ACIT Vs Bramas Industrial Service Association (ITAT Chennai)
Exemption u/s 11 Cannot Be Denied in u/s 143(1) Processing When Registration u/s 12AA Granted Retrospectively
The assessee, a non-profit industrial association incorporated under section 25 of the Companies Act, filed its return for AY 2019-20 declaring income of ₹10.50 lakh. While processing the return u/s 143(1), the CPC denied the exemption claimed u/s 11 and recomputed total income at ₹3.38 crore.
During appellate proceedings, the assessee submitted that at the time of filing the return it had not yet obtained registration u/s 12AA. However, the CIT(Exemptions) subsequently granted registration u/s 12AA on 14-09-2023 with retrospective effect from 04-02-2015, which covered the assessment year under consideration. The CIT(A) held that once such retrospective registration was granted, the assessee became eligible to claim exemption u/s 11 and therefore directed deletion of the additions made by CPC.
Before the Tribunal, the Revenue argued that the assessee had not filed the return in ITR-7 and had also not filed the audit report in Form 10B, which were mandatory conditions for claiming exemption u/s 11.
The Tribunal observed that the disallowance had been made while processing the return u/s 143(1). At that stage, only prima facie adjustments specified under section 143(1)(a) can be made. The allowability of exemption in light of retrospective grant of registration u/s 12AA is a debatable issue requiring examination and cannot be decided as an apparent incorrect claim during CPC processing.
Accordingly, the Tribunal upheld the order of the CIT(A) deleting the additions made by CPC and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
