The Chandigarh Bench of Income Tax Appellate Tribunal (ITAT) held that mere non-furnishing of a copy of the registration of charitable Trust under Section 12A of the Income Tax Act cannot be a reason to deny exemption under Section 11 of the Income Tax Act and hence set-asides the order of Commissioner of Income Tax (Appeals) [CIT(A)].
The Assessee Trust Lala Gauri Mal Butail Trust is registered under Section 12A of the Income Tax Act 1961 and is running a Dharamshala at Shimla and Palampur besides carrying out other charitable activities. The Trust has been regularly filing its return of income by claiming exemption under Section 11 of the Income Tax Act which has been allowed by the Department without raising any kind of dispute in the previous years.
Similarly, the return was filed for Assessment year 2020-2021 claiming exception under Section 11 of the Income Tax Act, was processed by Central Processing Cell (CPC) Bangalore which issued an intimation under Section 143(1) of the Income Tax Act and has disallowed the exemption claimed under Section 11 of Income Tax Act.
The assessee Trust filed an appeal before the CIT(A) which stated two reasons while confirming the denial of the benefit of exemption under Section 11 of the Income Tax Act to the assessee trust i.e firstly, the assessee trust was unable to submit a copy of its registration under Section 12A of the Income Tax Act. Second, Section 12AA’s provisions of the Income Tax Act will no longer be in effect as of 1/6/2020, the new Section 12AB of the Income Tax Act, a trust registered under Section 12A must submit an application to convert its earlier registration to the new Section 12AB of Income Tax Act.
Aggrieved by this assessee filed an appeal in ITAT and contended that the assessment Trust has been duly registered under Section 12A of the Income Tax Act and argued that the new provisions of Section 12AB of the Income Tax Act were only enforced from the assessment year 2022–2023 and are therefore irrelevant for the assessment year 2020–2021.
The Departmental Representative has relied on the order of the CIT(A) that, ”assessee has no valid registration under the Income Tax Act for the A.Y. 2020-21 and 2021-22. Therefore, without registration under Section 12AB of the Income Tax Act, exemption under Section 11 of the Income Tax Act is not available. Therefore, CPC is correct in disallowing exemption under Section 11 of the Income Tax Act for the A.Y. 2020-21”.
The Bench comprising of A.D. Jain, Vice President and Vikram Singh Yadav, Accountant Member held that mere non-furnishing of a copy of registration under Section 12A of the Income Tax Act cannot be held as a valid and justifiable reason for denial of exemption under Section 11 of Income Tax Act of the Act where such registration continues to exist and the assessee trust duly stand registered under Section 12A of Income Tax Act for the year under consideration.
The Tribunal further noted that the assessee trust’s current registration under Section 12A of the Income Tax Act continues to be valid and that the new registration rules have no impact on the assessee trust’s registration for the challenged assessment year 2020–21.
Hence the Bench set aside the order of the ld CIT(A) and direct the Assessing Officer(AO) to allow the exemption under Section 11 of the Income Tax Act as so claimed by the assessee trust while filing its return of income.
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