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TMI Blog2022 (10) TMI 945X X X X Extracts X X X X X X X X Extracts X X X X ..... t should be taxable. We find merit in the contention of the assessee and noted that net profit of the assessee should be taxable, as if the assessee is doing business in the capacity of association of person (AOP). The said lis should be remitted back to the file of the assessing officer to examine income and expenditure of assessee. Hence, we set aside the order of ld CIT(A) and remit this issue back to the file of the assessing officer with the direction to examine the Profit and loss account/or income and expenditure account of the assessee and compute the net taxable profit by applying the commercial principles. The assessee is also directed to submit before the assessing officer the Profit and loss account/or income and expenditure account, with supporting evidences and documents. Appeal of the assessee is treated to be allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of assessee was assessed at Rs.22,05,475/-. 4. Then after the assessee trust filed appeal before ld CIT(A) against intimation/order under section 143(1) of the Income Tax Act, dated 03.01.2018, passed by DCIT, CPC, Bangalore (hereinafter referred to as the 'AO') for AY.2016-17. The ld. CIT(A), has confirmed the action of the assessing officer, observing as follows: "7.2 Finding a) Assessee has filed its computation of Income for AY. 2016-17 (Page 1-2 of Paper book). Assessee has claimed Adjustment on account of Section 10 and 11 of the Act of Rs.22,05,475/-. As a result, Total Income is assessed at NIL. In Schedule 3 of the computation of Income, the Assessee has claimed as under: Schedule 3 Adjustments on account of Section 10 and 11 Return to be furnished u/s 139(4A) Whether registered u/s 12A/12AA Yes Income available for application u/s. 11 Rs.22,05,475/- b) The above fact mentioned in Computation of Income is incorrect. Assessee is not registered u/s 12A/12AA of the Act. But, it has been wrongly claimed in the Computation of Income that Assessee is registered u/s 12A/12AA of the Act. Therefore, claim u/s 11 of the Act was made. c) The Assessee has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , eligible to exemption u/s 11 on application subject to the condition that it is registered with Revenue u/s 12A/12AA of the Act. Assessee is not entitled to exemption u/s 11 of the Act as it is not registered u/s 12A/12AA of the Act. This issue stands settled by decision of Hon'ble Apex Court in UP Forest Corporation vs. DCIT(2008) reported in 297 ITR 1(SC). It is the correct legal position that is relevant and not the view that the parties may take of their rights in the matter [Refer to the judgments of Hon'ble Apex Court in Kedarnath Jute Manufacturing Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC) and CIT vs C Parikh & co (India) Ltd. (1956) 29 ITR 661 (SC)]. 7.3 In view of the above facts and respectfully following the judgments outlined in para 7.2 of this order, it is held that the Assessee is not entitled to exemption u/s 11 of the Act on account of non-registration u/s 12AA of the Act. On this issue, there is no ambivalence in law and same is consistent with the decision of Hon'ble Apex Court in UP Forest Corporation vs. DCIT. Thus, the addition/adjustment made by the AO u/s 143(1) of the Act is upheld. Grounds of Appeal Nos. 1 to 3 are dismissed. 7.4 Ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly prayed that as per sub-section (2) of section 12A of the Act, when an application has been made on or after 01.01.2007, the provision of section 11 and 12 shall apply in relation to income of such trust or institution from assessment year immediately following the financial year in which such application is made. The Proviso attached to sub-section (2) of section 12Ashall apply to a trust or institution, where the application is made from the assessment year from such institution or trust was earlier granted registration. The ld. AR for the assessee also vehemently submitted that the assessee was having valid registration since 1974 and the same was not cancelled or revoked and the assessee was always treated as a charitable trust and allowed the benefit under section 11 of the Act. The assessee was denied the benefit of section 11 of the Act only for the year under consideration. Thought the assessee applied for fresh registration and the same was allowed vide registration dated 26.06.2018 w.e.f 15.12.2017. 12. The Hon'ble Gujarat High Court in Mayur Foundation (supra) held that when the matter was pending before the Tribunal by way of an appeal it could be said that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord the reply of CPIO and the order of First Appellate Authority under RTI. Moreover, on further filing fresh application for registration under section 12AA, the assessee was granted fresh registration. In our view, the grounds of appeal raised by the assessee required fresh consideration by the ld.AO in view of the decisions of Hon'ble Jurisdictional High Court in Mayur Foundation (supra) and the Co-ordinate Benches of Tribunal as referred above. Therefore, the appeal is restored back to the file of ld.AO to consider the claim of assessee afresh by considering the various decisions as referred above and pass the order afresh in accordance with law without being influence of any of our observation. The assessee is also directed to provide complete details, evidences and information to the ld. Assessing Officer. 15. In the result, appeal of the assessee is allowed for statistical purpose." 8. Therefore, Ld. Counsel contended that AO cannot make prima facie adjustment under section 143(1) of the Act to deny the lawful exemption, however, AO can make adjustment in scrutiny assessment under section 143(3) of the Act. The ld Counsel also argued that in any event the exemption is de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has failed to fulfill the basic conditions, that is the assessee is not a registered trust under the Act. 11. We note that assessee-trust applied for registration under section 12A/12AA of the Act on 06.08.2012. After this the Assessing Officer issued a defect-memo within six months stating that assessee-trust has not submitted required documents and evidences for registration. Since, the assessee-trust has failed to submit the required documents and details for registration therefore ld CIT(Exemption) denied registration, hence assessee-trust could not get registered in assessment year 2013-14. We also note that for subsequent assessment years Viz: 2014-15, 2015-16, 2016-17 , 2017-18, 2018-19, 2019-20, 2020-2021 and 2021-22, the said Trust remains unregistered. After this, assessee trust applied for fresh registration in Form No.10A, in the year 2022 and the fresh registration was granted to the assesse-trust on 05.04.2022 therefore, assessee-trust is not entitled to get exemption prior to 05.04.2022. 12. The ld Counsel argued before us that since assessee-trust got registration on 05.04.2022, therefore, assessee-trust is entitled to get exemption for the past assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the benefit of section 11 to intimate to the assessing authority the particulars required, under rule 17 in Form No. 10 of the Rules. If during the assessment proceedings, the Assessing Officer does not have the necessary information, the question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particular part of the income from the net of taxation arises from section 11 and is subjected to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time he completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, in our opinion, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules, even then, in our opinion, it is reasonable to presume that the intimation required under section 11 has to be furnished before the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that when the matter is pending before the Tribunal by way of an appeal, the assessment proceeding is pending? The answer has to be in the affirmative. The assessing authority is empowered and is duty bound, to pass an order giving effect to the order of the Tribunal for the purposes of assessing the tax liability of the assessee for the assessment year which was under consideration before the Tribunal. In these circumstances, it cannot be contended on behalf of the Revenue that the assessment proceedings come to an end when the assessment order is framed. The contention on behalf of the Revenue to equate the assessment order with assessment proceeding is based on a fallacious premise. The aforesaid view that this court is taking finds support from the decision of the apex court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 . The apex court held that the Tribunal has jurisdiction to examine a question of law which arose from the facts as found by the income-tax authorities and having a bearing on the tax liability of the assessee. The powers of the Tribunal under section 254 of the Act and the discretion that the Tribunal has to entertain or not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal. In these circumstances, in the present case, the Tribunal was well within its jurisdiction to entertain the new ground by which the assessee claimed the benefit under section 11(2) of the Act and adjudicate the tax liability of the assessee. As already noticed hereinbefore, the Tribunal has categorically found that "the additional ground involves the question relating to interpretation of section 11(2) and the facts on the basis of which such a decision is to be given regarding interpretation of section 11(2) are not at all in dispute". In the circumstances, there is no infirmity in the order of the Tribunal, holding that the assessee is entitled to benefits allowable under section 11(2) of the Act. The question referred to the court is accordingly answered in the light of the opinion expressed hereinbefore in favour of the assessee and against the Revenue. There shall be no order as to costs." 13. In our view, this judgment of Hon`ble High Court of Gujarat in the case of Mayur Foundation(supra) is not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been granted to the trust or institution under section 12A/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 institution remain the same for such preceding assessment year. However, we do not agree with the plea taken by ld Counsel, as the assessee`s trust under consideration applied for registration under section 12A in assessment year 2013-14, on dated 06.08.2012 (vide Pb-31). Then after Assistant Commissioner of Income Tax issued defect memo to the assessee, on dated 18.10.2012, to submit certain documents and evidences(vide - 30). The assessee submitted its part reply (vide Pb-24). After this, Asstt.Commissioner of Income Tax issued letter dated 08.11.2013 stating that certain documents for registration has not been submitted and also asked to appear Authorized Representative before him. Since the assessee failed to provide required documents and details therefore registration has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vivid that when trust is refused for registration then in that situation the trust cannot claim benefit of first proviso to sub-section (2) of section 12A of the Act. In the assessee`s case under consideration, the assessee was refused for registration in the year 2012-13 hence assessee is not entitled to claim benefit of first proviso to subsection (2) of section 12A of the Act, therefore the plea taken by the ld Counsel is not acceptable. 19. The ld Counsel also argued before us that if exemption is not granted under section 11 of the Act, then in that event the income of the assessee-trust should be computed on commercial principles bases, that is net profit should be taxable. We find merit in the contention of the assessee and noted that net profit of the assessee should be taxable, as if the assessee is doing business in the capacity of association of person (AOP). Therefore, we are of the view that the said lis should be remitted back to the file of the assessing officer to examine income and expenditure of assessee. Hence, we set aside the order of ld CIT(A) and remit this issue back to the file of the assessing officer with the direction to examine the Profit and loss acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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