Trust. Consequently, the observations related to Section 13 were expunged. 4. Jurisdiction and Powers of the CIT(A): The Tribunal addressed the jurisdictional overreach by the CIT(A) in exercising enhancement powers. It was noted that the CIT(A)'s powers are not plenary and are confined to the subject matter of assessment. The Tribunal referred to judicial precedents, including the Delhi High Court's decisions in Union Tyres and Sardari Lal & Co., which restrict the CIT(A) from introducing new sources of income. The Tribunal concluded that the CIT(A) had exceeded its jurisdiction, and the enhancement was quashed. 5. Observations for Unrelated Assessment Years: The CIT(A) had advised the AO to consider adjustments for AYs 2013-14 and 2014-15, which were not under appeal. The Tribunal found this advice to be beyond the statutory powers conferred under Section 250(1)(a) of the Act. Such observations were deemed to be an overreach and were expunged from the appellate order. Conclusion: In both appeals, the Tribunal allowed the appeals of the assessee, setting aside the denial of exemptions, quashing the enhancements made by the CIT(A), and expunging any unwarranted observations regarding unrelated assessment years. The Tribunal emphasized adherence to statutory limits and judicial precedents in appellate proceedings.
|
