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TMI Blog2019 (12) TMI 376X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 10(23AA) of the Act of 1961 when it failed to prove it case. Thus, the order of the CIT(Appeals) and the tribunal to allow the exemption under the aforesaid provision cannot sustained. Addition u/s 40(a)(ia) - CIT(Appeals) deleted the addition - HELD THAT:- It is after ignoring the fact that the assessee was not found entitled to the exemption under Section 11 in view of the violation of Section 13. An order for denial of exemption under Section 11 was passed on 12.02.2016. Ignoring the aforesaid and treating the assessee to be entitled for the exemption on its registration under Section 12A of the Act of 1961, deletion of the addition was made. The tribunal upheld the order passed by the CIT(Appeals) ignoring the fact of denial of exemption under Section 11 of the Act of 1961. Once the exemption under Section 11 was denied, the assessee was required to deduct the TDS and thereby the addition was rightly made by the Assessing Authority. Accordingly, CIT(Appeals) so as to the tribunal was not justified to delete addition by referring to Section 40(a)(ia) while ignoring proviso appended to it and the order dated 12.02.2016 where the exemption under Section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 ? 3. Whether on the facts and circumstances of the case and in law, the learned ITAT is right in restricting the Maximum Marginal Rate on the addition of ₹ 1,54,745 and ₹ 2,95,185 made u/s 13 of the Income Tax Act 1961 whereas the exemption u/s 11 of the Income Tax Act 1961 has been denied in this case in the assessment order dated 12.2.2016 ? Learned counsel appearing for the revenue submits that while passing the assessment order initially, the exemption claimed by the assessee under Section 10(23AA) of the Act of 1961 was denied as it was not claimed at the time of submission of return. The assessee preferred an appeal before the CIT (Appeals) which was partly allowed on the issues other than in reference to Section 10(23AA) of the Act of 1961. Aggrieved by the order by CIT (Appeals), the assessee approached the tribunal. The appeal therein was allowed with remand of the case to determine the issue in reference to Section 10(23AA) of the Act of 1961. During the intervening period, assessment order was passed after a notice under Section 148 of the Act of 1961. In the reassessment, after opening the case, an additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Union. It may be for the welfare of past and present members and their dependents. In view of the above, the prayer is to cause interference in the order of CIT (Appeals) as well as the tribunal for grant of exemption to the assessee under Section 10(23AA) of the Act of 1961. It is further urged that CIT(Appeals) has also committed an illegality in deleting the addition of ₹ 20,15,500/- ignoring the fact that the exemption under Section 11 of the Income Tax Act of 1961 was denied in the assessment order dated 12.02.2016. It is in view of the violation of Section 13 of the Act of 1961. The deletion of the addition of ₹ 20,15,500/- is in ignorance of Section 11 and Section 13 of the Act, 1961 and for that the order passed on 12.02.2016. The CIT(Appeals) so as the tribunal simply referred the provision of Section 40(a)(ia) of the Act of 1961 to delete the addition. It is ignoring the proviso appended to the said provision. Thus, even deletion of the addition of ₹ 20,15,500/- by the CIT(Appeals) and upheld by the tribunal needs interference. It is even in regard to the maximum marginal rate in view of the denia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act of 1961 was denied to the assessee as it was not claimed at the time of submission of return. It was claimed at the time of assessment. Aggrieved by the order of Assessing Authority, the assessee preferred an appeal before the CIT(Appeals). It was dismissed while partly allowing the appeal on other issues. The assessee approached the tribunal thereupon where order of the CIT(Appeals) was set aside with remand of the case. During the intervening period, a notice under Section 148 of the Act of 1961 was given. In pursuance to the notice under Section 148, assessment order was passed while the matter was pending before the CIT(Appeals) on the issue of exemption under Section 10(23AA) of the Act on remand of the case. The assessee challenged the order of assessment by maintaining appeal which was heard alongwith the appeal on issue of Section 10(23AA) of Act on its remand. The CIT(Appeals) allowed the appeal and granted exemption under Section 10(23AA). A challenge to the order was made before the tribunal but appeal preferred by the revenue was dismissed. Perusal of the order of the tribunal does not reflect a detailed discussion in reference to exemption und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n its registration under Section 12A of the Act of 1961, deletion of the addition was made. The tribunal upheld the order passed by the CIT(Appeals) ignoring the fact of denial of exemption under Section 11 of the Act of 1961. Once the exemption under Section 11 was denied, the assessee was required to deduct the TDS and thereby the addition was rightly made by the Assessing Authority. Accordingly, CIT(Appeals) so as to the tribunal was not justified to delete addition by referring to Section 40(a)(ia) while ignoring proviso appended to it and the order dated 12.02.2016 where the exemption under Section 11 of the Income Tax Act of 1961 was denied to the assessee. Thus, order of the CIT(Appeals) so as to the tribunal needs interference even on that count. The last substantial question of law is regarding maximum marginal rate. The maximum marginal rate was not applied on the total income despite the fact that the assessee was not found entitled to the exemption under Section 11 of the Act of 1961. A reference of Section 164(2) of the Act of 1961 would be relevant for the aforesaid. If the assessee was not entitled to the exemption under Section 11, the maximum margina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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