9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2012 (8) TMI 428 - AT - Income TaxCharitable institution - withdrawal of benefit u/s 11 on ground that main donor is the Government of Andhra Pradesh and application included expenses worth of ₹ 488,49,585/- towards supply of equipment to Government Sector - Revenue contended application of income or property of the trust for the benefit of any person mentioned in Section 13(3) - Held that - Definition of person u/s 2(31) includes legal authority but not Government itself. See CIT v. Dredging Corporation of India (1988 (3) TMI 29 - ANDHRA PRADESH HIGH COURT). Contention of the Revenue that by giving the machines to the Government Hospitals sec. 13(1)(c) has been violated is not correct not only because State Government is not a person, but also government cannot be said to have benefited by the machines out of the grant given by the government and given to the government Hospitals. The benefit accrues to the General Public. Non-registration under A.P. Charitable & Hindu Religious Institutions and Endowments Act, 1987 - Held that - Once an institution is approved and granted registration u/s 12A, the department cannot refuse the registration except for violation of sec 11, 12 or 13. Therefore, eligibility for exemption u/s 11 has to be independently considered based on the provisions of the Income tax Act and not anything else. Hence, exemption u/s 11 cannot be denied merely because it is not registered under said Act Validity of reopening of assessment on suspicion based on report of C& AG (Civil) for the Govt. of AP - Held that - AO cannot reopen the assessment merely on the basis of roving enquiry and since there is no addition with respect to the purchase of equipments the initial reason given for reopening cannot survive and the AO cannot go beyond the reasons given by him for reopening - Decided in favor of assessee
Issues Involved:
1. Denial of exemption under Section 11 of the Income Tax Act. 2. Definition and interpretation of "person" under Section 2(31) of the Income Tax Act. 3. Non-registration under the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987. 4. Validity of reopening the assessment under Section 147 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Denial of exemption under Section 11 of the Income Tax Act: The Assessing Officer (AO) denied the exemption under Section 11 to the assessee, a charitable institution, on the grounds that the main donor was the Government of Andhra Pradesh and the application of funds included expenses towards supply of equipment to government sectors. The AO felt that the income or property of the trust was indirectly applied for the benefit of the government, which he considered a violation of Section 13(3). However, the CIT(A) opined that the government's involvement did not constitute a violation as the government is not a taxable entity and is not included in the definition of "person" under Section 2(31) of the Income Tax Act. The CIT(A) concluded that the government did not receive any personal benefit from the equipment supplied to government hospitals, and thus, there was no contravention of Section 13(1)(c)(ii). 2. Definition and interpretation of "person" under Section 2(31) of the Income Tax Act: The CIT(A) and the Tribunal both held that the government does not fall under the definition of "person" as per Section 2(31) of the Income Tax Act. The Tribunal referred to the Jurisdictional High Court's decision in CIT v. Dredging Corporation of India, which stated that the government is not considered a "person" for tax purposes. This interpretation was crucial in determining that the government's involvement did not violate Section 13(1)(c) as the government cannot be considered an "interested person" under Section 13(3)(b). 3. Non-registration under the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987: The AO argued that the assessee was not eligible for exemption under Section 11 due to its non-registration under the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987. The CIT(A) and the Tribunal rejected this argument, stating that the Income Tax Act does not mandate registration under any local statute for eligibility of exemption under Section 11. The Tribunal cited the decision of the Jurisdictional ITAT in Kamalakar Memorial Charitable Trust v. DIT (Exemptions), which held that non-registration under a local statute does not render a trust non-charitable for the purposes of the Income Tax Act. 4. Validity of reopening the assessment under Section 147 of the Income Tax Act: The assessment was reopened based on a report from the Comptroller and Auditor General (Civil) for the Government of Andhra Pradesh, which indicated that the assessee utilized Rs. 13.69 crores on the acquisition of overseas equipment. However, the return of income showed total assets of only Rs. 4,14,382/-. The CIT(A) upheld the reopening, but the Tribunal found that the reopening was based on suspicion and general information rather than concrete evidence of income escapement. The Tribunal concluded that the AO could not go beyond the reasons given for reopening and since no addition was made regarding the purchase of equipment, the initial reason for reopening did not survive. Thus, the Tribunal allowed the cross appeal of the assessee on the issue of reopening. Conclusion: The Tribunal dismissed the revenue's appeal and allowed the cross appeal of the assessee. The Tribunal upheld the CIT(A)'s decision that the government is not a "person" under Section 2(31), and therefore, the exemption under Section 11 could not be denied on the grounds of benefit to the government. The Tribunal also held that non-registration under the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987, does not affect the eligibility for exemption under the Income Tax Act. Finally, the Tribunal found the reopening of the assessment to be invalid as it was based on suspicion rather than concrete evidence.
|
