The Raipur Bench of Income Tax Appellate Tribunal (ITAT) held that in absence of satisfaction of the pre-condition contemplated in the “2nd proviso” to Section 12A(2) of the Income Tax Act and Circular Board of Direct Taxes (CBDT) Circular , the assessee society was not found to be entitled to avail the concession/relief for income of a charitable society.
The assessee society Chhattisgarh Rajya Open School, was established with the Direction of Education Department of Chhattisgarh Government filed its return of income for Assessment Year (A.Y.) 2016-17 in the status of an association of persons (AOP) or a body of individuals (BOI), declaring an income of Rs. Nil. The case of the assessee society was thereafter selected for scrutiny assessment under Section143(2) of the Income Tax Act.
During assessment proceedings, it was observed by the Assessing Officer (AO) that the assessee had claimed exemption under Section 10(23C)(iiiab) of the Income Tax Act that the assessee society had a total gross receipts of Rs.24.04 crore (approx.) during the year under consideration. Observing, that the assessee society was not in receipt of any government grants during the year under consideration, the A.O as regards its entitlement for exemption under Section 10(23C)(iiiab) of the Income Tax Act, the same was declined by the latter for the reason that the following two conditions were not satisfied:
(i) The education institution/university must be existing solely for the purpose of education and without any profit motive and;
(ii) The educational institution/university must be wholly or substantially financed by the government.
The AO based on his aforesaid deliberation, declined the assessee’s claim for exemption of the excess of income over expenditure of Rs.5.24 crore (approx.) under Section 10(23C)(iiiab) of the Income Tax Act.
Aggrieved the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which upheld the decision of AO, further aggrieved the assessee filed an appeal before the Tribunal and raised an additional ground of appeal that the AO may be directed to give effect to provisions of sub-section 2 of section 12A of the Income-tax Act and allow exemption under Section 11 and 12 of the Income tax Act and exclude the appellant’s income from the total income for Assessment Year 2016-17.
The Authorised Representative of the assessee submitted that the assessee society had before the framing of assessment in its case for the year under consideration, applied for registration under Section 12AA of the Income Tax Act in “Form 10A”. It was further submitted by the AR that as per the “2nd proviso” to Section 12A(2) of the Income Tax Act, as was available during the year under consideration, i.e., A.Y.2016-17, where registration had been granted to the trust or institution under Section 12AA of the Income Tax Act the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under the trust of any assessment year preceding the aforesaid AY.
The Departmental Representative (DR) relied on the orders of the lower authorities and submitted that the “2nd proviso” to Section 12A(2) of the Income Tax Act could not be pressed into service by the assessee society in the course of hearing of the present appeal wherein the issue involved was confined to declining of its claim of exemption under Section 10(23C)(iiiab) of the Income Tax Act.
The Bench comprising of observed that the “2nd proviso” to sub-section (2) of Section 12A of the Income Tax Act contemplates that where registration had been granted to the trust or institution under Section 12AA of the Income Tax Act, then the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid AY, for which assessment proceedings are pending before the AO as on the date of such registration.
It was further noted that the benefit of Sections 11/12 of the Income Tax Act would be available to an assessee for a period prior to the year of registration despite the fact that no application for registration for the said period had been filed. The only rider/pre-condition that is required to be satisfied for bringing a case within the realm of the CBDT Circular No.01/2015 is that the assessment proceedings for the said preceding assessment year is pending before the AO on the date of registration under Section 12AA of the Income Tax Act.
The Tribunal held that in absence of satisfaction of the pre-condition contemplated in the “2nd proviso” to Section 12A(2) of the Income Tax Act and CBDT Circular No.01/2015, the assessee society was not found to be entitled to avail the concession/relief therein provided.
With regards to claim of the AR that the AO/CIT(Exemption) remained under a statutory obligation to have guided the assessee society, which admittedly not being wholly and substantially financed by the government, was disentitled from raising a claim for exemption under Section 10(23C)(iiiab) of the Income Tax Act, to have applied for registration and raised a claim of exemption under Section 10(23C)(vi) of the Income Tax Act, the Bench is of the view that as the said issue does not emanate from the orders of the lower authorities, therefore, it refrain from dealing with the same.
Hence the assessee’s appeal was dismissed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
