ITAT upholds CIT(A) Decision on Exemption u/s 11 Despite ITR-6 Filing, Citing Consistency in Tax Treatment Across A.Ys [Read Order]

The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax (Appeals)[CIT(A)] decision granting exemption under Section 11 of the Income Tax Act,1961 despite the return being filed using ITR-6. It emphasized consistency in tax treatment across assessment years, noting that similar circumstances in prior years had resulted in granted exemptions.

The Revenue-appellant had appealed against the CIT(A)'s order dated May 3, 2024, challenging the exemption under Section 11 despite the return being filed with ITR-6 and raising issues on res judicata and depreciation for assets acquired with government grants.

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Ambur Economic Development Organization,the respondent-assessee,had filed its income return using ITR-6 and was engaged in executing common effluent treatment plants for leather industries in Tamil Nadu. The organization received grants from the Government of India and contributions from promoters for its projects. During scrutiny, the assessing officer (AO) was initially requested to transfer the assessment to a territorial officer but was later informed that the assessment could continue.

The AO noted that the organization had claimed depreciation of approximately Rs. 9.96 crores and had received grants totaling Rs. 45,43,90,460, which were utilized for asset acquisition. During the assessment, the organization revised its income application, claiming Rs. 2,26,42,024 as capital expenses, arguing that it should be treated as a registered entity under Section 12AA, thus allowing exemption under Section 11 despite the ITR-6 filing.

The AO had added amounts to the returned loss of Rs. 28,82,07,812, resulting in a profit of Rs. 2,84,44,173, which included depreciation and other additions. The CIT(A) upheld the organization’s exemption under Section 11, citing consistency with previous years where similar circumstances had led to granted exemptions.

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During the appeal, the Departmental Representative (DR) supported the AO's position, while the Authorized Representative (AR) defended the CIT(A)'s decision, providing previous orders as evidence.

The tribunal found that the same filing issues had existed in the prior assessment years and upheld the exemption granted by the CIT(A), stating that the revenue could not adopt inconsistent positions across assessment years without changes in material facts.

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The two member bench comprising SS Viswanethra Ravi(Judicial Member) and Amitabh Shukla(Accountant Member) sustained the CIT(A)'s order, dismissing all grounds of appeal raised by the revenue, as the merits of other additions became academic due to the upheld exemption.

In conclusion, the appeal filed by the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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