SAHRUDAYA WESCO CREDIT,ERNAKULAM vs. CIT EXEMPTION, KOCHI

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ITA 430/COCH/2023Status: DisposedITAT Cochin23 October 2024AY 2022-23Bench: Shri Satbeer Singh Godara (Judicial Member), Shri Amarjit Singh (Judicial Member)3 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the issue back to the CIT(Exemption) for fresh adjudication. The assessee was given three opportunities to plead and prove its relevant facts, as the CIT's order did not adequately consider the assessee's submissions regarding the non-commercial nature of its activities.

What were the facts?

The assessee, Sahrudaya Wesco Credit, applied for renewal of registration under Section 12A(1)(ac)(iii) of the Income Tax Act. The CIT(Exemption) rejected the application, stating that the assessee's primary income was from microfinance activities (interest on advances, loan processing fees) which constituted over 99% of its income, and it received no voluntary contributions.

What were the issues?

Whether the assessee's microfinance activities qualify for exemption under Section 12A, and if the CIT adequately considered the assessee's submissions regarding the nature of its activities.

Which sections of the Income-tax Act were involved?

Section 12A(1)(ac)(iii),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Before: Shri Satbeer Singh Godara & Shri Amarjit Singh

For Appellant: Shri P.M. Veeramani, CA
For Respondent: Dr. S. Pandian, CIT-DR
Hearing: 22.08.2024Pronounced: 23.10.2024

O R D E R Per Bench

This assessee’s appeal for A.Y. 2022-23 arises against the Commissioner of Income Tax (Exemption)’s DIN & Notice No. ITBA/ EXM/F/EXM45/2022- 23/1051447418(1) dated 28.03.2023 in proceedings u/s. 250 of the Income Tax Act, 1961 (the Act).

Heard both the parties. Case file perused.

2.

Both the learned representatives invited our attention to the Commissioner of Income Tax (Exemption)’s detailed discussion in para 3 of his order denying section 12 Registration to the assessee as under: - “3. The submissions made by the assessee are verified. The financial statement filed for the FY 2021-22 shows that assessee has earned income from providing microfinance Sahrudaya Wesco Credit facilities in the form of interests on advances from self help groups units, loan processing fee and service charges which constitutes more than 99 percent of the income of the assessee. The provision of microfinance facilities cannot be equated with the object of providing relief to urban and rural poor as claimed by the assessee. Further, for the FY 2021-22 and 2021-22 the assessee has not received any voluntary contribution or donations. All the funds are mobilised through banks and financial institutions. The activity of on lending cannot be equated with providing relief to urban and rural poor. The receipts from microfinance activity are more than 90% of the total receipts.

4. In view of the facts and circumstances as above, this application in Form 10AB submitted by you for renewal of registration U/s 12(A)(1)(ac)(iii) is rejected.”

3.

Learned CIT-DR draws strong support from the above stated findings that the assessee’s major investment facilities has rightly been treated as not eligible for the impugned exemption.

4.

Learned counsel, on the other hand submits, that the assessee had filed cogent supporting materials before the Commissioner of Income Tax (Exemption) duly explaining the fact that the activities carried out on its behalf are not of commercial/business nature which has nowhere been considered as per law.

5.

Faced with this situation, we deem it appropriate to restore the issue back to the Commissioner of Income Tax (Exemption) for his afresh adjudication within three effective opportunities at the risk and responsibility of the taxpayer only to plead and prove all the relevant facts in consequential proceedings. Ordered accordingly.

6.

This assessee’s appeal is allowed for statistical purposes in above terms.

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