DIOCESE OF SHIMOGA ,SHIMOGA vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 , SHIMOGA

The assessee is aggrieved by the decision of ld CIT(A) in confirming the action of the AO in rejecting the exemption claimed by the assessee u/s 11 of the Act, in disallowing depreciation and brought forward deficit.

The ld AR submitted that the assessee was granted registration u/s 12A of the Act w.e.f 21/7/1989, which was obtained on the basis of trust deed dated 14/11/88. During the course of assessment proceedings, the AO noticed that the assessee has executed a new trust deed on 22/12/2005 and the assessee has not got approval for the same from ld CIT(A). The AO took the view that the assessee should have got the prior approval of the CIT with regard to changes made in the trust deed and since the said approval was not obtained the assessee, the assessee cannot be allowed exemption u/s 11 of the Act as registration granted u/s 12A on the basis of earlier trust deed shall no longer exist. Accordingly he rejected the claim for exemption u/s 11 of the Act. The AO also disallowed the claim for depreciation and also disallowed deduction of brought forward losses. The ld CIT(A) confirmed the order passed by AO and hence the assessee has filed this appeal.

The ld AR for the assessee submitted that the changes made in the trust deed has since been approved by ld CIT(E) and the same has communicated to the assessee on 20/4/2015 by the DCIT, Headquarters. He submitted that the assessee has received the approval subsequent to the completion of the assessment and hence it could not be given to the AO. He further submitted that the ld CIT(A) has not taken note of this approval. He further submitted that the issues relating to disallowance of depreciation and brought forward deficit are covered by the decisions rendered by the Tribunal and High Courts. Accordingly he prayed that all the matters may be restored to the file of the AO for examining them afresh.

The ld DR also agreed to the prayer put forth by ld AR.

We notice that the assessee has submitted that the amendment made to the trust deed has been approved by the ld CIT(A) subsequent to the completion of the assessment and hence the AO did not have the benefit of considering the same. We notice that the rejection of exemption u/s 11 was made only for the reason that the amendments made to the trust deed were not approved by Ld CIT(E). Accordingly, we are of the view that the issue relating to the eligibility of the assessee to claim exemption u/s 11 of the Act requires fresh examination in view of the changed circumstances stated above. Further, the assessee submitted that the issues relating to disallowance of depreciation and brought forward deficit amount are covered by the decision rendered by the Tribunals/High Courts, which have not been considered by the AO. Accordingly we are of the view that all the issues may be restored to the file of the AO. Accordingly, we set aside the order passed by ld CIT(A) and restore all the issues to the file of the AO for examining them afresh. After affording adequate opportunity of being heard, the AO may take appropriate decision in accordance with law.

In the result, the appeal of the assessee is treated as allowed for statistical purposes.