Restoration of Section 12A Registration entitles Assessee for Tax Exemption: ITAT [Read Order]

Assessee Tax Exemption - ITAT -TAXSCAN

The Income Tax Appellate Tribunal ( ITAT ), Visakhapatnam Bench, has recently in an appeal filed before it by the revenue, held that restoration of section 12 A registration, will entitle the assessee to get a tax exception under section 11 of the Income Tax Act, 1961.

The aforesaid decision was made by the tribunal when the revenue filed an appeal before it, as against the order of the Commissioner of Income Tax (Appeals), (CIT(A)), Vijayawada, in appeal No. 10119/CIT(A)/VJA/2019-20, arising out of the order passed U/s. 143(3) r.w.s 147 and 254 of the Income Tax Act, 1961.

The Assessment Year (AY) in question being 2007- 08, the assessee, an Urban Development Authority constituted under Andhra Pradesh Urban Area (Development) Act, has registration U/s. 12AA filed its return of income for the aforesaid AY on 31/10/2007.

Admitting the total income of Rs. NIL after claiming exemption U/s. 11 of the Act in respect of its excess of income over expenditure of Rs. 1,44,77,293/, the assessment of the aforesaid assessee, U/s. 143(3) was completed on 30/03/2009, declaring a total income of Rs. NIL, after certain adjustments, was made by the AO. But, subsequently, the above-said assessment order was set aside by the CIT-1, Visakhapatnam, vide order U/s. 263 dated 7/3/2011, with a direction to the AO to re-do the assessment de novo.

However, even though the Tribunal vide order dated 8/8/2011 directed the AO to re-do the assessment de novo after examining the claim of the assessee in the light of the principles enunciated in the case law relied on by the assessee, the CCIT (OSD), Visakhapatnam (holding the charge of CIT-1, Visakhapatnam) passed an order U/s. 12AA(3) of the Act, canceling the assessee’s registration granted U/s. 12AA from the AY 2006-07 onwards, the reason for such cancellation being shown by the department to be the assessee’s engagement in commercial activities with the profit motive.

The DR contented in his counter-argument that the assessee’s registration u/s. 12A of the Act, being canceled by CCIT cannot now be auto invoked by the ITAT as per provisions of section 11 of the Income Tax Act, the Tribunal dismissing the revenue’s appeal, observed as under:

“With respect to Grounds raised from (iv) to (ix) of the Grounds of appeal, we find that the Ld. CIT(A) has followed the directions of the Hon’ble Income Tax Appellate Tribunal in ITA No. 295/Viz/2022, wherein the order of the Ld. CIT passed U/s. 12AA was canceled and the registration was restored to the assessee. We find that since the registration is restored by the Hon’ble ITAT, the assessee is entitled for claiming deduction U/s. 11 of the Act in the impugned assessment year.

We also note from the grounds that the Department has challenged the decision of the ITAT in restoring the registration of the assessee u/s. 12A of the Act before the Hon’ble High Court, and therefore the Revenue has raised the ground that the assessee shall not, therefore, be allowed the deduction claimed U/s. 11 of the Act.

 We also note that as of date, the decision of the Hon’ble Tribunal is valid until the final outcome of the High Court is pronounced. And accordingly, the directions of the Ld.CIT(A) to the AO to delete the additions, is valid in law and hence no interference is required on the above grounds.”

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The Deputy Commissioner of Income Tax vs M/s. Visakhapatnam Urban Development Authority

Counsel for Appellant:   Sri A. Chakradhar

Counsel for Respondent:   Sri A. Chakradhar


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