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TMI Blog2022 (1) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... he grounds raised by the assessee on this issue. - ITA No. 236/H/2020 - - - Dated:- 10-12-2021 - Shri Vijay Pal Rao, Judicial Member And Shri Laxmi Prasad Sahu, Accountant Member For the Assessee : ShrI S. Rama Rao For the Revenue : Shri Rohit Mujumdar ORDER PER L.P. SAHU, A.M.: This appeal filed by the assessee is directed against CIT(A), Kurnool s order dated 09/01/2020 for AY 2014-15 involving proceedings u/s 154 of the Income Tax Act, 1961 ; in short the Act on the following grounds of appeal: 1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous to the extent it is prejudicial to the appellant. 2. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the learned CIT (Exemptions) vide order No. ITBA/Exm/S/12AA/20I9-20/1017/56578(1) dated 1.8.2019 granted registration u/s 12AA of the LT. Act when the appeal for the assessment year 2014-15 was pending and that, therefore, the exemption u/s 11 of the I.T. Act is available even for the assessment year 2014-15. 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition made by the Assessing officer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an adjustment made to the returned income u/s.143(1) of the Act. However, while doing so, the assessee has challenged the validity of adjustment made by the AO u/s. 143(1)(a) of the Act and consequent rejection of the rectification application filed u/s.154 of the Act. 7.2 At the outset, it is an admitted fact that though the assessee is registered under the Societies Registration Act, and the main object of the assessee society is imparting education, but has not been registered u/s.12AA of the Act, in order to claim exemption of its income u/s. 11 of the Act. Similarly, it is not under dispute that the assessee has not been approved u/s. 10(23C) of the Act as a charitable institution/society. Accordingly, the assessee is not eligible to claim deduction of its income either u/s.l1 of the Act or u/s. 10(23C) of the Act. 7.3 Coming to the issue under dispute/ as seen from the facts of the case, in the return of income filed, the assessee has disclosed a total income of ₹ 2,28,290/-, and the same is computed under the head income from other sources. While doing so, the assessee has disclosed gross receipts of ₹ 12,58,021/, and, after claiming certain expenses, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of income of ₹ 2,28,290/-. When the exemption u/s. 11 or u/s. 10 are not allowed the deduction u/s. 3C that is depreciation is allowable as a deduction. Therefore, the Assessing Officer is not justified in making disallowance of depreciation and expenditure while 'processing the Return of Income. In view of the above and in view of the written submissions already filed the Assessing Officer is not justified in making any adjustment u/s.143(l) of the Income tax Act. 7.6 As seen from the above, it is the contention of the assessee that its income is exempt from tax u/s.l0(23C) (iii ad) of the Act and the corpus fund receipts/donations are exempt from tax u/s.ll(l)(d) of the Act. Further, during the course of appellate proceedings, the assessee has filed its copy of return of income and computation of total income. 7.7 I have carefully considered the assessee's contentions and perused the documentary evidence placed on record. As seen from the return of income filed, it is observed that the assessee has filed the return of income in Form ITR-7, which is meant for the persons who are eligible to claim exemption u/s 10(23C) and 11 of the Act. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society should have been approved by the competent authority by way of an order passed in writing. In the instant case, it is not under dispute that the assessee has not been approved u/s.l0(23C) of the Act by the' competent authority. Thus, as a natural corollary, it is not entitled to claim exemption of its income u/s. 10(23C) of the Act. 7.12 Thirdly, as per the provisions of sec. u/s 10(23C) (iii ad) of the Act, income of any University or other educational institution is exempt from tax, provided the gross annual receipts of such University or other educational institution do not exceed the threshold limit of ₹ 1,00,00,000/-. Also, it is mandatory that such University or other educational institution should exist solely for educational purposes and not for purposes of profit. 7.13 On the other hand, in the instant case, though the gross annual receipts of the assessee are less than the threshold limit of ₹ 1,00,00,000/- but the assessee is not qualifying the basic requirements stipulated u/s. 10(23C) (iii ad) of the Act. To be precise, as seen from the facts of the case, including the financial statements, the assessee is not a University or other ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AD is not justified in taxing the entire gross receipts. 7.17 In view of the above, the AO is directed to allow the corresponding expenses incurred towards earning the building rent and interest income to the extent of ₹ 12,58,021/-. Further, the AD is directed to allow depreciation allowance as claimed by the assessee society in the Profit Loss A/c to the extent of ₹ 1,47,362/- . 7.18 Secondly, in regard to the corpus fund receipts/donations, I am of the considered opinion that the entire amount is subject to tax inasmuch as the assessee is not entitled to claim exemption of the same in terms of sec. 11(1)(d) of the Act. Further, as per the definition of income u/s. 2(24)(iia) of the Act, any voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes, apart from others, is subject to tax without any deduction. 7.19 In this instant case, the provisions of sec. 2(24)(iia) of the Act are squarely applicable inasmuch as, as per the Memorandum of Association of the assessee society, the society has been formed with no profit motive, implyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the assessee is not eligible to claim benefit of proviso of section 12A(2) because of there was no assessment pending before the assessing officer during the pendency of registration u/s 12A/12AA of the Act. He submitted that if the Act is clear, then, the Act should be read as specific directions in the Act. He submitted further that the case law relied upon by the AR is not applicable to the assessee s facts. He submitted that the case laws relied on by the ld. AR is not applicable to the facts of the present case. 7. After hearing both the parties and perusing the material on record as well as the orders of the revenue authorities, we observe that the assessee has taken an addition ground before us, which is not taken before the CIT(A). As the said additional ground is legal ground, wherein, the facts are on record and facts do not require fresh investigation, following the decision of Hon ble Supreme Court in the case of National Thermal Power Co., Limited Vs. CIT 229 ITR 383 (SC), we admit the said additional ground of assessee. 7.1 The assessee is a society registered under AP Registration Act, by M.O.A. dated 07/03/2003, which is available on record. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period pending 31/03/2014. This is a wrong claim which comes u/s 143(1)(a)(ii) of the Act. Without obtaining registration U/s 12A/12AA, the assessee can not take benefit of exemption u/s 11 and 12 of the Income Tax Act. 1961 and, therefore, the argument of the ld. AR of the assessee on this issue is hereby rejected. 7.2 Coming to the additional ground regarding the assessee is eligible to get benefit of proviso of section 12A (2), during the pendency of appeal before the CIT(A), in this regard, we refer to the provisions of section 12A, which are as under: Conditions for applicability of sections 11 and 12. 12A. (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Principal Commissioner or Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed; 26 [(ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section.] (c) [***] (2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made: Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly held against the assessee, stating that there is nothing on record to show that the exemption activities/operations and genuineness of its claims for the Assessment Year 2013-14 was examined. Since registration has been granted only after the deed of trust was amended, the assessee cannot contend that they are to be granted benefit from the Assessment Year 2013-14. Apart from that the other question, which will also stare at the appellant is that the appeal, which was filed before the CIT (A) was against the order passed in a rectification petition under section 154 of the Act. The question would be whether the same can be considered to be an assessment proceedings pending before the Assessing Officer. However, since no Substantial Question of Law has been framed to that said effect, we do not wish to express any opinion on the said issue and the question is left open. 8. So far as the decisions cited by the learned counsel for the appellant, we find that the factual position in the case of Shree Shyam Mandir Committee (supra) was entirely different as could be seen from paragraph 6.4 of the said judgment as the issue was whether a reassessment proceedings would also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this case are taken into consideration then the assessee made an application for registration on 15-12-2014 i.e. in the assessment year 2015-16. The assessment in question is of the year 2011-12. Tn view of the above, whether the subsequent registration pursuant to the application dated 1512-2014 would make the assessee entitled for the benefit of sections 11 12. It is in respect of the assessment year prior to the date of application. It is in the circumstances that registration was finally given on 8-6-2015. We are required to consider proviso below sub-section 2 of section 12 A of the Act, 1961. The proviso provides that if registration has been given to the Trust or the Institution under section 12 AA of the Act, 1961, then provisions of sections 11 12 of the Act, 1961 shall apply in respect of any income. derived from the property held under the Trust or the institution for any assessment year proceeding, for which assessment is pending before the Assessing Authority as on the date of registration. The Tribunal has given interpretation to the proviso to hold that irrespective of the date of application, the benefit of sections 11 12 of the Act, 1961 would be availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the financial year in which the application was given. In the instant case the application for registration was given on 15-12-2014 i.e. in the financial year 2014-15. On registration of the Trust, benefit under sections 11 and 12 would be available to the assessee from the assessment year following the financial year in which application was given and not any previous year. The benefit of registration could not have been extended for the assessment year 2011-12, even if the matter was pending before the Tribunal when application for registration was submitted on 15-12-2014. 18. The proviso to sub-section 2 applies in a given circumstances, but cannot by making main provision of section 12 A as redundant. In the instant case, the application for registration was then submitted on 15-12-2014. The registration was given on 8-6-2015. Since registration has been given on 8-6-2015, the benefit of sections II 12 would be available for the following financial year in which application was made if the assessment proceedings for the relevant assessment year was pending till the date of registration. It cannot be for the assessment year 2011-12 due to pendency of. the appeal be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs is considered to be pending before the Tribunal due to pendency of the appeal but it is applicable in those cases where words used are pendency of the assessment proceedings and not with words pending before the Assessing Officer . The interpretation therein is in reference to the words 'pendency of the assessment' and not in reference to the pendency of the assessment before the Assessment Officer. The instruction of CBDT can not be applied if seems counter the statue. 21. Accordingly the judgment of Gujarat High Court in Mayur Foundation (supra), would not apply. The view expressed therein cannot be applied to the facts of this case, otherwise an anomalous situation may emerge in a given case where for one or the other reason assessment proceedings before the Tribunal remain pending for years together or on a remand or for any other reason it comes before the Assessing Officer and such cases also subsequent application for registration and acceptance would result to extend benefit of sections 11 and 12 creating anomalous position if not meant for. This was not the object sought to be achieved by the legislature. If for one or the other reason, the proceedings in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the assessee at pages 4 5, which are as under: 7.3.1 The Profit Loss account has been incorporated in the order of CIT(A) cited supra and the balance sheet as above wherein the corpus fund receipts were shown under the capital account at ₹ 31,90,180/-. During the course of hearing, the Bench specifically asked the ld. AR that what was the purpose for the receipts of corpus fund as there is no specific purpose mentioned in the financial statements. The ld. AR was unable to explain the same. With regard to the opening balance of corpus fund of ₹ 84,06,205/- also, the ld. AR was unable to explain the specific purpose for what purpose the same was received. On the assets side of the balance sheet, we find that the assessee has invested in different assets and from the fixed assets, the assessee has charged depreciation of ₹ 1,47,362/- in the P L Account. If the corpus has been received by the assessee for a designated purpose, the same should have utilized for that purpose only and if depreciation is charged, depreciation should be reduced from the corpus fund as well as from the fixed assets. Whereas the assessee has reduced from the current y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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