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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. MADHUMITA ROY & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 10.01.2020 passed by learned Commissioner of Income-Tax (Appeals)-I, Indore [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 21.12.2017 passed by learned ITO, Ward-2(3), Indore [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the assessee has filed this appeal on following grounds:
“(1) That impugned order passed by the Ld. CIT(A) is bad in law, without jurisdiction, it is based on incorrect interpretation of law and without allowing proper and reasonable opportunity of being heard, moreover the facts have also been incorrectly construed.
Confederation of Real Estate Developers Association of India Assessment year 2015-16 2. That on the facts and in the circumstances of the case the ld. CIT(A) erred in confirming the Ld. AO’s action for not allowing deduction u/s 12A without appreciating the fact that Ld. CIT(E) has not considered assessee’s application for registration on merits after the direction of Hon'ble I.T.A.T.
3. That on the facts and in the circumstances of the case the Ld. CIT(A) erred in confirming addition of Hotel expenses of Rs.44,846/- incurred during the members meeting.
4. That on the facts and in the circumstances of the case the Ld. CIT(A) failed to appreciate the fact that the assessee is a mutual association and entire receipt is from contribution and subscription from members except interest income therefore its income cannot be regarded as liable to Income Tax u/s 2(24)(vii) of the Act.
That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the action of the Ld. AO of not allowing basic exemption of Rs.2,50,000/-. The assessee being AOP and none of its member is entitle for any share, therefore entitle for basic exemption of Rs.2,50,000/-”
The registry has informed that that the present appeal is filed after a delay of 147 days and therefore time-barred. The Ld. AR prayed that the delay has occurred due to Covid-19 Pandemic. The Ld. AR further placed reliance on the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws has been granted and hence there is no delay in fact. We confronted the Ld. DR who agreed to the submission of Ld. AR. In view of this, the appeal is proceeded with for hearing, there being no delay.
Briefly stated the facts are such that the assessee is a company. It is incorporated as a Non-Profit Company u/s 25 of the Companies Act, 1956 w.e.f. 10.05.2011. It filed return of relevant AY 2015-16 declaring a total income of Rs. Nil which was subjected to scrutiny. Ld. AO issued statutory notices u/s 143(2)/142(1) which the assessee complied with. Finally, the Ld. AO completed assessment u/s 143(3) at a total income of Rs. 3,47,653/-. Aggrieved by assessment-order, the assessee filed appeal to Ld. CIT(A) but Confederation of Real Estate Developers Association of India Assessment year 2015-16 did not get any relief. Now, the assessee has come in this appeal before us assailing the order of Ld. CIT(A).
We may take a brief note as to how the “Nil” income declared by the assessee got converted into a total income of “Rs. 3,47,653/-” There are two reasons for this as detailed under:
(i) In the return of income, the assessee declared gross-receipts of Rs. 42,78,332/-; expenses of Rs. 39,75,525/- u/s 57; giving a net surplus of Rs. 3,02,807/-. But then the assessee claimed 15% of gross- receipts of Rs. 42,78,332/- restricted to the available surplus of Rs. 3,02,807/- as a standard-exemption u/s 11(1)(a) of the act “under protest” for the reason that its registration u/s 12A / 12AA was pending before Commissioner of Income-tax (Exemption). We would discuss a little later as to how and why such registration is claimed to pending. While completing assessment, Ld. AO however did not grant he standard-exemption of Rs. 3,02,807/-. Ld. CIT(A) also upheld the disallowance by observing in Para No. 4 of his order:
“During the appeal proceedings, it has been observed that the Commissioner of Income-tax vide his order dated 09.07.2012 had rejected the application of the appellant u/s 12AA of the IT Act. The appellant has contended that Hon’ble ITAT has directed the Ld. CIT to consider the appellant’s application on merit and the appellant’s application u/s 12AA is under consideration with Ld. CIT(Exemption). It is a settled matter that no exemption can be allowed during pendency of application for registration u/s 12AA of the IT Act. Thus, this ground of appeal is dismissed.” (ii) In the return of income, the assessee claimed a deduction of Rs. 44,846/- as “Meeting Expenses” of members which is incurred on serving “liquor” to its members in a hotel. Lower authorities have not allowed this deduction for the reason that the assessee could not file any explanation with regard to this expenditure, more particularly for its expediency.
Confederation of Real Estate Developers Association of India Assessment year 2015-16 5. During hearing before us, Ld. AR has filed a Paper-Book containing 121 pages; a Written-Submission dated 16.08.2021; another Written- Submission dated 31.12.2021 and also made oral pleadings. Ld. DR has made oral pleadings only. We have heard the learned Representatives of both sides at length and perused the material held on record.
Ground No. 1:
Ground No. 1 is general and does not require any adjudication from us.
Ground No. 2:
This ground reads as under:
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the Ld. AO’s action for not allowing deduction u/s 12A without appreciating the fact that the Ld. CIT(Exemption) has not considered assessee’s application for registration on merits after the direction of Hon’ble ITAT.
Apropos to this ground, the Ld. AR briefly explained that history and status of assessee qua the grant of registration u/s 12A / 12AA. Ld. AR submitted that the assessee-company is a Confederation of Real Estate Developers Association of India (CREDAI), as the name indicates. It is a Non- Profit Company incorporated u/s 25 of the Companies Act, 1956 w.e.f. 10.05.2011. It submitted an application dated 04.01.2012 to CIT(Exemption) for grant of registration u/s 12A / 12AA. However, the Ld. CIT(A) rejected application for non-prosecution. Against such rejection- order, the assessee went in appeal before ITAT, Indore in ITA No. 501/Ind/2012. Ld. AR submitted that the said appeal came to be decided vide order 10.05.2013 (copy of the order placed at Page No. 51 to 54 of the Paper-Book) wherein the Hon’ble Co-ordinate Bench of ITAT remanded the matter of registration to CIT(Exemption) by holding thus:
Confederation of Real Estate Developers Association of India Assessment year 2015-16 “2. We have considered the rival submissions and perused the material available on record. The facts in brief, are that the assessee confederation/association applied for registration u/s 12A of the Act on 4.1.2012. To verify the condition of registration a latter was claimed to be issued on 12.1.2012 to the assessee, fixing the date of hearing for 30.1.2012, in which the assessee was asked to produce the books of accounts and other relevant details. As per the impugned order, the assessee did not attend. An inspector was also claimed to be deputed to verify the activities of the assessee. As per the report of the Inspector, no activities of the association were found and the association is merely dealing with the real estate business which are of commercial in nature. However, before us the stand of the assessee is that the report of the Inspector was never supplied to the assessee, for which our attention was invited to the pages 41 & 42 of the paper book wherein a request has been made to supply the report of the Inspector. The assessee has also filed an affidavit (page 43 of the paper book), stating that the Inspector never visited the office situated at 401, Shri Classic Arc, 79, Bhima Nagar, Anand Bazar, Indore and never met the President in connection with the application filed for registration u/s 12A of the Act. Keeping in view the totality of facts and circumstances available on record/asserted before us, we are of the view that no person should be condemned unheard, therefore, in the interest of justice, we remand this appeal to the file of the Ld. CIT for fresh consideration. The ld. Commissioner is directed to examine the claim of the assessee within the ambit of the provisions of the Act and after providing due opportunity of being heard and decide in accordance with law. The assessee is also at liberty to furnish evidence, if any in support of its claim.”
Ld. AR submitted that pursuant to the aforesaid order of ITAT, Indore, the CIT(Exemption) was required to pass an order on merit in the matter of grant of registration of assessee. But the Ld. CIT(Exemption) has not done so till now. It is further submitted that the assessee has also filed reminder- letters dated 17.08.21 and 06.10.21 to Ld. CIT(Exemption) vide emails sent to BHOPAL.CIT.EXMP@incometax.gov.in (copies of letters placed at Page No. 4 to 9 of the Written-Submission dated 31.12.2021) but still no action has been taken. The contents of both of these letters are identical, one of them is reproduced below:
Confederation of Real Estate Developers Association of India Assessment year 2015-16 Confederation of Real Estate Developers Association of India Assessment year 2015-16
Thus, it is strongly canvassed by Ld. AR that grant of registration is still pending before Ld. CIT(Exemption) in assessee’s case. At this stage, the assessee has also pointed out that the tax-authorities have granted registration to assessee u/s newly inserted section 12AB for AY 2022-23 to 2026-27 vide order dated 18.10.2021. A copy of the order is placed before us. Thus, the Ld. AR strongly claims that the assessee deserves registration u/s 12A / 12AA for earlier assessment-year as well.
Ld. AR also pointed out that similar bodies of other locations in the country, have already got registration from tax-authorities. Ld. AR has placed instances of following bodies:
(i) CREDAI, Mumbai has got registration from Director of Income-tax (Exemptions), Mumbai w.e.f. 25.11.1999 vide order No. DIT(E)/MC/12-A/35346/2001-02 dated 07.09.2001 (Paper Book Page No. 117)
(ii) Forum of Real Estate Developers and Integrated Enterperneurs of National Capital Region of Delhi has got registration from Director of Confederation of Real Estate Developers Association of India Assessment year 2015-16 Income-tax (Exemption), New Delhi w.e.f. 01.04.2003 vide order No. 2004-05/F-257/04/844 dated 24.09.2004.
Thus, the Ld. AR submits that the assessee ought to have been granted registration, more so pursuant to the direction of Hon’ble Co- ordinate Bench in assessee’s own case in Indore in ITA No. 501/Ind/2012 (supra). But since the registration-application is still hanging at the level of CIT(Exemption), the assessing authorities have been denying exemption claimed by assessee. Ld. AR prays to take a judicious decision in the matter.
Ld. DR has dutifully supported the orders of lower authorities but could not plead any objection against the aforesaid submissions made by Ld. AR.
We have considered rival submissions and perused the material held on record. After a thorough discussion in the following paragraphs, we do not need to discuss anything more, suffice it to sum up the key points coming from earlier discussions i.e. (i) that the ITAT, Indore Bench has already remanded the case to Ld. CIT(Exemption) for deciding the registration-application of assessee on merit; (ii) that the Ld. CIT(A) has not passed any order pursuant to such direction; (iii) that the assessee has been granted registration u/s 12AB w.e.f AY 2022-23; and (iv) that similar bodies have also been granted registration u/s 12A / 12AA much earlier. With this set of facts, we find it appropriate to direct the Assessing Officer in present case to ascertain the status of pending-application of assessee from the office of Ld. CIT(Exemption) and thereafter take a call on the allowability or otherwise of exemption of Rs. 3,02,807/- claimed by the assessee “under protest” in terms of section 11(1)(a) read with section 12A. With this, Ground No. 2 is remanded back to Ld. AO in the terms indicated here.
Ground No. 3:
Confederation of Real Estate Developers Association of India Assessment year 2015-16 15. This ground relates to the disallowance of Rs. 44,846/-.
During assessment-proceeding, Ld. AO observed that the assessee claimed a deduction of Rs. 44,846/- as “Meeting Expenses” of members which was incurred on serving “liquor” to its members in a hotel. The lower authorities have not allowed this deduction for the reason that the assessee has not filed any explanation of this abnormal expenditure. Even during hearing, the Ld. AR has not been able to satisfy us with regard to the expediency of this expenditure. Being so, we uphold the disallowance made by lower authorities. Ground No. 3 is, therefore, dismissed.
Ground No. 4 and 5:
These grounds become academic at present for the reason that we have remanded Ground No. 2 to Ld. AO. Ground No. 4 and 5 are dismissed therefore.
In the result, this appeal of assessee is partly allowed for statistical purpose.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 13/12/2022.