Spreading Smile Vs ITO (ITAT Delhi)
ITAT Allows Section 11 Exemption as Final 12AB Registration Related Back to Original Application; Charitable Trust Entitled to Tax Exemption Since Later 12AB Approval Covered Relevant Assessment Year; Section 11 Benefit Cannot Be Denied Where Final Registration Is Granted on Remanded Application.
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, allowed the appeal filed by the assessee trust for Assessment Year 2022-23 and held that the trust was entitled to exemption under Sections 11 and 12 of the Income-tax Act, 1961, despite the fact that final registration under Section 12AB had been granted after the assessment order was passed.
The assessee had filed its return of income declaring nil income after claiming exemption under Section 11. During scrutiny assessment proceedings, the Assessing Officer (AO) noted that the assessee’s application for registration under Section 12A/12AB had earlier been rejected by the Commissioner of Income Tax (Exemptions) [CIT(E)] on 17 November 2022 due to non-submission of documents. The AO observed that although the Tribunal had subsequently remanded the registration matter back to the CIT(E), no fresh order granting registration had been produced before him during assessment proceedings. Accordingly, the AO concluded that the assessee did not possess a valid registration during the relevant year and denied exemption under Section 11 in respect of the excess of income over expenditure amounting to Rs. 1,70,635. The AO also disallowed Rs. 3,10,239 incurred towards “Gyan Kendra Infrastructure Expenses” by treating it as capital expenditure. The total income was taxed by applying the Maximum Marginal Rate (MMR) by treating the assessee as an Association of Persons (AOP).
