2018 (8) TMI 1551 - HC - Income Tax

Exemption of income under section 11 disallowed - assessee was registered as a Trust on 24th March 2000 and this registration was granted under Section 12A - Held that - The sole reason as to why the Assessing Officer chose not to follow the Tribunal s decision and disallowed claim of the assessee for exemption was that the appeal of the Revenue against the order of the Tribunal restoring the appellant s registration under Section 12A of the Act was pending before this Court. As this Court has already dismissed the appeal the foundation of the order of the Assessment Officer collapses automatically.

Summary

Issues:
1. Disallowance of exemption of income under section 11 of the Income Tax Act, 1961.
2. Cancellation of registration of the assessee under Section 12AA(3) and subsequent restoration by the Tribunal.
3. Disallowance of exemption by the Assessing Officer due to pending appeal by Revenue against Tribunal's decision.
4. Legality of Tribunal's decision challenged by Revenue in the current appeal.
5. Stay petition by Revenue for the operation of the Tribunal's order.

Analysis:
1. The appeal pertains to the disallowance of the assessee trust's claim for exemption of income under section 11 of the Income Tax Act, 1961 for the assessment year 2010-11. The assessee was registered as a Trust under Section 12A of the Act, and the registration was initially cancelled under Section 12AA(3) but restored by the Tribunal's decision.

2. The cancellation of the assessee's registration under Section 12AA(3) was challenged by the assessee before the Tribunal, which invalidated the cancellation order and reinstated the registration. The subsequent assessment order disallowing the exemption was based on the pending appeal by the Revenue against the Tribunal's decision.

3. The Assessing Officer disallowed the claim for exemption citing the pending appeal by the Revenue against the Tribunal's decision restoring the registration of the assessee trust. However, the High Court had already dismissed the Revenue's appeal against the Tribunal's decision, rendering the basis for disallowance by the Assessing Officer invalid.

4. The Tribunal's decision rejecting the Revenue's appeal against the restoration of the assessee's registration was challenged by the Revenue in the current appeal before the High Court. The High Court found no substantial question of law involved as the issue was already addressed in a prior judgment related to the same matter.

5. The Revenue also filed a stay petition seeking to halt the operation of the Tribunal's order, but the High Court dismissed both the appeal and the stay petition, concluding that the issue was already settled in a previous judgment. The High Court upheld the Tribunal's decision and rejected the Revenue's challenge, thereby dismissing the appeal and the stay petition.