Case Law Details
Lala Gauri Mal Butail Trust Vs ADIT (ITAT Chandigarh)
ITAT Chandigarh held that mere non-furnishing of copy of registration u/s 12A cannot be held as a valid and justifiable reason for denial of exemption u/s 11 of the Act where such registration continues to exist and the assessee trust duly stand registered u/s 12A for the year under consideration.
Facts- The assessee Trust is registered u/s 12A of the Act and is running a Dharamshala at Shimla and Palampur besides carrying out other charitable activities. The assessee Trust has been regularly filing its return of income by claiming exemption u/s 11 and which has been allowed by the Department without raising any kind of dispute in the previous years. For the year under consideration, the assessee Trust filed its return of income on 09.12.2020 declaring total income at ‘nil’ after claiming exemption u/s 11. The return so filed was processed by CPC Bangalore and in terms of intimation issued u/s 143(1) dated 30.11.2021, CPC Bangalore has disallowed the exemption claimed u/s 11 and amount of Rs.61,77,016/- being the surplus has been brought to tax in the hands of the assessee Trust.
Conclusion- Held that during the appellate proceedings, one of the reason for denial of benefit u/s 11 was the assessee trust could not submit copy of its registration u/s. 12A originally granted on basis of which the past assessment were completed allowing exemption u/s section 11 of the Act. We find that in the assessment order for assessment year 1984-85, there is a clear mention of the assessee Trust being granted registration u/s 12A vide ld. CIT, Patiala letter dated 30.01.1986 and following the same, the assessment orders for assessment year 2010-11, 201112, 2012-13 and 2015-16 have been passed wherein the exemption u/s 11 has been allowed by the AO. Being an old matter, the assessee trust may not have produced copy of the registration originally granted u/s 12A, however, the factum of the assessee’s trust being duly registered u/s 12A and such a registration not being withdrawn is borne out of the assessment records for the earlier assessment years and in view of the same, mere non-furnishing of copy of registration u/s 12A cannot be held as a valid and justifiable reason for denial of exemption u/s 11 of the Act where such registration continues to exist and the assessee trust duly stand registered u/s 12A for the year under consideration.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal filed by the assessee against the order of the CIT(A)/NFAC, Delhi dated 25.10.2022 wherein the assessee has taken the following grounds of appeal:
1. That the CIT (A) NFAC was not Justified in upholding the disallowance of exemption claimed u/s 11 amounting to Rs. 61,77,016.
2. That the CIT [A) NFAC while sustaining the addition failed to appreciate that the assessee was registered as Charitable Trust u/s 12A as per the previous history the exemption u/s 11 was allowed to the assessee.
3. That the CIT (A) NFAC had given a wrong finding that the new registration as per the amended provisions of sec 12AB are applicable to AY 2020-21 whereas the same are applicable from A.Y 2022-23.
4. That the CIT (A) NFAC failed to appreciate that disallowance of exemption u/s 11 could not have been made while processing the return u/s 143(l)(a).
5. That the orders of AO and CIT (A) NFAC are against the Law and Facts of the case.
2. During the course of hearing, the ld. AR submitted that the assessee Trust is registered u/s 12A of the Act and is running a Dharamshala at Shimla and Palampur besides carrying out other charitable activities. It was submitted that assessee Trust has been regularly filing its return of income by claiming exemption u/s 11 and which has been allowed by the Department without raising any kind of dispute in the previous years. It was submitted that for the year under consideration, the assessee Trust filed its return of income on 09.12.2020 declaring total income at ‘nil’ after claiming exemption u/s 11. The return so filed was processed by CPC Bangalore and in terms of intimation issued u/s 143(1) dated 30.11.2021, CPC Bangalore has disallowed the exemption claimed u/s 11 and amount of Rs.61,77,016/- being the surplus has been brought to tax in the hands of the assessee Trust.
3. It was submitted that the assessee Trust subsequently carried the matter in appeal before the ld. CIT(A) NFAC and even the ld. CIT(A) has not appreciated the relevant provisions and has failed to take into consideration the past history of the assessee where the registration has been duly taken into consideration while allowing the exemption u/s 11.
4. In this regard, it was submitted that the ld. CIT(A), Patiala had originally allowed the registration to the assessee Trust u/s 12A vide order dated 30.01.1966 for assessment year 1985-86 onwards and the assessee trust has accordingly filed its return of income by claiming exemption u/s 11 on the basis of said registration granted by the ld. CIT(A), Patiala. It was further submitted that the assessee has also applied for renewal of registration in Form 10A and registration has been approved by the Department by issuing Form 10AC dated 24.09.2021 for assessment year 2022-23 to 2026-27.
5. It was submitted that the ld. CIT(A) NFAC was not correct in holding that the earlier provisions of Section 12AA are not applicable and new Section 12AB are applicable in the instant case. It was submitted that the new provisions have been introduced only w.e.f. assessment year 2022-23 and are, therefore, not relevant for impugned assessment year 2020-21.
6. It was further submitted that the Central Board of Direct Taxes has also came out with Circulars from time to time and in this regard, our reference was drawn to Circular No. 22/2022 dated 01.11.2022 wherein the Board in exercise of powers u/s 119 has condoned the delay upto 25.11.2022 in filing Form No. 10A under Section 12A(1)(ac)(1) of the Act.
7. Further, our reference was drawn to the previous assessment orders for assessment year 2010-11, 2011-12, 201213 and 2015-16 wherein the exemption u/s 11 has been allowed by the AO. Further, our reference was drawn to the assessment order for assessment year 1984-85 wherein there is a clear mention of the assessee Trust being granted registration u/s 12A vide CIT, Patiala letter dated 30.01.1986.
8. It was, accordingly, submitted that the ld. CIT(A), NFAC was not correct in ignoring the fact that the assessment Trust is duly registered under Section 12A of the Act and as far as the applicability of new provisions are concerned, same are not applicable for the impugned assessment year. It was, accordingly, submitted that the assessee may be allowed necessary relief by allowing exemption claimed u/s 11 and the additions so made be directed to be deleted.
9. Per contra, the ld. CIT/DR has relied on the order of the lower authorities and our reference was drawn to the findings of the ld. CIT(A) which are contained in para 4.2.3 of the impugned order and the contents thereof read as under :
“4.2.3 I have gone through the assessment order u/s. 143(1) and statement of facts along with grounds of appeal. The main ground of appeal is against disallowance of exemption claimed u/s. 11 at Rs.61,77,016/- which was added to the total income by CPC. Ben galuru.
The appellant is a trust as Dharamshala at Shimla and Palampur has registered u/s. 12A vide its order dated 30.01.1986 for A.Y. 1985-86 onwards. During appeal proceedings, the appellant submitted the copies of order for the A. Ys. 2010-11 2011-12, 2012-13 & 2015-16 wherein the appellant got exemption u/s. 11 as the registration was allowed by the CIT, Patiala u/s 12A. The appellant has produced an Approval Form 10AC dated 24.09.2021. However, it is seen that the order for registration in Form No. 10AC dated 24.09.2021 in which registration is being granted under section 12A(1)(ac)(i) of the IT.Act, 1961 from A.Y. 2022-23 to A.Y. 2026-27. This appeal is for the A.Y. 2020-21. During the appeal proceedings, the appellant could not submit the registration u/s. 12A on which basis the stated orders for A.Y. 2010-11, 2011-12, 2012-13 & 2015-16 were passed.”
Moreover, by finance Act 2020, section 12AA was amended as under:-
“(5) Nothing contained in this section shall apply on or after the 1st day of June, 2020.
Thus, the provisions of section 12AA are not applicable from 1/6/2020. A new section u/s. 12AB has been introduced for registration of trusts. Where a trust or institution is already registered under Section 12A or u/s 12AA then such a trust or institution is required to be filed an application before the PCIT/CIT within 3 months starting from 01-06-2020 to 31-08-2020 (now extended till 31-12-2020) for converting the earlier registration under section 12A or under section 12AA to the new section 12AB as per the newly introduced Section 12A(1)(ac)(i). Thus, the assessee had to reapply for registration for the A.Y.2020-21. However, the Form 10AC granting approval for such registration has allowed the registration to the assessee from A.Y. 2022-23 to 2026-27. Hence, assessee has no valid registration under the Income Tax Act for the A.Y. 2020-21 and 2021-22. Therefore, without the registration u/s. 12AB, exemption u/s. 11 is not available. Therefore, CPC is correct in disallowing exemption u/s. 11 of the IT. Act for the A.Y. 2020-21.
Hence, in the absence of the before said approval given by department for A.Y. 202021 the appellant is not eligible for the exemption u/s 11.”
10. We have heard the rival submissions and perused the material available on record. The ld CIT(A) NFAC has stated two reasons while confirming the denial of benefit of exemption u/s 11 to the assessee trust. Firstly, it has been stated that during the appellate proceedings, the assessee trust could not submit copy of its registration u/s. 12A originally granted on basis of which the past assessment were completed allowing exemption u/s section 11 of the Act. In this regard, we find that in the assessment order for assessment year 1984-85, there is a clear mention of the assessee Trust being granted registration u/s 12A vide ld. CIT, Patiala letter dated 30.01.1986 and following the same, the assessment orders for assessment year 2010-11, 201112, 2012-13 and 2015-16 have been passed wherein the exemption u/s 11 has been allowed by the AO. Being an old matter, the assessee trust may not have produced copy of the registration originally granted u/s 12A, however, the factum of the assessee’s trust being duly registered u/s 12A and such a registration not being withdrawn is borne out of the assessment records for the earlier assessment years and in view of the same, mere non-furnishing of copy of registration u/s 12A cannot be held as a valid and justifiable reason for denial of exemption u/s 11 of the Act where such registration continues to exist and the assessee trust duly stand registered u/s 12A for the year under consideration.
11. Secondly, it has been stated by the ld CIT(A) that the provisions of section 12AA are not applicable from 1/6/2020 and in terms of new section 12AB which has been introduced for registration of trusts, where a trust is already registered under Section 12A, it is required to apply and file application before the PCIT/CIT within stipulated time frame for converting the earlier registration under section 12A to the new section 12AB as per the newly introduced Section 12A(1)(ac)(i) of the Act and in the instant case, the assessee trust has been granted registration under the new provisions from A.Y. 2022-23 to 2026-27 and since, the assessee trust has no valid registration for A.Y. 202021, it is not eligible for exemption under section 11 of the Act.
12. In this regard, we refer to sub-section (5) to section 12AA which states that “Nothing contained in this section shall apply on or after the 1st Day of April 2021” which has been inserted by the Taxation and other laws (Relaxation and Amendment of certain Provisions) Act, 2020 w.e.f 01/04/2021. The ld CIT(A) has apparently referred to earlier sub-section (5) which was inserted by the Finance Act, 2020 w.e.f 01/06/2020 and which has since been omitted by the Taxation and other laws (Relaxation and Amendment of certain Provisions) Act, 2020 w.r.e.f 01/06/2020. As per the provisions of sub-section (5) to section 12AA, the registration granted to the assessee trust continue to exist and in any case has not been withdrawn for the impugned assessment year 2020-21. Further, there are corresponding amendments/insertion of new provisions in section 12A(1)(ac) by the Taxation and other laws (Relaxation and Amendment of certain Provisions) Act, 2020 w.e.f 01/04/2021 which has again escaped the attention of the ld CIT(A). In view of the same, we agree with the contention of the ld AR that the new registration provisions have no impact as far as registration of the assessee trust for the impugned assessment year 2020-21 and its existing registration u/s 12A continues to hold good. In view of the same, we set-aside the order of the ld CIT(A) and direct the AO to allow the exemption u/s 11 as so claimed by the assessee trust while filing its return of income.
13. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 6th June, 2023.
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