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2024 (12) TMI 1260 - AT - Income TaxDenial of exemption u/s 11 - Assessee had not filed Form No. 10 and had not filed the income tax return within the due date prescribed u/s 139(1) - HELD THAT - In the instant case, both the return of income as well as Form 10B audit report were filed together on 25-1-2019 which is well within the due date prescribed u/s139(4) of the Act. This is evident. Hence Assessee would be entitled for deduction u/s 11 of the Act. With regard to the grants received by the assessee, it is pertinent to note that those are specific grants received by the Assessee and cannot be used for any other purpose other than the purpose for which grant was given. The disbursement letters issued by the competent authorities proving the fact that the monies were paid only for specific purposes. In our considered opinion, they do not partake the character of income of the Assessee. We hold that the Assessee would be entitled for deduction u/s 11 - Decided in favour of assessee.
Issues Involved:
1. Whether the denial of exemption under Section 11 of the Income-tax Act, 1961 by the National Faceless Appeal Centre (NFAC) was justified. 2. Whether the return of income filed within the time limit prescribed under Section 139(4) of the Act qualifies for exemption under Section 11. 3. Whether the grants received by the assessee should be considered as income under the provisions of the Income-tax Act. Issue-wise Detailed Analysis: 1. Denial of Exemption under Section 11: The primary issue in this appeal was whether the NFAC was justified in confirming the denial of exemption under Section 11 of the Income-tax Act, 1961. The Assessee, a society registered under the Societies Registration Act, 1860, claimed exemption under Section 11(1)(a) and Section 11(2) of the Act. The NFAC upheld the Assessing Officer's (AO) decision to deny this exemption on the grounds that the income tax return was not filed before the due date prescribed under Section 139(1) of the Act. However, the Tribunal found that both the return of income and the Form 10B audit report were filed together on 25-1-2019, which was within the due date prescribed under Section 139(4) of the Act. The Tribunal concluded that the Assessee was entitled to the deduction under Section 11, as the conditions laid out in Section 12A(1)(b) were met. 2. Filing of Return within Time Limit under Section 139(4): The Tribunal examined whether the return of income filed within the time limit prescribed under Section 139(4) qualifies for exemption under Section 11. The Tribunal referenced the provisions of Section 12A(1)(ba) as applicable for the assessment year 2018-19, which required the filing of the audit report along with the return of income. The Tribunal cited precedents, including decisions from the Delhi and Kolkata Tribunals, which clarified that filing a return within the time allowed under Section 139, including Section 139(4), should suffice for claiming exemption under Section 11. The Tribunal emphasized that the return was filed within the permissible time frame and should be considered compliant with the requirements for exemption under Section 11. 3. Treatment of Grants as Income: The Tribunal also addressed whether the grants received by the Assessee should be considered as income. The Assessee argued that the funds received under the Pradhan Mantri Gram Sadak Yojana (PMGSY) were liabilities and not income, as they were earmarked for specific purposes and could not be used otherwise. The Tribunal agreed with this viewpoint, noting that the grants were specific and could not be considered income of the Assessee. The Tribunal supported this conclusion by referencing a decision from the Punjab and Haryana High Court, which held that grants received for specific purposes do not constitute income. The Tribunal concluded that the grants did not partake the character of income, thereby supporting the Assessee's claim for exemption. Conclusion: The Tribunal allowed the Assessee's appeal, holding that the Assessee was entitled to exemption under Section 11 of the Act. The Tribunal found that the return filed within the time limit under Section 139(4) was valid for claiming exemption and that the grants received did not constitute income. The decision underscored the importance of adhering to the statutory provisions and judicial precedents in determining the eligibility for exemptions under the Income-tax Act. The appeal was thus allowed in favor of the Assessee.
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