2022 (11) TMI 116 - AT - Income Tax

Exemption u/s 11 - as per AO assessee was not engaged in charitable activity and had earned above normal profits - CIT-A allowed the benefit - HELD THAT - It is noted that the Ld. CIT(A) has taken into consideration the fact that the assessee is duly registered u/s 12AA and for the year under consideration, the assessee s total receipt are to the tune of Rs. 822.24 lacs and total expenditure to the tune of Rs. 923.85 lacs which shows that the assessee actually had no surplus rather there is deficit during the year under consideration. Capital expenditure has been incurred to acquire assets namely computer, electrical equipments, furniture and fixtures, laboratory equipments, building construction and related objects of the assessee society. Further the Ld. CIT(A) has taken into consideration the fact that the claim of the assessee has been allowed by the AO for A.Y. 2009-10, 2013-14 and 2014-15 wherein the claim of the assessee has been accepted and exemption u/s 11 has been allowed to the assessee. As regards the double deduction on account of depreciation, the AO has been asked to verify the same as per the law applicable for the year under consideration - No infirmity in the finings so recorded by the Ld. CIT(A) who has considered the entirety of facts and circumstances of the case and has allowed the exemption so claimed by the assessee u/s 11 of the Act. In the result, the ground taken by the Revenue is hereby dismissed.

Issues:
1. Extension of time for filing appeal due to COVID-19 outbreak.
2. Denial of exemption under section 11 of the Income-tax Act, 1961.
3. Admissibility of appeal after delay.
4. Allowance of exemption under section 11 for the assessee society.

Extension of Time for Filing Appeal Due to COVID-19 Outbreak:
The appeal filed by the Revenue was initially barred by 56 days. However, the Central Government issued notifications extending time limits for filing appeals due to the COVID-19 pandemic. The appeal, filed on 30.06.2020, was within the extended time limit, and the delay in filing the appeal was condoned. The appeal was admitted for adjudication based on the extended time limits set by the Central Government.

Denial of Exemption under Section 11 of the Income-tax Act, 1961:
The Assessing Officer (AO) denied the benefit of exemption under section 11 to the assessee society, stating that the society was not engaged in charitable activities and had earned above-normal profits. The AO disallowed depreciation claimed and assessed the income accordingly. The AO held that the society's surplus was not applied for charitable purposes but for other expenses and investments that did not align with charitable objectives. The AO concluded that the society was not engaged in charitable activities, thus denying the exemption under section 11.

Admissibility of Appeal After Delay:
The delay in filing the appeal was initially noted, but it was condoned due to the extension of time limits granted by the Central Government in response to the COVID-19 pandemic. The appeal was admitted for adjudication considering the circumstances and the extended time limit provided by the notifications issued during the pandemic.

Allowance of Exemption under Section 11 for the Assessee Society:
The assessee appealed the AO's decision before the Ld. CIT(A), who considered various factors, including the registration of the assessee under section 12AA, past assessments, and expenditure details. The Ld. CIT(A) allowed the appeal, noting that the assessee's total receipts and expenditures showed a deficit rather than a surplus. The Ld. CIT(A) also considered the capital expenditures made by the society for acquiring assets related to its objectives. The Ld. CIT(A) directed the AO to verify the double deduction on depreciation. The Ld. CIT(A) allowed the exemption claimed by the assessee under section 11, considering the overall facts and circumstances of the case. The Tribunal upheld the Ld. CIT(A)'s decision, dismissing the Revenue's appeal and affirming the allowance of exemption under section 11 for the assessee society.

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