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TMI Blog2022 (8) TMI 1464X X X X Extracts X X X X X X X X Extracts X X X X ..... t of an assessee for exemption under section 11 depends on non-disqualification under section 13 and satisfaction of conditions under section 11. Therefore, this court is of the opinion that mere registration does not guarantee exemption under section 11 and it only entitles the assessee to claim exemption and the same will be granted to them, subject to fulfilment of other prescribed conditions. The overall analysis of the provisions of law viz., sections 11, 12, 12AA and 13, would compel this court to hold that the grant of registration under section 12AA in favour of the assessee cannot ipso facto give them exemption under sections 11 and 12 and an independent examination by applying the relevant provisions of law, is required by the authorities qua satisfaction of other conditions by the assessee for grant of exemption. In view of the same, the direction given by the Tribunal to the assessing officer to grant exemption to the assessee under sections 11 and 12 of the Act, merely on the basis of the registration obtained under section 12AA, is not correct and hence, the orders passed by the Tribunal to that effect, warrant interfere by this court. Accordingly, the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted to the assessee when no valid return had been filed? 3. The background facts of the appeals are as follows: 3.1. The assessee / Chennai Port Trust, is a statutory body created under the Major Port Trusts Act, 1963. Till 2002, the income of the assessee was not assessed to tax. They were brought to taxation for the first time in the assessment year 2002-2003 on account of insertion of explanation to subsection 20 of section 10 by the Finance Act, 2002. 3.2. For the assessment year 2003-2004, the assessee filed its return of income on 01.12.2003 disclosing a loss of Rs. 19,50,71,678/-, which was processed under section 143 (1) of The Income Tax Act 1961 (in short, the Act ) and notice dated 28.06.2004 was issued under Section 148 of the Act, on receipt of which, the assessee filed its return of income on 18.02.2005 declaring a loss of Rs. 46,36,69,119/-. Subsequently, the assessing officer passed the order of assessment on 17.03.2006, under section 143 (3) r/w section 147, determining the income of the assessee as Rs. 36,70,98,060/-. Subsequently, vide orders dated 10.12.2007 and 28.12.2007, in compliance with the order dated 17.08.2007 passed by the Tribunal in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, as the return filed on 28.01.2009 is a return filed out of time allowed under section 139(1) and 139(5). 3.6. Assailing the orders of assessment dated 30.12.2008 for the assessment years 2003-2004 and 2004-2005 and dated 01.12.2009 for the assessment year 2005-2006, the assessee filed separate appeals before the Commissioner of Income Tax (Appeals), which were allowed on 23.03.2011, in respect of the claim made by the assessee under section 11 of the Act. The said orders of the CIT(A) were also affirmed by the Income Tax Appellate Tribunal, thereby dismissing the appeals filed by the Revenue, by order dated 07.09.2011, which are impugned in TCA Nos.267 to 269 of 2014. 3.7. For the assessment year 2006-07, the assessee filed its return of income on 31.10.2006 declaring an income of Rs. 74,63,59,000/- and later, filed a revised return of income on 31.03.2008 declaring income of Rs. 70,96,24,690/-. Subsequently, they filed another return of income on 28.01.2009 in Form No. 3A declaring Nil income after claiming exemption under section 11 of the Act. Since the revised return filed on 28.01.2009 was beyond the time limit prescribed under the provisions of section 139 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought to quash the orders of the Tribunal and allow these appeals. 5. Per contra, Mr. G. Baskar, learned counsel appearing for the respondent would justify the orders passed by the Tribunal and submitted that the Director of Income Tax (Exemptions) has granted the Certificate of Registration under Section 12AA only on 16.06.2008, but with retrospective effect from 01.04.2002 and therefore, there was no scope for the assessee to make a claim for exemption in the returns filed for the assessment years in question. Taking note of the same, the Tribunal rightly concluded that the assessee is entitled to claim deduction under section 11 of the Act, which was also affirmed by the Tribunal. The learned counsel further submitted that for the assessment years 2005-06 and 2006-2007, after receipt of the certificate of registration on 16.06.2008, the assessee filed its revised return of income along with audit report in Form 10B belatedly i.e., on 28.01.2009. Without properly appreciating the same, the assessing officer erred in rejecting the claim of exemption made by the assessee under section 11, by observing that no valid return was filed and the revised return filed on 28.01.2009 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessing officer, on the ground that the assessee is a local authority and from the assessment year 2003-04 onwards, they are liable to pay tax, in view of the amendment of section 10(20). But, the CIT(A) accepted the contentions of the assessee and opined that the exemption contained in section 11 is available to a 'person' subject to fulfilment of conditions stipulated therein and denial of the same to the assessee, because of it being assessed as a local authority is not correct. Accordingly, following the decision of the Hon'ble Supreme Court in CIT v. Nagpur Hotel Owners' Association [114 Taxmann 255 (SC)] , the CIT(A) allowed the appeals and directed the assessing officer to grant exemption under section 11 to the assessee. The said orders of the CIT(A) were affirmed by the Tribunal in the appeals filed by the Revenue, by the order dated 07.09.2011, the relevant passage of which is usefully extracted below: 6. We heard both sides in detail. The assessee has been granted registration under Sec.12AA. The registration confirms declaration of the assessee that it is a charitable institution. It is not necessary that the assessee must be an Assoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) on 29.12.2010, rejecting the claim of exemption made by the assessee on the ground that no valid return was filed by the assessee, in the light of the decision of the Hon'ble Supreme Court in Goetze (India) Ltd v. Commissioner of Income-tax [284 ITR 323] . The said order of assessment was confirmed by the CIT(A) in the appeal filed by the assessee. However, by order dated 23.08.2012, the Tribunal allowed the assessee's appeal and directed the assessing officer to grant exemption to the assessee under sections 11 and 12 of the Act, by observing that the assessee received a right to claim exemption by virtue of the order of the Director of Income Tax (Exemptions), who is also a part of the revenue machinery and therefore, such exemption ought not to have been denied for a technical reason alone; and also placing reliance on the earlier order of the Tribunal dated 07.09.2011 in respect of the assessee's own case relating to the assessment years 2003-04, 2004-05 and 2005-06. Those two orders of the Tribunal are under challenge in these four tax case appeals, at the instance of the Revenue. 9. The two main contentions raised by the learned senior standing counsel a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal was of the view that the exemption is automatic and the same cannot be denied citing technical reason and accordingly, directed the assessing officer to grant exemption under section 11 of the Act to the Assessee. The learned counsel for the respondent / assessee also submitted that the order dated 30.12.2010 passed by the DIT(E), Chennai, rejecting the application filed by the assessee to condone the delay in filing Form 10B relating to the assessment year 2006-07, was put to challenge by the assessee by filing WP.No.23088 of 2011, which was allowed by order dated 02.12.2011 by setting aside the order of the DIT(E), and directing him to condone the delay in filing the Form 10B. Subsequently, the said order of the learned Judge was also affirmed by a Division Bench of this court by judgment dated 21.03.2018 in WA.No.1037 of 2013 [(2018) 256 Taxman 101/(2018) 93 taxmann.com 362 (Madras)] . Apart from that, placing reliance on the decision of a co-ordinate bench of this court in CIT v. Abhinitha Foundation Pvt. Ltd [(2017) SCC Online Mad 1978] , the learned counsel for the respondent / assessee submitted that even the claims not made in the original returns or revise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sections 11 and 12 of the Act. 12. The provisions of law also make it clear that Section 12A provides for conditions for applicability of sections 11 and 12 which provides, the provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the conditions stipulated thereon, are fulfilled. Further, Section 11 provides for the incomes from the property held for charitable or religious purposes which are liable to be exempted from total income of the assessee. Section 13 on the other hand, precludes the application of section 11 in certain cases. As such, while registration is the precondition to apply section 11, the entitlement of an assessee for exemption under section 11 depends on non-disqualification under section 13 and satisfaction of conditions under section 11. Therefore, this court is of the opinion that mere registration does not guarantee exemption under section 11 and it only entitles the assessee to claim exemption and the same will be granted to them, subject to fulfilment of other prescribed conditions. 13. In this context, it would be apropos to refer to the observation of the Allahabad High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the assessment years 1989-90 and 1990-91. In the present matter, there are numerous other points on which the Tribunal has given its findings. We do not wish to disturb those findings at this stage. 6 . In the case of Fifth Generation Education Society v. CIT (MANU/UP/0244/1990) : [1990] 185 ITR 634 (All), the Division Bench of the Allahabad High Court took the view that Section 11 provides for exemption of income which is applied for charitable purposes. That, Section 12 is in the nature of an Explanation to Section 11. Before a person can claim the benefit of Section 11 or Section 12, he must obtain registration under Section 12A. The authority to decide grant of certificate is vested in the Commissioner who has to examine whether the application is made in accordance with Section 12A. It is for the Commissioner to see whether the objects of the trust are charitable or not. At that stage, the Commissioner is not required to examine the application of income. Hence, in the present matter, the Tribunal was certainly entitled to ascertain whether there was a proper application of income for charitable purposes during the assessment years 1989-90 and 1990-91. 7 . To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y usefully refer to the decision rendered by a Division Bench of High Court of Punjab Haryana in CIT v. Market Committee, Dhariwal and Ors. (2008) 166 Taxman 392 (P H), wherein the Bench has expressed the view as under: 51. The aforesaid submission had been advanced for a totally different purpose, namely, to highlight the fact that registration under Section 12AA of the IT Act did not ipso facto result in the grant of any Income Tax exemption to a municipal committee. The effort, on the part of learned Counsel, while advancing the instant contention, was to show, that registration under Section 12AA of the IT Act did not ipso facto bestow any benefit on the IT Act, did not ipso facto bestow any benefit on the market committee, lie clarified that, for the benefit of Income Tax exemption, it would again be open to the petitioner to independently determine whether the market committee had utilised the income for which it seeks exemption, for a charitable purpose, in terms of the mandate of Section 11 of the IT Act, and only such income, which is so utilised, to the satisfaction of the IT authorities, would not be included, in the total income of the market committee, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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