2023 (8) TMI 327 - AT - Income Tax

Exemption u/s. 11 - assessment of trust - A.O was of the view that as the gross receipts of the assessee society during the year under consideration were surplus, thus ineligible for deduction u/s. 10(23C)(iiiad) - as per CIT(A) A.O was of the view that as the assessee society was not registered either u/s. 12A or u/s. 10(23C)(vi) therefore, it was not eligible for claiming exemption of the surplus amount - HELD THAT - Now when the CBDT Circular No. 01/2015 (supra) was brought to the notice of the CIT(Exemption) who is vested with powers which are co-terminus with that of the A.O, the latter, however, instead of acting as per the mandate of law had declined the assessee s claim for exemption u/s. 11 of the Act for the reason that there was no evidence to prove that any assessment for an earlier assessment year was pending before the A.O on the date of grant of registration i.e. on 20.04.2017. As in the backdrop of the CBDT Circular No. 01/2015, dated 21.01.2015 the assessee would duly be entitled for the benefit of Sections 11/12 of the Act for the year under consideration i.e. A.Y. 2015-16. As the A.O had in the course of the assessment proceedings summarily rejected the assessee s claim for exemption u/s. 11/12 of the Act, i.e., without looking into the other aspects, therefore, the matter in all fairness requires to be restored to his file for framing of a fresh assessment in light of my aforesaid observations. What was required to be looked into by AO was as to whether or not any assessment for the year under consideration i.e. A.Y.2015-16 was pending on the date of which registration was granted, i.e., on 20.04.2017, which material aspect we are afraid had absolutely been lost sight of by him while disposing off the appeal. The observations recorded hereinabove are confined to the assessee s entitlement for the relief contemplated in CBDT Circular No. 01/2015 (supra) and the same would not come in the way of the A.O as regards making of further verifications as regards the assessee s entitlement for exemption u/s. 11/12 of the Act for which, he shall remain at a liberty to carry out necessary verifications. Accordingly, the matter is restored to the file of the A.O with a direction to frame a fresh assessment. Appeal of assessee allowed for statistical purposes.

Summary

Issues Involved:
1. Eligibility for deduction under Section 11 of the Income-tax Act, 1961.
2. Applicability of registration under Section 12AA for prior assessment years.
3. Validity of rejection of exemption under Section 10(23C)(iiiad).

Summary:

Issue 1: Eligibility for Deduction under Section 11
The assessee, an educational society, claimed a deduction under Section 11 of the Income-tax Act, 1961, which was denied by the Assessing Officer (A.O) on the grounds that the society was not registered under Section 12AA for the assessment year 2015-16. The A.O added a surplus amount of Rs. 11,47,592/- to the returned income. The CIT(A) upheld this view, emphasizing that the society was not registered under Section 12A or Section 10(23C)(vi) for the relevant year.

Issue 2: Applicability of Registration under Section 12AA for Prior Assessment Years
The assessee argued that the registration under Section 12AA granted on 20.04.2017 should apply retrospectively to the assessment year 2015-16, as the assessment was pending at the time of registration. The assessee relied on CBDT Circular No. 01/2015, which allows retrospective application of Sections 11 and 12 benefits if the assessment is pending on the date of registration. The Tribunal found that the assessment for A.Y. 2015-16 was indeed pending on 20.04.2017 and thus, the assessee was entitled to the benefits under Sections 11/12 as per the CBDT Circular.

Issue 3: Validity of Rejection of Exemption under Section 10(23C)(iiiad)
The A.O rejected the exemption claim under Section 10(23C)(iiiad) because the gross receipts exceeded the threshold limit. The Tribunal did not specifically address this issue in detail, focusing instead on the applicability of Section 11/12 benefits.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, directing the A.O to reassess the eligibility for exemption under Sections 11/12 in light of the CBDT Circular No. 01/2015. The Tribunal emphasized that the A.O must verify the entitlement for exemption under Sections 11/12, considering the registration under Section 12AA and the pending status of the assessment as of 20.04.2017. The same principles were applied to the assessment year 2016-17.

Order:
Both appeals (ITA No. 262/RPR/2022 for A.Y. 2015-16 and ITA No. 263/RPR/2022 for A.Y. 2016-17) were allowed for statistical purposes, with directions for fresh assessment.