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2014 (10) TMI 779 - AT - Income TaxExemption to be allowed u/s 10(23C)(vi) or section 11 assessee claimed exemption u/s 11 Held that - Deduction was claimed u/s 11 of the Act in the return of income and the assessee was not having exemption u/s 10(23C)(vi) of the Act at the time of filing of the return of income - The assessee had made an application for the approval which was received by the assessee for the AY 2005-06 wrongly which was rectified by the CCIT vide her order dated 12.07.2010 for the AY 2005-06 and onwards for all the times to come - the assessee was having approval u/s 10(23C)(vi) from the CCIT, though the same was rectified u/s 154 of the Act on 12.07.2010 - the assessee had option to make claim u/s 10(23C)(vi) or Section 11(1) of the Act as decided in Bharati Vidyapeeth Medical Foundation vs. ACIT 2014 (7) TMI 94 - BOMBAY HIGH COURT the assessee cannot be forced to go for deduction u/s 11 of the Act - Though the claim was made before the AO during assessment proceedings, as and when the assessee got the rectified order from CCIT - It was only under the exceptional circumstances that the assessee could not claim exemption u/s 10(23C(vi) of the Act, as mentioned hereinabove. Such rectification is bound to be there in view of Circular No.725 dated 16.10.1995 issued by the CBDT as per the Circular No.725 dated 16.10.1995 of CBDT, the AO was under obligation to allow exemption u/s 10(23C)(vi) of the Act and there is nothing on record that the assessee has contravened any of the conditions as required u/s 10(23C)(vi) of the Act - assessee s income is exempt u/s 10(23C)(vi) of the Act and there was no infirmity in the order of the CIT(A) Decided against revenue.
Issues Involved:
1. Exemption under Section 10(23C)(vi) vs. Section 11 of the Income Tax Act, 1961. 2. Treatment of purchase/addition to fixed assets as application towards charitable purposes. 3. Non-filing of notice under Explanation to Section 11(1) within prescribed time limits. 4. Consistency in granting exemptions in subsequent assessment years. 5. Applicability of Supreme Court decision in Goetze (India) Ltd. vs. CIT. Detailed Analysis: Exemption under Section 10(23C)(vi) vs. Section 11 of the Income Tax Act, 1961: The Revenue challenged the CIT(A)'s decision to allow exemption under Section 10(23C)(vi) when the assessee claimed exemption under Section 11 in its return. The Tribunal noted that the assessee was granted approval under Section 10(23C)(vi) by the Chief CIT, which was initially for the assessment year 2005-06 but later rectified to apply for subsequent years. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had the option to claim exemption under either Section 10(23C)(vi) or Section 11, as supported by the ITAT Pune Bench in Bharati Vidyapeeth Medical Foundation vs. ACIT. The Tribunal emphasized the CBDT Circular No. 725, which allows rectification under Section 154 when notifications are issued post-assessment. Treatment of Purchase/Addition to Fixed Assets as Application Towards Charitable Purposes: The AO disallowed the application of Rs. 53,84,680 towards the purchase of fixed assets, citing the Uttarakhand High Court's decision in Queens Educational Society. However, the CIT(A) and subsequently the Tribunal relied on the Punjab & Haryana High Court's decision in Pinegrove International Charitable Trust, which held that application of income in capital assets does not disqualify the exemption. The Tribunal found no infirmity in the CIT(A)'s order, which allowed the exemption. Non-Filing of Notice under Explanation to Section 11(1) within Prescribed Time Limits: The AO also disallowed an accumulation of Rs. 1,41,08,968, as the assessee did not file the notice under Explanation to Section 11(1) within the prescribed time. The CIT(A) and the Tribunal found that since the assessee had approval under Section 10(23C)(vi), the provisions of Section 11(1) were not applicable. The Tribunal upheld the CIT(A)'s decision to delete the addition. Consistency in Granting Exemptions in Subsequent Assessment Years: The Tribunal emphasized the principle of consistency, noting that the assessee had been granted exemptions under Section 10(23C)(vi) in preceding and subsequent years. The Tribunal found that the CIT(A) correctly applied this principle in allowing the exemption for the assessment years in question. Applicability of Supreme Court Decision in Goetze (India) Ltd. vs. CIT: The AO rejected the revised claim for exemption under Section 10(23C)(vi) based on the Supreme Court's decision in Goetze (India) Ltd., which restricts the AO's power to entertain claims not made in the return except through a revised return. The Tribunal clarified that this restriction does not apply to the ITAT's powers under Section 254. The Tribunal found that the CIT(A) correctly allowed the exemption under Section 10(23C)(vi), considering the rectification order and the CBDT Circular. Conclusion: The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeal, affirming the CIT(A)'s decisions on all issues. The Tribunal upheld the exemption under Section 10(23C)(vi), allowed the application of income towards fixed assets, and emphasized the principle of consistency in granting exemptions. The Tribunal also clarified the applicability of the Supreme Court's decision in Goetze (India) Ltd., highlighting the ITAT's broader powers.
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