Credit Guarantee Fund Trust for Micro & Small Enterprises Vs DCIT (ITAT Mumbai)
Facts
Assessee, a trust registered u/s 12A, created by Govt. of India & SIDBI to provide credit guarantee support to MSMEs, filed return claiming exemption u/s 11. AO denied exemption by invoking proviso to s.2(15), holding guarantee fee collection to be business income. AO computed taxable income at ₹4132.27 Cr (after disallowing provision for guarantee claims of ₹3470.43 Cr) & levied penalty u/s 270A of ₹2936.36 Cr (200% of tax) for misreporting.
CIT(A) upheld penalty on the ground that Revenue had challenged quantum relief before High Court.
Tribunal’s Observations/ Decision
- In assessee’s own case for AYs 2010-11, 2011-12 & 2014-15, Tribunal had already held that proviso to s.2(15) does not apply; assessee’s activities are charitable.
- For AY 2018-19, Tribunal (24.11.2023) had deleted quantum additions, holding guarantee fee not profit-driven & provisions allowable under mercantile system.
- Since quantum additions are deleted, no under-reported income survives, hence penalty cannot stand.
- Pendency of Revenue’s appeal before High Court is irrelevant for sustaining penalty.
- Charitable trust’s activities were consistently funded by Govt. corpus with annual deficits, establishing absence of profit motive.
- ITAT deleted penalty of ₹2936.36 Cr levied u/s 270A.
- Assessee’s appeal allowed in full.
When quantum additions are deleted, penalty u/s 270A has no legs to stand on. Charitable institutions like CGTMSE, functioning with Govt. support & without profit motive, cannot be penalised merely for Revenue’s different interpretation of proviso to s.2(15).
