S. 12A Amendments on Timely Filing Apply from AY 2018-19, Not Retroactively: ITAT Allows Society’s Exemption [Read Order]

The Nagpur Bench of the Income Tax Appellate Tribunal (ITAT) ruled that amendments to Section 12A of the Income Tax Act, 1961 concerning the timely filing of returns and audit reports apply prospectively from AY 2018-19. 

Shri Panchmurti Education Society (assessee), a charitable trust engaged in education, had initially been denied registration under Section 12AA due to the absence of a dissolution clause in its bye-laws. The Commissioner of Income Tax (Exemption) rejected its application, despite acknowledging its charitable nature. However, on appeal, ITAT directed the grant of registration retrospectively from AY 2017-18.

How to Audit Public Charitable Trusts under the Income Tax Act, Click Here

The assessee filed its return for AY 2017-18 on March 30, 2018. The assessee filed an appeal before the Commissioner of Income Tax (appeals) [CIT(A)] against the demands raised by the Central Processing Centre (CPC). 

The CIT(A) dismissed the appeal of the assessee citing that the Income Tax Return was filed belatedly. Therefore, the CIT(A) ruled that the assessee was not eligible to avail exemption under section 11 and 12 of the Income Tax Act.   

Aggrieved by the order of the CIT(A), the assessee filed an appeal before the ITAT. The counsel for the assessee drew the attention of the Tribunal to several documents which included Paper book, order of CIT(E) for approval under section 12AA of the Income Tax Act. 

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The Counsel for the Revenue supported the findings of the CIT(A) and argued that the belated filing of Income Tax Return and Audit report was the root cause to deny application under section 11 and 12 of the Income Tax Act. 

The two-member bench comprising Shri V. Durga Rao (Judicial Member) and Shri K.M. Roy (Accountant Member) observed the amendments to Section 12A(1)(ba). The tribunal also observed the CBDT Circular which also clarified that the amendments take effect from 1st April, 2018. 

How to Audit Public Charitable Trusts under the Income Tax Act, Click Here

The tribunal clarified that these amendments, which impose conditions for timely filing of returns, became effective from April 1, 2018. The tribunal also clarified that the assessee was successful on twin grounds of submission of Income Tax Return and submission of Audit report. 

Therefore, the tribunal allowed the society exemption to the assessee. Thereby the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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