AO to Determine if Registration under Societies Registration Act or as Trust to Ascertain Income Tax Deduction: ITAT Restores Matter [Read Order]

The Income Tax Appellate Tribunal (ITAT), New Delhi Bench, restored a matter to the Assessing Officer (AO) to conduct fresh assessment and determine what the assessee-appellant is registered under as. Once done, income tax deduction, if any, could be computed.

The assessee, Ganna Vikas Parishad, filed its return of income on 15.03.2022 declaring nil taxable income and the case was selected for scrutiny assessment proceedings. The assessee-appellant is a cane development council constituted by Cane Commissioner under Section 5 of Sugarcane (Regulation of Supply and Purchase) Act, 1953. This council has been constituted to perform the functions as laid down in Section 6 of the above act.

During assessment proceedings, the assessee Cane Development Council filed a letter dated 16.11.2022 and submitted that due to clerical mistake the assessee was entitled for exemption under Section 10(20) instead of exemption under Section 80P(2)(b) as had been claimed.

The AO, after examining the provision of Section 10(20) denied the claim of the assessee on the ground that deduction is allowable to any Panchayat referred to in clause (d) of Article 243 of the Constitution, or Municipality as referred to in clause (e) of Article 243P or Municipal Committee and District Board, legally entitled or entrusted by the Government with, the control or management of a Municipal or local fund or Cantonment Board as defined in Section 3 of the Cantonments Act, 1924.

One of the grounds raised by the assessee-appellant was that the assessee is merely a fund management body without any right of absolute ownership over the fund at its disposal for road construction and development. Said fund consists of grants by the Indian Sugarcane Committee, grants made by the state government or central government and contribution in the form of commission being cess made by the sugar factories and cane growers.

It was submitted that the CIT(A) did not consider that the appellant has received “contribution in the form of commission” and “grants” as per the Act and rules.

The bench of C.N. Prasad (Judicial Member) allowed the appeal on statistical purpose to make fresh assessment and determine whether the assessee is registered under societies registration Act or registered as a trust. However, ITAT noted that the CIT(A)’s reasoning could not be found at fault for sustaining the addition.

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