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Facts
The assessee, a charitable trust, did not file its original return of income for AY 2012-13 but filed a return only after a notice under Section 148 was issued. The Assessing Officer (AO) accepted the income declared but denied the exemption claim under Section 10(23C)(iiiae) because the original return was not filed.
Held
The Tribunal held that the denial of exemption solely on the ground of not filing the original return is not in accordance with the law. Section 139(4C) mandates filing of returns in specific circumstances but does not provide for denial of exemption for not filing the original return.
Key Issues
Whether denial of exemption under Section 10(23C)(iiiae) is justified solely on the ground that the assessee failed to file the original return of income.
Sections Cited
148, 10(23C)(iiiae), 139(4C), 250(6)
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER
1. The above appeal is filed by the assessee against order passed by the ld.Commissioner of Income (Appeals), Kolkata dated 04.01.2024 under section 250(6) of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short] for the assessment year 2012-13.
The grounds raised in the appeal by the assessee are as under:
The order passed by lower authorities is bad in law and required to be quashed.
2. Ld. JCIT (A) erred in law and on facts in reopening of assessment without observing any escapement merely for making fishing and roving inquiry.
Solitary issue, it was contended before us, related to denial of claim of exemption under section 10(23C)(iiiae) of the Act. The claim being denied, it was pointed out, for the reasons that the assessee had not filed original return of income, rather it had filed the return only in response to the notice under section 148 of the Act.
Referring to the facts of the case, it was pointed out that the assessee was a trust and had not filed its return of income for the impugned assessment year i.e. Asst.Year 2012-13. The Department was in possession of information that the assessee had a contract receipt of Rs.12,54,400/- from Ahmedabad Municipal Corporation during the year, therefore, the case of the assessee was reopened by issuing notice under section 148 of the Act.
In response to the same, the assessee filed return of income declaring income at Rs.1,00,760/-. The return filed was scrutinized by the AO and income declared therein accepted. The claim of the assessee for exemption under section 10(23C)(iiiae) of the Act was, however, denied for the reason that original return of income had not been filed by the assessee. The decision of the CIT(A) in this regard is as under:
V. DECISION: - I have gone through the detail assessment order passed by Assessing officer (AO) and details of submission given by appellant. The fact of the case is that the appellant trust had not filed its return of income for A.Y. 2012-13. The department was in possession of information that the assessee trust had received contract receipt of Rs.12,54,400/- from Ahmedabad Municipal Corporation during F.Y. 2011-12 (relevant to A:Y - 2012-13).After obtaining necessary approval from the higher authority the case of the appellant trust was reopened and notice u/s. 148 of the IT. Act was issued on 29.03.2019.The appellant had filed return of income for A.Y. 2012-13 on 13.12.2019 declaring total income of Rs.1,00,760/. The AO had not made any addition during assessment rather accepted total income of Rs.1,00,760/-, however appellant argued that AO erred in not allowing exemption of Rs.1,00,760/- u/s. 10(23C) (iiiae) of the Income Tax Act, 1961. The appellant trust had not filed original return within due date, rather it had filed return only in response to 148 notice. Under law, appellant only can claim exemption, if it had filed original return within due date. Further, AO had not specifically mentioned anything in assessment order denying exemption. Therefore, appellant's argument is rejected.
In the result appeal filed by appellant is dismissed.
During the course of hearing before us, since the order of the ld.CIT(A) did not reveal that under which provision of the Act, the assesse’s claim of exemption under section 10(23C)(iiiae) was denied, the ld.DR was directed to enlighten the Bench with regard to the same, to which he contended that the claim was denied in terms of provisions of section 139(4C) of the Act.
We have gone through the provisions of section 10(23C)(iiiae) of the Act which read as under:
10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—
…. ….. ….. ……
(23C) any income received by any person on behalf of— iiiae) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, if the aggregate annual receipts of the person from such hospital or hospitals or institution or institutions do not exceed five crore rupees. Explanation.—For the purposes of sub-clauses (iiiad) and (iiiae), it is hereby clarified that if the person has receipts from university or universities or educational institution or institutions as referred to in sub-clause (iiiad), as well as from hospital or hospitals or 4 institution or institutions as referred to in sub-clause (iiiae), the exemptions under these clauses shall not apply, if the aggregate of annual receipts of the person from such university or universities or educational institution or institutions or hospital or hospitals or institution or institutions, exceed five crore rupees; or
As per the said provision any hospitals or institutions, fulfilling conditions mentioned under the said clause and existing solely for philanthropic purpose and not for the purpose of profit are entitled to exemption of their entire income, provided their receipts from the running of such hospitals or institutions does not exceed Rs.5 crores. Thus, hospitals/institutions running wholly for philanthropic purpose, are entitled to claim exemption of their income if their gross receipts do not exceed Rs.5 crores.
The denial of claim of exemption by the assessee under such sub-clause is admittedly not for the reason that it does not qualify for the same on account of non-fulfillment of any of the criterion mentioned in the sub-clause. The denial of the same is only for the reason that the original return of income was not filed by the assessee. There is no mention of any specific provision under the Act, while denying this claim of the exemption for not filing original return. However, the ld.DR has referred to the provisions of section 139(4C) of the Act in this regard. The same are reproduced hereunder:
(1) Every person,— (a) being a company or a firm; or (b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed : …. ….. ….. ……
(4C) Every— (a) research association referred to in clause (21) of section 10; (b) news agency referred to in clause (22B) of section 10; (c) association or institution referred to in clause (23A) of section 10; (ca) person referred to in clause (23AAA) of section 10; (d) institution referred to in clause (23B) of section 10; (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (iiiab) or sub- clause (iiiad) or sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (iiiac) or sub-clause (iiiae) or sub-clause (via) of clause (23C) of section 10; (ea) Mutual Fund referred to in clause (23D) of section 10; (eb) securitisation trust referred to in clause (23DA) of section 10; (eba) Investor Protection Fund referred to in clause (23EC) or clause (23ED) of section 10; (ebb) Core Settlement Guarantee Fund referred to in clause (23EE) of section 10; (ec) venture capital company or venture capital fund referred to in clause (23FB) of section 10; (f) trade union referred to in sub-clause (a) or association referred to in sub-clause (b) of clause (24) of section 10; (fa) Board or Authority referred to in clause (29A) of section 10; (g) body or authority or Board or Trust or Commission (by whatever name called) referred to in clause (46) of section 10; (h) infrastructure debt fund referred to in clause (47) of section 10, shall, if the total income in respect of which such research association, news agency, association or institution, person or fund or trust or university or other educational institution or any hospital or other medical institution or trade union or body or authority or Board or Trust or Commission or infrastructure debt fund or Mutual Fund or securitisation trust or venture capital company or venture capital fund is assessable, without giving effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).
A perusal of the above would reveal that the said section only requires assessees claiming their incomes exempt under the specified clause, which includes 10(23C)(iiiae) of the Act also, to file their return 6 of income, if their income, without claiming exemption exceeds maximum limit, which is not liable to tax. Section 139(4C) of the Act, therefore, only mandates the filing of the return of income in specified circumstances by entities claiming their incomes as exempt under different provisions of the Act. Such section does not provide for denial of claim of exemption if the return of income is not filed.
Even otherwise, the income returned by the assessee and accepted by the AO amounts to only Rs.1,00,760/-. The assessee being a trust has been assessed in the capacity of AOP which finds mention in the body of the assessment order also. The basic limit upto which incomes of AOP’s are not subject to tax, it was pointed out to us was Rs.2,50,000/-. This was pointed out by the ld.counsel for the assessee and not controverted by the ld.DR. In view of the same, even considering the provisions of section 139(4C) of the assessee, the assessee was not required to file any return of income.
Therefore, it is evident from the above discussion that the denial of claim of exemption under section 10(23C)(iiiae) of the Act, was not in accordance with the provisions of law. The order passed by the ld.CIT(A) is therefore set aside.
In the result, the appeal of the assesse is allowed.
Order pronounced in the Court on 27th February, 2025 at Ahmedabad.