2018 (8) TMI 1050 - AT - Income Tax

Denial of exemption u/s 11 - CIT(A) observed that assessee was not having registration either under section 12AA of the Act or approval u/s.10(23C)(vi) of the Act and, therefore, the entire receipts has to be taken as income of the assessee - taxing the entire receipts of the assessee trust in place of net receipts. Held that - it is not in dispute that the objects and activities of the trust or the year under consideration are same as were on 30.3.2015 when registration u/s.12AA was granted to the assessee by the CIT (Exemption) - Further, as held by Ahmedabad Bench in the case of Shri Bhanushali Mitra Mandal (2016 (4) TMI 578 - ITAT AHMEDABAD) that the appeal is the continuation of the assessment proceedings and going by the principle of purposive interpretation of statues, an assessment proceeding which is pending in appeal before the appellate authority should be deemed to be assessment proceedings pending before the assessing officer within the meaning of that term as envisaged under the first proviso to Sub-section (2) of Section 12A. It follows therefrom that the assessee which obtained registration u/s. 12AA of the Act during the pendency of appeal was entitled for exemption u/s 11 of the Act. - Decided in favor of assessee.

Summary

Issues Involved:
Taxation of entire receipts of assessee trust instead of net receipts after deducting expenses.

Analysis:
The appeal was filed against the order of the CIT(A) for the assessment year 2014-15, focusing on the taxation of the entire receipts of the assessee trust rather than the net receipts after deducting expenses. The CIT(A) upheld the tax assessment, stating that since the assessee did not have registration under section 12AA or approval under section 10(23C), the entire receipt was considered as income. The assessee argued that even without these registrations, only the net income should be taxed, citing precedents from the Tribunal. The Tribunal examined the relevant provisions, including the first proviso to sub-section (2) of Section 12, and referred to a case from the Ahmedabad Bench regarding retrospective application of registration benefits. It was established that the assessee obtained registration during the pendency of appeal, entitling them to exemption under sections 11 and 12 of the Act. Therefore, the Tribunal set aside the lower authorities' orders and remanded the matter to the Assessing Officer to compute the income after allowing the exemption. Consequently, the grounds of appeal by the assessee were allowed.

The Tribunal's decision was based on the interpretation of statutory provisions and the retrospective application of registration benefits. It was emphasized that registration granted during the appeal process should entitle the assessee to exemption under relevant sections of the Act. The Tribunal highlighted the principle of purposive interpretation of statutes to support its decision, ensuring that genuine charitable trusts receive the intended benefits. The judgment underscored the importance of considering the timing of registration and the continuity of assessment proceedings in determining tax liabilities for trusts. By remanding the matter for fresh computation of income after allowing the exemption, the Tribunal aimed to uphold the legislative intent behind the registration provisions and provide relief to eligible charitable organizations.

In conclusion, the Tribunal's ruling favored the assessee by allowing the appeal and dismissing the stay petition as infructuous. The decision highlighted the significance of registration under relevant sections for tax assessment purposes and underscored the need for a comprehensive analysis of the timing and impact of registration on the taxation of trust incomes.