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Facts
The assessee, a charitable trust, was denied exemption under Section 11 of the Income Tax Act for AY 2011-12 for not furnishing the registration certificate under Section 12A. The Assessing Officer treated corpus donations as income and disallowed depreciation. The CIT(A) upheld this order.
Held
The Tribunal, following the Supreme Court's decision in Maharishi Institute of Creative Intelligence, held that the assessee was eligible for exemption under Section 11, as it had a registration under Section 12AA from 1987 and had been granted exemption in previous years. The denial of exemption solely based on the non-production of the 12A certificate was set aside.
Key Issues
Whether the denial of exemption under Section 11 was justified due to the non-production of the Section 12A registration certificate when the assessee had historical registration and prior year exemptions. Whether corpus donations are taxable as income and whether depreciation is allowable.
Sections Cited
250, 11, 12A, 143(3), 147, 148, 12AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the assessee directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC] under section 250 of the Income Tax Act, 1961 dated 03.07.2024for the A.Y.2011-12. The Assessee has raised the following grounds of appeal :
“1] The learned CIT(A) erred in holding that the assessee was not entitled to claim exemption u/s 11 since the assessee could not furnish the registration certification u/s 12A of the Act.
21 The learned CIT(A) erred in not appreciating that the assessee was charitable trust registered u/s 12A of the Income Tax Act and it was also granted exemption in the earlier years and therefore, simply because, the assessee could not produce the registration certificate u/s 12A could not justify the disallowance of claim of exemption u/s 11 of the Act.
3] The learned CIT(A) failed to appreciate that the assessee was granted exemption u/s 11 in the earlier years and therefore, even during the year under consideration the assessee should have been granted u/s 11 of the Act.
4] Without prejudice, the learned CIT(A) erred in taxing the corpus donations as an income of the assessee without appreciating that the corpus donations were capital receipts and hence, the same could not be taxed as an income of the assessee.
5] The learned CIT(A) erred in not granting depreciation in respect of the assets owned by the assessee trust and the same may kindly be allowed.
61 The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
Submission of ld.AR : 2. Ld.AR filed a paper book containing 48 pages. Ld.AR submitted that the Assessing Officer has denied benefit of Section 11 of the Act, only because Assessee failed to file copy of Certificate issued u/s.12A of the Act. However, in earlier assessment year for A.Y.2010-11 the Assessing Officer u/s.143(3) of the Act, had allowed benefit of Section 11 of the Act. Assessee is eligible for depreciation and ld.CIT(A) has erred in not allowing the same.
Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of Assessing Officer(AO) and ld.CIT(A).
Findings & Analysis : 4. We have heard both the parties and perused the material placed before us. In this case, Assessing Officer issued notice u/s.148 of the Act for A.Y.2011-12. The assessee filed Return of Income in response to notice u/s.148 of the Act. Assessee in the Return of Income had shown total income of Rs.32,72,873/- and claimed Rs.34,18,631/- as applied for Charitable Purpose. Thus, Assessee had shown total income at Rs.Nil in the Return of Income. Assessee filed copy of Income and Expenditure Account, Balance Sheet along with Return of Income. The Assessing Officer vide order dated 31.12.2018 passed u/s.143(3) r.w.s 147 of the Act, held that Assessee is not eligible for exemption u/s.11 of the Act, as Assessee had not filed copy of Registration u/s.12A of the Act. The relevant paragraph of the Assessment Order is reproduced as under : “10. The capital receipts of the trust are brought to tax as the assessee is treated as an AOP. The amount of Rs 22,08,407/- being corpus is added to the total income of the assessee.
11. In view of the discussion Income as per income and Expenditure Account Rs. 10,64,466/- Add: Corpus donations received during the year Rs.22,08,407/- Total Income Rs. 32,72,873/- Less: expenditure claimed Rs. 2,56,774/- Total Assessed Income Rs 30,16,099/- 4.1 Assessing Officer also did not allow depreciation claimed by assessee stating that no evidence has been produced by Assessee regarding ownership of the assets claimed by assessee in the Balance Sheet.
4.2 Aggrieved by the assessment order, assessee filed appeal before the Ld.CIT(A). The relevant paragraph 5, 6 and 7 of the ld.CIT(A)’s order is reproduced as under : “5. The assessment of receipts of the Trust are brought to tax as the assessee's income of Rs.22,08,407/- being corpus fund which is rightly added to the total income of the Trust. The status of the assessee is AOP. Addition of corpus donation of Rs.22,08,407/- is confirmed. The assessment of Rs.3016099/- as income of the FY 2010-11 is confirmed.
6. Depreciation has not been claimed by the Trust in the earlier years in AYs 2008-09 and AY 2009-10.
7. There was no addition to fixed assets during the relevant FY The assessee could not justify its claim of depreciation this year and hence rightly rejected by the AO.
4.3 Aggrieved by the same, Assessee filed appeal before this Tribunal.
Delay : 5. There is a delay of 176 days in filing appeal before this Tribunal. The Trustee has filed Affidavit. We have perused the Affidavit and convinced that there is sufficient and reasonable cause for delay. Therefore, the Delay is condoned.
It is a fact that Assessee is a Charitable Trust registered under Bombay Public Trust Act. It is observed that for A.Y.2010-11, Assessee was allowed exemption u/s.11 of the Act. The relevant paragraph 4 and 5 of the Assessment Order u/s.143(3) dated 26.12.2012 for A.Y.2010-11 is reproduced here as under : “04. The assessee is Trust formed on 22/06/1998 registered number 2683/ Pune and registered under BPT Act sith Charity Commisioner. Pune The Trust also been registered u/s 12AA of the Income tax Act, 1961. The assessee's trust objects includes the Shree Mahaveer Research Foundation Trust is established for charitable Social and educational purpose Major activities of trust include running of Bhojanshala, Gaushala, Anathashram Sadharmil Bhakti etc. The object of the trust includes spreading and promotion of education or learning in all its fields including yoga, meditation, spiritualism, spiritual sciences and ideological studies. The trust is engaged in establishment, maintenance and support of libraries, museum, reading rooms and other means of advancement of education and knowledge Trust is also engaged in providing medical relief and spreading knowledge of health and hygiene Trust uses its funds for providing grant relief by way of giving donations. contributions, subscriptions, monetary or financial assistance or aid to dump. blind deaf, orphans, widows and poor or needy person Trust is also engaged in opening and running community centers, guest house, dharmashalas and satri niwas at various cultural and historical centers. Trust also gives donations to Public Charity Trusts with similar objects the trust.
On verification and after discussion, total income will be recomputed as below :
Total Income Rs.Nil/- Assessed accordingly, Issue demand notice and challan. Tax and interest payable is as per ITNS 150 enclosed.”
6.1 It is also noted that Assessee have valid 80G Certificate issued on 30.11.1999, then it was renewed vide order dated 02.06.2003.
The Assessing Officer has denied exemption u/s.11 of the Act, because Assessee could not file copy of registration u/s.12AA of the Act. The Commissioner of Income Tax(Exemption) is the Authority who grants registration u/s.12AA of the Act. The Assessing Officer- DCIT(Exemption)[HQ, Pune] who passed the order u/s.143(3) r.w.s 147 for A.Y.2011-12 works under Commissioner of Income Tax(Exemption). Thus, the DCIT(Exemption-HQ Pune) had access to the records of the Commissioner of Income Tax(Exemptions) to verify Certificate of the Assessee-Trust. However, Assessing Officer failed to verify the same. It is also observed that for A.Y.2010-11, the ACIT, Circle-6, Pune had granted exemption u/s.11 of the Act, to the assessee. In the Assessment Order for A.Y.2010-11, the Assessing Officer specifically mentioned that Assessee is registered u/s.12AA of the Act.
7.1 The Hon’ble Supreme Court in the case of Maharishi Institute of Creative Intelligence U.P. Lucknow Vs. CIT(Exemption) 454 ITR 533 (SC) vide order dated 18.04.2023 held as under : 8. Having heard the learned counsel appearing for respective parties and taking into consideration that since1987 from the date on which the assessee applied for registration under section 12A, the assessee continued toavail the benefit of exemption under section 12A at least up to the assessment year 2007-2008.
9. The aforesaid is not disputed by the learned counsel appearing on behalf of the revenue. It is required to benoted that even post 1997 also the assessee continued to avail the exemption under section 12A on the basis ofits registration in the year 1987.
In that view of the matter, the Assessing Officer was justified in granting the benefit of exemption undersection 12A for the assessment year 2010-2011. What was required to be considered was the relevantprovision prevailing in the year 1987, namely, the day on which the assessee applied for the registration. Atthe relevant time there was no requirement of issuance of any certificate of registration.
Be that as it may, the fact remains that for all these years after 1997 till the year 2007-2008 when theassessee continued to avail the benefit of exemption solely on the basis of the registration in the year 1987 andit was never the case on behalf of the revenue and even the Commissioner that in the earlier years there wasany certificate of registration or the registration was not granted. Even from the material on record, namely, acommunication dated 3-6-2015 which was considered by the ITAT, it is apparent that the assessee was grantedregistration on 22-9-1987. Therefore it cannot be said that there was no registration at all.
In view of the above, the impugned judgment and order passed by the High Court is erroneous and isunsustainable and the same deserves to be quashed and set aside and is accordingly quashed and set aside. Theorder passed by the ITAT is hereby restored.
The present appeals are accordingly allowed to the aforesaid extent.”
7.2 It is not a case of the Revenue that Registration u/s.12AA has been cancelled by CIT(Exemption). Therefore, since Assessing Officer for A.Y.2010-11 has mentioned that Assessee has registration u/s.12AA of the Act, respectfully following the decision of Hon’ble Supreme Court (supra), we hold that Assessee is eligible for Exemption u/s.11 of the Act. Accordingly, we direct the Assessing Officer to allow the exemption u/s.11 of the Act. Accordingly, Ground No.1, 2, 3 and 4 raised by the Assessee are allowed.
Ground No.5 : 8. Ground No.5 is regarding Depreciation. The AO is directed to verify claim of the Assessee in the light of the fact that Assessee is eligible for Exemption u/s.11 of the Act. Assessing Officer shall provide opportunity to the Assessee. The Assessee shall file necessary details before the Assessing Officer. Accordingly, Ground No.5 raised by the assessee is allowed for statistical purpose.
In the result, appeal of the assessee is Partly Allowed. Order pronounced in the open Court on 27 May, 2025.