2023 (2) TMI 335 - AT - Income Tax

Exemption u/s 11 - registration cancelled by the CIT u/s 12AA - assessee is established under the Society Registration Act 1860 and it was granted registration u/s 12A(a) - CIT had withdrawn the registration u/s 12AA w.e.f. assessment year 2004-05 - HELD THAT - The registration was restored by the order of the ITAT Amritsar Bench. After the order of the ITAT the assessee is registered u/s 12AA and eligible to claim deduction u/s 11 r.w.s. 12A of the Act. The assessee was eligible for the benefit of section 11 of the Act. In no reason the benefit can be denied by the department. CIT(A) in the order has observed that the revenue appeal is pending before the Hon ble Punjab Haryana High Court against the order of the ITAT Amritsar. But till the revenue has not able to submit any outcomeof the appeal filed before the Hon ble High Court. We fully relied on the order of our Coordinate bench 2016 (3) TMI 1447 - ITAT AMRITSAR . The assessee is eligible to get benefit of Section 11 - CIT-Dr was unable to bring any contrary fact against the submission of the assessee. In our considered view the order of the ld. CIT(A) is quashed. The ground of the appeal of assessee is allowed. Depreciation disallowance and hoc disallowance of entertainment expenses - HELD THAT - Going by the nature of expenses such as claim of depreciation entertainment expenses it is prima facie not very clear whether these expenses can be claimed as revenues expenses and allowable under sections 30 to 37 of the Act in relation to Trust registered U/s 12AA of the Act. Since there is absence of any findings of the lower authorities we deem it appropriate to set-aside the same to the file of the ld. CIT(A) who shall examine the aforesaid contentions so raised besides examining the matter from the perspective of allowability in case of Trust and genuineness of expenses. Further the assessee should get reasonable opportunity of hearing for filing the evidence in relation to its claim. In the result appeal allowed for statistical purposes.

Summary

Issues:
1. Disallowance of exemption u/s 11 in connection with withdrawal of registration u/s 12A.
2. Disallowance of expenses in ITA No. 581/Asr/2015 for A.Y. 2008-09.

Issue 1: Disallowance of exemption u/s 11 in connection with withdrawal of registration u/s 12A:

The batch of appeals by the assessee challenged the order of the ld. Commissioner of Income Tax (Appeals) for A.Ys. 2007-08 to 2010-11, related to the disallowance of exemption u/s 11 due to withdrawal of registration u/s 12A. The common issue across cases was the rejection of exemption u/s 11. The assessee, established under the Society Registration Act, had its registration u/s 12A withdrawn by the ld. CIT, leading to disallowance of the claim u/s 11. However, the ITAT had previously restored the registration u/s 12AA, making the assessee eligible for exemption u/s 11. The legal grounds were covered in favor of the assessee, allowing the appeal and quashing the order of the ld. CIT(A). The restoration of registration rendered the assessee eligible for the benefit of section 11, and the department could not deny this benefit.

Issue 2: Disallowance of expenses in ITA No. 581/Asr/2015 for A.Y. 2008-09:

In this specific case, the disallowed expenses included car repair and maintenance expenses, depreciation, and entertainment expenses. The ld. AO added back these amounts without specific findings, leading to a general observation-based disallowance. The Tribunal found a lack of proper examination by lower authorities regarding the allowability of these expenses under sections 30 to 37 of the Act for a Trust registered u/s 12AA. As a result, the matter was remanded to the ld. CIT(A) for a detailed examination of the genuineness and allowability of the expenses. The assessee was directed to be given a reasonable opportunity for presenting evidence related to the claim. Consequently, the appeal for A.Y. 2008-09 was allowed for statistical purposes.

The Tribunal's decision highlighted the importance of registration under relevant sections for claiming exemptions and the necessity for proper examination of expenses before disallowance. The judgments emphasized adherence to legal procedures and the need for thorough assessments in tax matters to ensure fair treatment for taxpayers.