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Facts
The assessee, a charitable trust, filed its return claiming exemption under Section 11. The CPC processed the return and disallowed the exemption, treating certain amounts as income. The assessee's appeal before the CIT(A) was dismissed, primarily on the grounds of not filing an audit report in Form 10BB and not providing details of registration under the new regime.
Held
The Tribunal held that the requirement to file Form 10BB came into effect from AY 2023-24 onwards, not for AY 2021-22. The assessee had a valid 12A registration until AY 2021-22 and had applied for new registration under the amended Act. The Tribunal found that the CPC and CIT(A) erred in disallowing the exemption.
Key Issues
Whether the exemption claimed by the assessee under Section 11 was rightly disallowed by the CPC and upheld by the CIT(A) based on non-compliance with Form 10BB and registration under the new regime?
Sections Cited
143(1), 11, 12A, 12AB, 10BB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI AMITABH SHUKLA
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee Educational Trust against the order of the Learned Commissioner of Income Tax (Appeals)/Addl./JCIT (A), (hereinafter in short "the Ld.CIT(A)”), Mumbai, dated 13.12.2023 for the Assessment Year (hereinafter in short "AY”)
2021-22.
The main grievance of the assessee is against the action of the First Appellate Authority dismissing the grounds of appeal raised by the assessee against the intimation passed by the CPC, Bangalore, u/s.143(1) of the Income Tax Act, 1961 (hereinafter in short "the Act”) dated 23.08.2022 for AY 2021-22.
Brief facts are that the assessee noted to be a Charitable Trust established on 16th September, 1988, with the sole objective of providing medical and educational relief to the poor, and registered under section 12A of the Act on 22nd February 2007; and the assessee filed for AY 2021-22, its original return of income (RoI) on 30.03.2022 claiming exemption u/s.11 of the Act to the extent of Rs.89,31,093/- and consequently admitted ‘Nil’ income. Later, the RoI was processed by the CPC and by intimation dated 23.08.2022, assessed income at Rs.1,60,31,093/- by disallowing exemption and consequently treated the entire application of income of Rs.89,31,093/- and the balance in the corpus fund of Rs.71 lakhs as income of the assessee (according to the assessee, the corpus fund of Rs.71 lakhs was inadvertently disclosed by it as opening balance of the corpus fund as on 31.03.2021 [in Sl.No.A(i) of Schedule-VC (corpus fund definition) instead of Schedule-J (balance of the corpus fund as on the last day of the previous year)] as there was no clarity in disclosing the balance of the corpus fund. However, pursuant to a rectification petition filed by assessee, the CPC deleted the corpus donation of Rs.71 lakhs [vide order No.CPC/2122/U7/325010452,] but sustained addition of Rs.89,31,093/-
Aggrieved by the aforesaid action of the CPC, i.e. the action of the CPC making addition of Rs.89,31,093/-, the assessee preferred an appeal before the Ld.CIT(A), who dismissed it on the ground that assessee didn’t file Audit Report within due date in Form 10BB which requirement of Law according to Ld AR came into force from AY 2022-23 and not in this year.
Therefore, according to Ld AR, the impugned action of Ld CIT(A) is per-se erroneous. Hence, the assessee is in appeal before this Tribunal.
We have heard both the parties and perused the material available on record. We note that the CPC had disallowed exemption on the ground that the assessee didn’t give the details of registration u/s.12AB of the Act for claiming exemption [i.e., as per the amendment brought in from 01.06.2020] and disallowed the exemption by noting as under:-
"In Schedule Part A General -"Details of registration or approval under Income Tax Act" details of Section 12AB or 10(23C)(iv)/ 10(23C)(v)/ 10(23C)(vi)/ 10(23C)(via) is not provided in the column "Section under which the registration is applied". The Act has been amended from 01/06/2020, and all the entities have to get new registration/approval u/s 12AB or 10(23C) (iv)/ 10(23C)(v)/ 10(23C)(vi)/ 10(23C)(via) to be eligible for exemption. Since in your case, new registration/approval details are not available, exemption claimed in S.No.4i to 4viii in Schedule Part B-Tl is not allowable.
On appeal, the First Appellate Authority is noted to have found out another reason i.e. the assessee didn’t furnish the Audit Report within the due date as required in Form 10BB. However, it has been brought to our notice that Form 10BB has to be filed only from AY 2023-24 onwards; and not for the relevant AY 2021-22, and as per the Law in force for AY 2021- 22, the assessee had to file Audit Report in Form 10B, which assessee had filed albeit belatedly on 30.03.2022 (‘43’ days delay); and moreover, it was brought to our notice that the assessee had already filed application before the competent authority for condonation of delay in filing of Form 10B. Be that as it may, it was brought to our notice that the assessee had in fact filed Form 10B along with Return of Income and the CPC had processed and passed the intimation order only on 23.08.2022 meaning the Audit Report in Form 10B was already before the CPC when the return was processed.
Further, we find that the CPC erred in disallowing exemption u/s.11 of the Act for AY 2020-21, only on the ground that assessee didn’t give the details of registration under the new regime which came w.e.f.01.06.2020 because, assessee was having valid 12A registration from 22.02.2007 onwards, which fact is discernable from Page No.12 of the Paper Book. It is further noted that after the amendment has come into effect from 01.06.2020, the assessee had applied for new registration u/s.12A(1)(ac)(i) of the Act and has been granted registration u/s.12AB(i)(a) for five (5) years from AYs 2022-23 to 2026-27, which fact is discernable from perusal of Page No.11 of the Paper Book. Since the assessee has been enjoying 12A registration up to 2021-22 ( i.e. before the new regime came into force), the CPC erred in denying the exemption u/s.11 of the Act for the relevant AY 2021-22; and the First Appellate Authority is noted to have misdirected itself from the grounds raised by the assessee and has found out a new issue i.e., non-filing of Form 10BB which is erroneous because such a requirement of law came in subsequent AY i.e. AY 2022-23 onwards; and the Ld.CIT(A) has also not rightly appreciated the fact that the assessee was having valid registration for the relevant assessment year under consideration as noted (supra). Therefore, the impugned action of the Ld.CIT(A) can’t be countenanced.
Having said so, we note that the assessee has filed for condoning the delay in filing of the Audit Report in Form 10B (delay of ‘43’ days) on 24.02.2024 i.e. after the impugned order of the Ld.CIT(A). Be that as it may, since we find that the foundation of the action of the CPC in denying exemption to the assessee was that it was not having valid registration u/s.12A of the Act, which we find to be erroneous as noted (supra) and the Ld.CIT(A) also misdirected itself on an erroneous ground to decline exemption u/s.11 of the Act, which is legally un-sustainable and that too, without giving proper opportunity to assessee is found to be legally fragile, therefore, we set aside the impugned order of the Ld.CIT(A) and taking judicial notice of the fact that assessee did enjoy registration as
per old regime u/s.12A of the Act up to AY 2021-22 & under the new regime for five years from AY 2022-23 to AY 2026-27, which was the reason given by CPC for declining exemption u/s.11 of the Act, which foundation is not existing as noted supra, therefore, the assessee is (AY 2021-22) M/s. Eswari Education Trust entitled to exemption u/s.11 of the Act and direct deletion of Rs.89,31,093/-. And since the CPC has already deleted Rs.71 lakhs vide order No.CPC/2122/U7/325010452, the appeal of the assessee is allowed.
In the result, appeal filed by the assessee is allowed.
Order pronounced on the 09th day of October, 2024, in Chennai.