2021 (5) TMI 759 - AT - Income Tax

Exemption u/s 11 - Revenue filed Miscellaneous appication (MA) stating that its Cross objection was not adjudicated with the appeal of the assessee - HELD THAT - Tribunal was of the view that since character of the assessee has been changed, it has been held that it is entitled for the benefit of sections 11 and 12 of the Act, and considering its nature as a charitable institution, the exercise of determining the income has to be carried out afresh. In such circumstances, quantification and impact of section 11(5) and 13(1)(d) has to be examined afresh. The Tribunal has observed that this aspect could be looked into while determining the taxable income of the assessee. In the first round, the income of the assessee was determined by denying exemption under section 11 and 12. This stand of the AO was reversed by the Tribunal, and the matter was relegated to him to examine afresh. We fail to understand how it can be pleaded that CO filed by the Revenue has not been considered on merit. These very issues were available in appeals of the assessee as well of the Revenue. The ultimate dispute was true determination of the income of the assessee. In the first round, the AO was of the view that benefit of sections 11 and 12 cannot be granted. This stand did not meet approval of the Tribunal. Once it is to be held that the assessee is a charitable institution and it is entitled for benefit u/s 11 and 12, then all other aspects of section 11(5) and 13(1)(d) etc are to be considered afresh. Somehow, it appears that the ld.AO failed to comprehend or concur with the higher appellate authorities about the status of the assessee being held as charitable institution, which is entitled for the benefit of section 11 and 12. Misc. Application of the Revenue is dismissed.

Issues:
1. Assessment proceedings denying benefit of Sections 11 and 12, applicability of Section 2(15).
2. Dismissal of Cross Objection by ITAT without adjudicating the grounds taken.
3. Apparent error pointed out by Revenue in Tribunal's order dated 10.11.2017.
4. Tribunal's decision on the status of the assessee as a charitable institution and entitlement to benefits under Sections 11 and 12.

Issue 1: Assessment Proceedings and Applicability of Section 2(15)
The assessment proceedings involved the denial of benefit under Sections 11 and 12 of the Income Tax Act, 1961, and the applicability of Section 2(15). The AO computed the income without granting these benefits, resulting in a taxable income determination. The Tribunal, in its order dated 10.11.2017, decided the appeals for the assessment years 2012-13 and 2013-14. The Tribunal held that the assessee is to be treated as a charitable institution entitled to exemptions under Sections 11 and 12, thereby impacting the determination of taxable income.

Issue 2: Dismissal of Cross Objection
The Cross Objection (CO) filed by the Revenue was dismissed by the ITAT without adjudicating the grounds raised in the CO. The Revenue filed a Misc. Application pointing out this error, seeking a re-adjudication of the issue. However, the Tribunal, in its order dated 9.1.2019, found that the issues raised in the CO were no longer relevant as the status of the assessee had changed to that of a charitable institution. The Tribunal held that all consequential issues should be examined by the AO while passing a fresh assessment order.

Issue 3: Apparent Error in Tribunal's Order
The Revenue pointed out an apparent error in the Tribunal's order dated 10.11.2017, where the CO was not decided along with the appeal of the assessee. The Revenue's Misc. Application highlighted this oversight, requesting a re-adjudication of the issue. However, the Tribunal, upon review, found that the issues raised in the CO had become redundant due to the change in the assessee's status to a charitable institution, which entitled it to benefits under Sections 11 and 12.

Issue 4: Tribunal's Decision on Assessee's Status
The Tribunal's decision on the status of the assessee as a charitable institution and its entitlement to benefits under Sections 11 and 12 was a crucial aspect. The Tribunal held that since the character of the assessee had changed to that of a charitable institution, all other issues, including the applicability of Section 11(5) and 13(1)(d), needed re-examination by the AO while determining the taxable income. The Tribunal dismissed the Misc. Application of the Revenue, emphasizing that all relevant aspects had been considered and adjudicated in its order.

In conclusion, the Tribunal's decision in this case revolved around the status of the assessee as a charitable institution and its entitlement to exemptions under Sections 11 and 12. The Tribunal dismissed the Revenue's Misc. Application, stating that all relevant issues had been addressed and no apparent error existed in its previous order.

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