Registration to trust u/s. 12AB granted as exemption u/s. 11 not claimed: ITAT Ahmedabad

Swaminarayan Satsangis Organisation Vs CIT (Exemption) (ITAT Ahmedabad)

ITAT Ahmedabad held that registration to trust under section 12AB of the Income Tax Act granted since assessee demonstrated that exemption under section 11 of the Income Tax Act is not claimed. Accordingly, appeal allowed.

Facts- The solitary plea of the assessee, vide the present appeal, is with regard to denial of grant of registration by CIT(E). Notably, the assessee-trust had sought registration as a charitable entity under the new regime provided u/s.12AB of the Act. The assessee-trust had applied for registration as a trust having commenced its activities and seeking registration for the first time in terms of Section 12A(1)(ac)(vi) sub-clause (B) of the Act.

CIT(E) rejected the assessee’s application finding that the assessee has violated this very condition since he found the assessee to have claimed exemption of its income u/s.11 of the Act for the Assessment Year (AY) 2022-23.

Conclusion- Held that the assessee having now demonstrated that it had not claimed any exemption u/s.11 of the Act in AY 2022-23, the impediment for the grant of registration as per the Ld.CIT(E), stands removed. The Ld.CIT(E) is directed therefore to grant registration to the assessee-trust u/s.12AB of the Act. In the result, the appeal of the assessee is allowed.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This appeal has been filed by the assessee against the order dated 29/08/2024 passed by the Ld. Commissioner of Income-Tax (Exemption), Ahmedabad [hereinafter referred to as “ld.CIT(E)] denying grant of registration u/s.12AB of the Income Tax Act, 1961 (in short “the Act”).

2. Ground of appeal raised by the assessee is as under:

The learned CIT(Exemption) has erred in rejecting the application in Form No. 10AB for Registration under Section 12A as non-maintainable on the ground that the appellant has claimed the exemption under Section 11 of the Income-tax Act, 1961 (the Act) inasmuch as (a) the appellant is not Registered under Section 12AA and (b) the appellant inadvertently claimed under Section 11 while filing return for A.Y. 2023-2024 though not registered.

3. The solitary plea of the ld.counsel for the assessee, before us, was that denial of grant of registration by the ld.CIT(E) is passed on an incorrect appreciation of the fact of the case. He pointed out that the assessee-trust had sought registration as a charitable entity under the new regime provided u/s.12AB of the Act. The assessee-trust had applied for registration as a trust having commenced its activities and seeking registration for the first time in terms of Section 12A(1)(ac)(vi) sub-clause (B) of the Act. He contended that the condition stipulated in the said clause was that the assessee ought not to have sought exemption under sub-clause (iv)(v)(vi) or (via) of Section 23C or Sections 11 or 12 of the Act for any previous year ending on or before the date of such application made by the assessee. He drew our attention to the specific provision which is reproduced at paragraph No. 6.1 of the Ld.CIT(E)’s order as also is as under:

“6.1. To begin with, for the sake of clarity Provisions of section 12A(1)(ac)(vi)-ITEM(B) of the Act is reproduced as under.

((vi) in any other case, where activities of the trust or institution have-

A. not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought;

B. commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities,]

and such trust or institution is registered under section 12AB:]”

From the above, it is clear that in order to avail the benefit of 12A(1)(ac)(vi)-ITEM(B) it is necessary that the activities of the trust shall be commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities.”

3.1. The ldc.counsel for the assessee further pointed out that the Ld.CIT(E) rejected the assessee’s application finding that the assessee has violated this very condition since he found the assessee to have claimed exemption of its income u/s.11 of the Act for the Assessment Year (AY) 2022-23. He drew our attention to the finding of the Ld.CIT(E), in this regard, at paragraph Nos.8 and 9 of his order are as under:

“DECISION

8. The said reply of the applicant dated 21.08.2024 is considered; however, the same is not found acceptable. To begin with, the applicant has stated that it has filed ITR on 29.11.2023. however, the snapshot submitted by the applicant shows that the as of 24.05.2024, the ITR was under processing and on 17.12.2023 the applicant was in receipt of 143(1)(a). However, the applicant has not stated that whether the CPC/AO has re-assessed its income subject to tax neither it has submitted computation sheet and the rectification request raised by the applicant for which it is in receipt of an error is also void of date on which it has been logged in system and also said request rejected/errored due to the fact that the ‘latest return was under processing’.

Moreover, the applicant could have opt for other ITR forms and even if it was suppose to file ITR 7 it was not suppose to claim tax benefit on the basis of provisional registration for which the applicant was well aware.

In view of the above, that the applicant has claimed exemption/excluded any income or part from the total income with following details:

9. In view of the above facts, 1 me applicant has violated existing provisions and is MENT not eligible to get registered under section 12A(1)(ac) (vi)-ITEM(B) of the Act, therefore, the present application is rejected as non-maintainable.”

3.2. The ld.counsel for the assessee also contended that the fact of the matter was the assessee had inadvertently and by-mistake claimed exemption of its income in the return filed for the said year which had been rectified by the CPC , Bengaluru in the intimation made to it u/s.143(1) of the Act denying exemption for the said assessment year. To clarify these facts, he drew our attention to the return of income filed by the assessee in ITR-7 placed in the paper-book at page Nos.17 to 19, more particularly, to page No.17 pointing out that while in column A-17 of Part-A of ITR-7 while the assessee had specified to have claimed to its income exemption u/s.11 of the Act. However, in part A-19, wherein it was required to furnish details of registration granted to it for seeking exemption which was a mandatory requirement, the assessee has categorically mentioned that it had not yet applied. He therefore stated that the assessee had truly disclosed the fact that it had not been granted registration u/s.12AB of the Act, but had inadvertently claimed exemption u/s.11 of the Act. Thereafter, he drew our attention to the intimation made to the assessee u/s.143(1) of the Act by the CPC, Bengaluru, placed before us in the paper-book at page No.34 pointing out that the assessee had been rightly denied exemption in the said intimation. He contended that this intimation was made after passing of order by the Ld.CIT(E) and he pointed out that even the Ld.CIT(E) had noted the fact that the return of the assessee was “under processing”. He therefore contended that since the assessee had not violated the condition of having claimed exemption in any preceding year u/s.11, 12 of the Act, the order of the Ld.CIT(E) denying grant of registration, for this very reason in terms of Section 12A(1)(ac)(vi) sub-clause (B) of the Act, is not justified.

4. The Ld.DR, though did not dispute the facts stated by the assessee that subsequently the assessee had been denied exemption in AY 2022-23 in the intimation made u/s.143(1) of the Act, he however, vehemently supported the order of the Ld.CIT(E) on the ground that on the date of passing of the order, the assessee had claimed exemption u/s.11 of the Act.

5. Having heard the contentions of both the parties, we are in agreement with the ld.counsel for the assessee that the assessee having now demonstrated that it had not claimed any exemption u/s.11 of the Act in AY 2022-23, the impediment for the grant of registration as per the Ld.CIT(E), stands removed. The Ld.CIT(E) is directed therefore to grant registration to the assessee-trust u/s.12AB of the Act.

6. In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on 29t^h November, 2024 at Ahmedabad.