Section 11(7) Amendment Not Retrospective: ITAT Allows Tata Social Welfare Trust’s Pre-Amendment Exemptions u/s 10(34) & 10(35) [Read Order]

The Mumbai bench of Income Tax Appellate Tribunal (ITAT) confirmed that Section 11(7), which limits alternative exemptions for charitable trusts, cannot be applied retrospectively. Tata Social Welfare Trust’s claims for dividend and unit income exemptions for years prior to the amendment were held valid.

The present appeal involves the Tata Social Welfare Trust, a charitable entity registered under Section 12A of the Income Tax Act, 1961 (the Act). The revenue challenged the trust’s claim of exemption for dividend income and income from units under Sections 10(34) and 10(35) of the Act for assessment years before the insertion of Section 11(7) w.e.f. A.Y. 2015-16.

The AO disallowed the exemption on the ground that the Trust had surrendered its 12A registration and, therefore, could not claim alternative exemptions. Additionally, the AO contended that the Trust’s income should be taxed at the maximum marginal rate due to alleged violations of Sections 13(1)(d) and 13(2)(h). Against this order, the Trust filed an appeal before the CIT(A), which was subsequently contested by the revenue before the ITAT.

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The Tribunal examined the nature of the claimed income and the timing of statutory amendments. It was observed that the amendments to Section 11(7) debarring claims of alternative exemptions were applicable only from A.Y. 2015-16.

For prior years, pre-amendment provisions allowed the Trust to claim exemption under Sections 10(34) and 10(35). The ITAT relied on Coordinate Bench rulings in Tata Social Welfare Trust vs. ITO (2018) and similar cases, affirming that claims of exemption before the statutory amendment could not be disallowed merely on procedural grounds.

The Tribunal also considered the status of the 12A registration. Even though the Trust had formally surrendered registration, the Principal Commissioner of Income Tax had cancelled the registration with effect from a later date, establishing that the Trust maintained valid registration during the relevant year. Accordingly, the exemption claims for dividend and unit income fell squarely within the statutory provisions and could not be denied.

In view of the above, the two-member bench comprising N.K. Billaiya (Accountant Member) and Saktijit Dey (Vice President) dismissed the revenue’s appeal and upheld the CIT(A)’s decision, allowing the Trust’s exemption claims under Sections 10(34) and 10(35). This decision reinforces that pre-amendment exemptions are valid and procedural technicalities, such as surrender of registration, cannot override substantive rights under the Act.

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