M/S. AURO LAB TRUST,,MADURAI vs. ITO, MADURAI

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ITA 3076/CHNY/2019Status: DisposedITAT Chennai21 August 2024AY 2014-1512 pages
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What did the Tribunal hold?

The tribunal held that Section 12A, which deals with conditions for applicability of Sections 11 and 12, requires registration under Section 12AA but does not stipulate that the registration must be in force. Therefore, the denial of exemption based on this interpretation was incorrect.

What were the facts?

The assessee, Aurolab Trust, appealed against the denial of exemption under Sections 11 and 12 of the Income Tax Act. The CIT(A) held that continuation of registration under Section 12A was a prerequisite for granting exemption.

What were the issues?

Whether continuation of registration under Section 12A is a mandatory pre-requisite for claiming exemption under Sections 11 and 12, and whether the generation of surplus alone disqualifies an entity from exemption.

Which sections of the Income-tax Act were involved?

Section 11,Section 12,Section 12A,Section 12AA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, C BENCH: CHENNAI

Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH

For Respondent: Shri K. Ravi, Advocate, Shri R. Clement Ramesh Kumar, CIT
Hearing: 12.08.2024Pronounced: 21.08.2024

PER JAGADISH, A.M : Aforesaid four appeals filed by the assessee for Assessment Years (AYs) 2011-12 to 2015-16 arises out of the common order of Learned Commissioner of Income Tax (Appeals)-2, Madurai [hereinafter “CIT(A)”] dated 23.09.2019. 2. The facts in all the four appeals of the assessee are identical and common grounds have been raised in all the appeals, all the appeals are decided by the common order. For brevity, we shall take up the the assessment year 2011-12 as lead case. The grounds raised by the assessee for A.Y 2011-12 are as under:

“1. The Order of the Learned Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case.

2.

The Commissioner of Income Tax (Appeals) erred in holding that continuation of registration u/s. 12A is a pre-requisite for granting exemption u/s. 11 and 12 of the Income Tax Act, 1961. Section 12A which deals with conditions for applicability of section 11 and 12 stipulate that on an application made by the trust, the trust should be registered under section 12AA. It does not stipulate that the registration u/s. 12AA should be in force.

3.

The Commissioner of Income Tax (Appeals) erred in holding that appellant has published the price list in its website and has enabled facilities such as online placement of or orders for supply of products. These are factually incorrect and not supported by any material.

4.

The Commissioner of Income Tax (Appeals) erred in observing in para 5 of the order that arguments made by the appellant were similar to those made before the Hon'ble ITAT in the appeal against the order of cancellation of registration of registration u/s. 12A of the Income Tax Act, 1961. The appellant had explained how the visionary had drafted the objects of the deed and how it was implemented till date, which details were not discussed in the order of the Hon'ble ITAT dated 11/05/201 1. 5 The Commissioner of Income Tax erred in ignoring that the working model of the appellant was not appreciated by the Tribunal while dismissing the appeal against cancellation of registration u/s.12A of the Income Tax Act, 1961. 6. Generation of surplus alone, would not make an entity a business entity. Any Business is carried on for the benefit of shareholders/stakeholders. In the case of the appellant, none of the trustees are benefited out of the surplus. Even the assessing officer has not made any allegations that the surplus is being misused by the trustees. The allegation that the donations are made to other trusts, Where there are common trustees also do not merit consideration. As the trusts to which donations were made also enjoy exemption under Income Tax Act, 1961 and have been subject to regular scrutiny by the department. Therefore, denial of exemption on the ground of surplus being generated is invalid in the eyes of law. Without prejudice to the above,

7.

The Commissioner of Income Tax (Appeals) erred in ignoring the submissions made on excluding Rs.11,65,89,634/- from the total income of the appellant. This amount can be added only u/s. 11 and if the Commissioner of Income Tax (Appeals) takes a view that provisions of section 11 and 12 will not apply in the absence of registration u/s. 12A, then this amount of Rs.11,65,89,634/ - cannot be brought to tax in the Asst. Year 2011-12. 8. For these and such other grounds that may be permitted to be raised during the For Aurolab Trust hearing of the appeal.”

3.

Ground No.1 is general in nature hence, no adjudication is required.

4.

Grounds No.2 to 6 are against confirming the denial of exemption u/s. 11 & 12 of the Income-tax Act, 1961 (hereinafter “the Act

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