2015 (4) TMI 512 - HC - Income Tax

Entitlement to benefit under section 10(20) - Commissioner rejected claim for exemption under section 11 mainly for the reason that this claim was not made in the original return and that Form 10 and audit report in support of this claim are not filed before the Assessing Officer - AO directed by ITAT to take into account the registration granted under section 12AA with effect from 1st April 2003 and the audit reports as well as the other documents filed in support thereof - Held that - Case of the assessee is peculiar. It was not the assessee s fault inasmuch as it got into a legal tangle. Upto assessment year 2002-03 it was enjoying a benefit under section 10(20) of the IT Act by a local authority. Later on it decided to avail of the benefit of section 11 and applied for registration. The chequered history of the case pertaining to registration has been noted by us. It is that which enabled the Tribunal to conclude that the rigors of the section have been somewhat diluted by the Revenue s understanding and the issuance of a circular. Thus the circular contemplates condonation of delay in filing the above documents and which would enable the assessee to avail of the benefit. Filing of Form No.10 is not dispensed with. The Commissioner is only vested with powers to accept it after the specified period. This circular No.273 dated 3rd June 1980 which has been relied upon to hold that the assessee s claim for benefit of exemption under section 11 of the Act deserved acceptance. It is in these circumstances and when the objects of the trust were found to be genuine that the Assessing Officer was directed to carry out a de novo assessment in terms of the Tribunal s observations. We do not find such conclusion to be perverse or vitiated by any error of law apparent on the face of the record. No larger question or wider controversy needs to be decided. - Appeal dismissed.

Summary

Issues:
1. Interpretation of provisions under section 10(20) and section 11 of the Income Tax Act, 1961.
2. Grant of registration under section 12A of the Income Tax Act.
3. Consideration of exemption under section 11 for assessment year 2005-06.
4. Compliance with Revenue circular regarding filing of Form No.10 and audit reports.

Analysis:

1. The main issue in these appeals was the interpretation of provisions under section 10(20) and section 11 of the Income Tax Act, 1961. The Tribunal had to determine whether the assessee, initially a local authority under section 10(20), was entitled to exemption under section 11 after applying for registration under section 12A. The Tribunal found that the assessee's transition from section 10(20) to section 11 was legitimate, considering the circumstances and the history of the case.

2. The grant of registration under section 12A was crucial for the assessee to claim exemption under section 11. The Commissioner of Income Tax had initially granted registration prospectively from 1st April, 2006, but the Tribunal directed the Commissioner to condone the delay and grant registration retrospectively from 1st April, 2003. This retrospective registration was pivotal for the assessee to benefit from section 11 exemptions.

3. Another key issue was the consideration of exemption under section 11 for the assessment year 2005-06. The assessee had filed Form No.10 and audit reports to claim this exemption before the Commissioner of Income Tax (Appeals). The Commissioner rejected the claim citing procedural reasons, but the Tribunal held that late filing of these documents should not deprive the assessee of the benefits under section 11. The Tribunal directed a de novo assessment, taking into account the registration granted under section 12AA and the supporting documents.

4. The final issue revolved around compliance with the Revenue circular regarding the filing of Form No.10 and audit reports. The Tribunal found that the circular allowed for the condonation of delay in filing these documents, enabling the assessee to avail of the exemption under section 11. The Tribunal's decision was based on the genuineness of the trust's objectives and the circumstances leading to the delayed filing of documents. The High Court upheld the Tribunal's findings, dismissing the appeals as devoid of merit and emphasizing that no larger legal questions needed to be addressed.

In conclusion, the judgment delves into the intricate details of the Income Tax Act provisions, the registration process, and the procedural requirements for claiming exemptions under section 11. The Tribunal's decision, supported by the High Court, highlights the importance of considering the specific circumstances of each case and ensuring that technicalities do not override the substantive benefits intended by the law.