2018 (6) TMI 1169 - AT - Income Tax

Grant of approval u/s 10(23C)(vi) - claim granted from assessment year 2017-18 onwards only while it had been sought from assessment year 2016-17 onwards - Held that - The only reason for shifting thereafter the applicability of the approval from assessment year 2016-17 to A.Y 2017-18 appears to be the fact that the assessee had in the meanwhile filed its return of income for assessment year 2016-17 claiming exemption of its income u/s 10(23C)(vi) of the Act though it had still not been granted approval under the said section. It is indeed we find a very strange reasoning on the part of the Ld.CIT(E). How this act on the part of the applicant assessee justifies shifting of grant of approval from A.Y. 2016-17 to A.Y. 2017-18 when otherwise the applicant assessee has been found eligible for grant of approval and has also filed application for the same within time for approval from A.Y. 2016-17 we fail to understand. In the absence of any justifiable reason for shifting the grant of approval to A.Y.2017-18 when otherwise the applicant assessee was eligible for approval from A.Y. 2016-17 we direct the Ld.CIT(E) to grant approval to the applicant assessee from A.Y. 2016-17 onwards. - Decided in favour of assessee.

Summary

Issues:
Grant of approval u/s 10(23C)(vi) of the Income Tax Act, 1961.

Analysis:
The appellant filed an appeal against the order of the Ld. Commissioner of Income Tax (Exemptions), Chandigarh regarding the grant of approval u/s 10(23C)(vi) of the Income Tax Act, 1961. The grievance of the appellant was that approval was granted only from assessment year 2017-18 onwards, although it had been sought from assessment year 2016-17 onwards. The Ld. CIT(E) had initially granted approval w.e.f. assessment year 2016-17, but later shifted it to assessment year 2017-18. The reason given for this shift was that the appellant had treated its income for assessment year 2016-17 as exempt without having the approval. The appellant argued that the delay in granting approval led to claiming exemption in the return for 2016-17. The Ld. CIT(E) found the appellant eligible for approval but shifted the grant to 2017-18 due to the early claim of exemption. The Tribunal held that the delay in granting approval was the reason for the early claim and directed the Ld. CIT(E) to grant approval from assessment year 2016-17 onwards. The appeal was allowed.

This case highlights the importance of timely approval under section 10(23C)(vi) of the Income Tax Act and the consequences of delays in the approval process. The Tribunal emphasized that the appellant's early claim of exemption was a result of the delay in approval and did not reflect negatively on the genuineness of their activities. The decision underscores the need for authorities to consider the circumstances leading to such actions by taxpayers and to ensure timely processing of approval applications to avoid unnecessary complications and disputes.