Shri Saibaba Charitable Trust Vs ITO Exemptions (ITAT Mumbai)
Mumbai ITAT: Every Addition Is Not Taxable Under Section 115BBE; Denial of Section 11 Exemption Cannot Trigger Special Tax Rate
The Mumbai ITAT held that Section 115BBE applies only to additions specifically made under Sections 68 to 69D, and cannot be invoked merely because an addition or disallowance has been made during assessment proceedings. Accordingly, it directed the Assessing Officer to compute tax under the normal provisions of the Act instead of applying the higher tax rate under Section 115BBE.
The assessee, a charitable trust, had filed its return declaring Nil income after claiming exemption under Sections 11 and 12. During scrutiny, the Assessing Officer noticed that the trust did not possess a valid registration under Section 12A/12AA and consequently denied the exemption. An amount of ₹49,321, representing donation/expenditure incurred towards charitable purposes, was disallowed and added to income. The Assessing Officer thereafter subjected the addition to tax under Section 115BBE, which was also upheld by the CIT(A).
Before the Tribunal, the assessee argued that even if the exemption under Sections 11 and 12 was denied, the addition did not fall within the scope of Sections 68, 69, 69A, 69B, 69C or 69D, and therefore the special tax regime under Section 115BBE had no application. It was further contended that the assessee was entitled to be taxed at the normal rates prescribed under the Act.
Accepting the contention, the Tribunal observed that the Assessing Officer had not invoked any of the provisions from Sections 68 to 69D while making the addition. The addition had arisen solely because the exemption claim was denied due to the absence of registration under Section 12A/12AA. The ITAT emphasized that Section 115BBE is not a universal charging provision for every addition or disallowance, but applies only where income is assessed under the specific deeming provisions mentioned therein.
The Tribunal further clarified that a clear distinction must be maintained between an addition made under the normal provisions of the Act and an addition made under the deeming provisions of Sections 68 to 69D. Only the latter category can be subjected to the special tax rate prescribed under Section 115BBE.
Accordingly, the ITAT held that the Assessing Officer was not justified in invoking Section 115BBE and directed recomputation of the tax liability under the normal provisions of the Act. The assessee’s appeal was therefore partly allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT MUMBAI
