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2022 (11) TMI 1035 - AT - Income TaxExemption u/s 11 and 12 - denial of deduction as assessee has not furnished the return of income along with audit report in Form No.10B on or before the due date of furnishing of return of income - HELD THAT - CBDT vide circular No.F.173/193/2019-ITA-1, dated 23.04.2019 and subsequent circular No.2/2020 vide F.No.197/55/2018-ITA-I dated 03.01.2020 were not considered by the ld.CIT(A)/NFAC, although, these are instructions/circulars issued by the Board and are binding on the revenue authorities, therefore, we deem it proper to restore the issue to the file of ld.CIT(A)/NFAC with the direction to adjudicate the issue afresh in the light of the circulars/instructions issued by the CBDT clarifying the time allowed for filing of return of income subsequent to the insertion of clause(ba) in sub-section (1) of section 12A - CIT(A)/NFAC shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. Appeal filed by the assessee is allowed for statistical purposes.
Issues:
1. Denial of benefit under section 11 and 12 to the assessee. 2. Taxability of corpus donations and interest income. 3. Compliance with filing requirements for claiming deductions. 4. Interpretation of CBDT instructions regarding filing of returns. 5. Validity of intimation issued by CPC under section 143(1). Issue 1: Denial of benefit under section 11 and 12 to the assessee: The appeal was against the order of the Learned Commissioner of Income Tax (Appeals)/National faceless Appeal Centre (NFAC) for AY 2020-21. The assessee, a society formed for journalists' welfare, filed its return belatedly but within the allowed time, declaring nil total income. The CPC considered corpus donation as income, denying the benefit of section 11 and 12. The ld.CIT(A)/NFAC upheld this decision, citing non-compliance with filing requirements as the reason. The appellant's argument that corpus donations are capital receipts and exempt was rejected based on section 2(24)(iia) and section 11(1)(d) of the Act. Issue 2: Taxability of corpus donations and interest income: The intimation by the CPC brought corpus donations and interest income to tax, leading to a substantial tax liability. The assessee contended that corpus donations should not be taxed as they are capital receipts. However, the ld.CIT(A)/NFAC upheld the taxability based on non-compliance with filing requirements for claiming deductions under section 11 and 12. Issue 3: Compliance with filing requirements for claiming deductions: The decision to deny the benefit of section 11 and 12 was primarily due to the assessee filing the return beyond the prescribed time limits. The ld.CIT(A)/NFAC emphasized the importance of timely filing, as failure to do so results in denial of deductions under section 11. The appellant's argument that voluntary contributions to the corpus fund should be exempt was dismissed based on non-compliance with section 12A(1)(ba) requirements. Issue 4: Interpretation of CBDT instructions regarding filing of returns: The assessee referred to CBDT instructions allowing returns under section 139(4A) for claiming deductions under section 11 and 12. The Tribunal considered these instructions and circulars, directing the ld.CIT(A)/NFAC to reexamine the issue in light of the CBDT clarifications. The Tribunal held that these instructions were binding on revenue authorities and should be considered in adjudicating the matter. Issue 5: Validity of intimation issued by CPC under section 143(1): The intimation issued by the CPC determining the total income and tax liability was challenged by the assessee. The Tribunal, after considering the arguments and CBDT instructions, decided to restore the issue to the ld.CIT(A)/NFAC for a fresh adjudication. The Tribunal allowed the appeal for statistical purposes, emphasizing compliance with CBDT instructions in determining deductions under section 11 and 12. This detailed analysis covers the key issues involved in the legal judgment delivered by the Appellate Tribunal ITAT HYDERABAD.
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