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2025 (1) TMI 1186 - AT - Income TaxDenial of exemption u/s 11 and 12 - Assessee has received voluntary contributions which is an income of the assessee - HELD THAT - The assessee has made application for registration on 25-10-2019 and the approval was granted on 30-01-2020. The proviso to section 11 subsection 2 will apply on the date of approval of pending proceeding and since the CPC proceeded on the date of 27-06- 2023 the approval was already granted and thus the proviso will apply in the present assessee s case. These submissions of the ld. A.R. appears to be justifiable as there was no change of any objects and activities of the trust for assessment year 2020-21 and that also of assessment year 2019-20. Thus the decisions cited by the ld. A.R. when the entire process of assessment starts from the stage of filing of return u/s. 139 or issuance of notice u/s. 142(1) till the making of the assessment order u/s. 143(3) of section 144 will be applicable in assessee s case vis- -vis the assessment proceedings when pending before the Assessing Officer on the date of registration u/s. 12A of the Act in terms of section proviso of section 12A(2) of the Act which provides for the grant of registration for preceding assessment year. The corpus of donations i.e. voluntary donations are considered a capital receipts which are not chargeable to the Income Tax Act and therefore the same cannot be considered as income - Appeal of the Revenue is dismissed.
ISSUES PRESENTED and CONSIDERED
The primary issue in this case is whether the assessee, a public charitable trust, is eligible for exemption under the first proviso to Section 12A(2) of the Income-tax Act, 1961, allowing exemption of Rs. 10,45,50,001 under Sections 11 and 12 despite the fact that no assessment for the assessment year 2019-20 was pending as of the date of application for registration under Section 12AA. The secondary issue is whether proceedings under Section 143(1) can be treated as assessment proceedings for the purpose of applying the exemption. ISSUE-WISE DETAILED ANALYSIS 1. Eligibility for Exemption under Section 12A(2) Relevant Legal Framework and Precedents Section 12A(2) of the Income-tax Act provides that the provisions of Sections 11 and 12 shall apply in respect of income of a trust or institution for any preceding assessment year relevant to the financial year during which the application for registration is made, provided the objects and activities of the trust remain unchanged. The first proviso to this section allows for the grant of registration for preceding assessment years if certain conditions are met. Court's Interpretation and Reasoning The Tribunal considered the timing of the application for registration and the approval date. The assessee applied for registration on 25-10-2019, and approval was granted on 30-01-2020. The Tribunal noted that the proviso to Section 12A(2) applies on the date of approval of pending proceedings. Since the proceedings were pending on the date of approval, the proviso was applicable. Key Evidence and Findings The Tribunal found that there was no change in the objects and activities of the trust for the assessment years 2019-20 and 2020-21. The trust had provided details of voluntary contributions, which were considered capital receipts not chargeable to tax. Application of Law to Facts The Tribunal applied the first proviso to Section 12A(2) and concluded that the trust was eligible for exemption for the preceding assessment year since the conditions for the application of the proviso were met. Treatment of Competing Arguments The Revenue argued that the voluntary contributions should be treated as income and that the order under Section 154 should not have been quashed. They relied on the decision of the Gujarat High Court in the case of Mayur Foundation. However, the Tribunal distinguished this case by noting that there was no change in the trust's objects, and the voluntary contributions were capital receipts. Conclusions The Tribunal concluded that the trust was eligible for exemption under the first proviso to Section 12A(2) for the assessment year 2019-20, and the appeal by the Revenue was dismissed. 2. Treatment of Proceedings under Section 143(1) Relevant Legal Framework and Precedents Section 143(1) involves the processing of returns and issuing intimation. It is not considered an assessment proceeding. The distinction between processing and assessment is crucial for determining the applicability of exemptions under Sections 11 and 12. Court's Interpretation and Reasoning The Tribunal held that proceedings under Section 143(1) are not equivalent to assessment proceedings. Therefore, the pendency of proceedings under this section does not affect the applicability of the exemption under Section 12A(2). Key Evidence and Findings The Tribunal noted that the trust filed a rectification application under Section 154, which was rejected. However, the CIT(A) allowed the appeal, recognizing the voluntary contributions as capital receipts. Application of Law to Facts The Tribunal applied the legal distinction between processing under Section 143(1) and assessment proceedings, concluding that the latter's pendency is irrelevant for the exemption's applicability. Treatment of Competing Arguments The Revenue contended that the proceedings under Section 143(1) should be treated as assessment proceedings. The Tribunal rejected this argument, emphasizing the legal distinction between processing and assessment. Conclusions The Tribunal concluded that the proceedings under Section 143(1) do not constitute assessment proceedings, and thus, the exemption under Section 12A(2) was correctly applied by the CIT(A). SIGNIFICANT HOLDINGS The Tribunal held that the first proviso to Section 12A(2) applies when the registration is granted during the pendency of proceedings, allowing for exemption in the preceding assessment year. The Tribunal emphasized that voluntary contributions are capital receipts and not chargeable to tax. The Tribunal also clarified that proceedings under Section 143(1) are not assessment proceedings, thus not affecting the exemption's applicability. Core Principles Established The Tribunal established that voluntary contributions to a charitable trust are capital receipts not subject to tax under Sections 11 and 12. It also reinforced the legal distinction between processing under Section 143(1) and assessment proceedings, impacting the applicability of exemptions under Section 12A(2). Final Determinations on Each Issue The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to grant the exemption for the assessment year 2019-20 under the first proviso to Section 12A(2). The Tribunal concluded that the proceedings under Section 143(1) do not affect the exemption's applicability.
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