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Income Tax Appellate Tribunal, DELHI BENCH, ‘C’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI ANUBHAV SHARMA
ORDER PER SHAMIM YAHYA, AM,
This appeal by the assessee is directed against the order of the Ld.
CIT(Exemption), Chandigarh, wherein, the Ld. CIT(E) has rejected the grant of registration application u/s 12AA of the Act.
Brief facts of the case are that the assessee in this case has filed form No.10A on 24.06.2020 seeking registration u/s 12AA of the Act. The Ld. CIT(E) noted that the application reveals that the applicant is a trust which was formally created on 18.02.2019. Thereafter, the Ld. CIT(E) referred to the query which he raised to the assessee. After elaborately referring to the queries and he observed that the reply of the assessee to the above queries was received through ITBA portal which was placed on record and examined thoroughly. However, the Ld. CIT(E) rejected the request for registration by observing as under:-
“6. After considering the submissions on record, it is observed that the applicant has shown an amount of Rs. 2,02,35,000/- as Corpus Fund in its Balance Sheet for F.Y. 2019-20. The society has diverted these receipts in the name of corpus to the Balance Sheet which, rather, should, have been taken as income in the Income & Expenditure account for the respective financial year. As per the provisions of the Income Tax Act, 1961, corpus contribution would be exempt only under. Section 11(1 )(d) and an assessee can claim benefit u/s 11 only when such assessee is registered u/s 12A or 12AA. This assertion is not only backed by the statute but also by the decision of Hon’ble Supreme Court in the case of CIT vs. U P Forest Corporation, 230 ITR 945 (SC) [1998] and decisions of various other Hon'ble High Courts like: (A) .New Life in Christ Evangelsit Association vs. CIT reported in 246 ITR'532- (Madras) [2001]; (B) CIT vs. Red Rose School reported in 212 CTR (All) 394; (C) M. Visvesvaraya Industrial Research & Development Centre vs. ITAT reported in 251 ITR 852 (Mumbai) [ 2001]; (D) CIT vs. Otacamund Gymkhana Club reported in 110 ITR 392 (Madras) [1977] and (E) Gouri Shankar Deity vs. Union of India 145 ITR 67 (MP) [1984], Before the period of grant of registration, all voluntary contributions (including the ones with specific direction that they shall form part of the corpus) are the income of a charitable, religious or charitable cum religious trust. Therefore, in the present case, the corpus fund shown by the applicant on record during FY 2019-20 is the income of the applicant and, thus, the trust/society becomes liable to pay tax for that year which has not been paid. The applicant should have added the amount shown against corpus funds during the year into its income and then it should have filed the correct ITR and paid taxes. Unless the legitimate tax against the income, as discussed above, is paid, the application for registration u/s 12AA of the Act cannot be considered. The trust has illegally taken the benefit of provisions of the Income Tax Act for getting tax exemption benefits and has tried to subvert the Income Tax laws. This act of the applicant is unacceptable and the jurisdictional assessing officer will be intimated to take remedial action in the matter.
7. In light of the above discussion, I do not find the applicant trust eligible for getting registration u/s 12AA of the Act and, therefore, the present application for registration u/s 12AA of Income Tax Act is, hereby, rejected.” 3. Against the above order, the assessee is in appeal before us.
We have heard both the parties and perused the records. The Ld. Counsel for the assessee submitted that the assessee has never been given opportunity to submit its pleadings on the issues raised by the Ld. CIT(E). She pleaded that in the substantial interest of justice, an opportunity should be granted before the Ld. CIT(E) to the assessee to canvass its case. She submitted that the intervening period of the application was affected by Covid pandemic. She submitted that the limitation period in general was also extended by Hon’ble Supreme Court during this period.
Per contra, Ld. DR submitted that it is not clear whether the assessee has submitted all the requisite material as sought by the Ld. CIT(E) or not.
Upon careful consideration, we find that no adverse inference made by the Ld. CIT(E) for lack of material supplied. Hence, the DR’s objection is not sustainable. A reading of the aforesaid order also reveals that the basis of Ld. CIT(E) denial of exemption is that in the intervening period all the income including that of donation to corpus funds, should have been treated as income of the assessee and taxes paid thereon. The assessee seeks an opportunity before the Ld. CIT(E) to canvass its case.
In the substantial interest of justice, we remit the issue to the file of the Ld. CIT(E). The Ld. CIT(E) is directed to consider the issue afresh after giving opportunity of hearing to the assessee.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 15th September, 2022.