2012 (7) TMI 14 - AT - Income Tax

Tax Tribunal Upholds Exemption for Assessee under Income Tax Act

Asstt. Commissioner of Income Tax, Versus Krishi Upaj Mandi Samiti,

The ITAT dismissed the Revenue's appeal and upheld the CIT(A)'s decision to grant the assessee exemption under section 11 of the Income Tax Act for ... Denial of claiming exemption under section 11 - revised return filed for claim in view of registration under section 12A - DR stated that assessee is not entitled for exemption as it does not apply 85% of its income towards charitable purpose since it charges 2% from trade from the traders as Mandi Fee and out of this, 1% is directly deposited to the State Government - Held that:- AO has not brought any material on record nor made any adverse comments in the remand report to show that the assessee has violated any condition laid down under section 11 - the assessee has applied more than prescribed percentage of its income for furtherance and in the attainment of its objectives with no material on record to show that that the assessee Samiti has been established or carried out activities for personal or private gains - contention of the DR that the assessee Samiti has deposited 1% fund to the State Government out of 2% charges made by the traders is not acceptable as the fund transferred to the State Government are always utilized for welfare of person of the State which amounts to charitable purpose - in favour of assessee. Issues Involved:1. Whether the CIT(Appeal) erred in deleting the return income originally filed by the assessee and accepted by the Assessing OfficerRs.2. Whether the registration granted under section 12AA automatically makes the assessee eligible for exemption under section 11 of the Income Tax ActRs.Analysis:Issue 1:The appeal was filed by the Revenue against the order passed by the CIT (Appeals) for Assessment Year 2006-07. The assessee initially filed a return in the status of a local authority and later filed a revised return claiming exemption under section 11 of the Income Tax Act due to registration under section 12A. The Assessing Officer did not accept the claim made in the revised return regarding exemption under section 11 and completed the assessment based on the original return. The CIT called for a remand report to determine if the assessee fulfilled the conditions for exemption under section 11. The Assessing Officer, in the remand report, stated that the provisions of section 11 did not apply to the assessee as it did not apply 85% of its income towards charitable purposes. However, the CIT(A) allowed the exemption under section 11 and deleted the addition made by the Assessing Officer. The CIT(A) emphasized the importance of following decisions of appellate authorities and noted that the matter regarding registration under section 12A had attained finality.Issue 2:The Revenue contended that the assessee was not entitled to exemption under section 11 as it did not apply 85% of its income towards charitable purposes. The Departmental Representative argued that mere registration under section 12A did not automatically entitle the assessee to exemption under section 11. However, the Authorized Representative relied on the order of the CIT(A) and highlighted that the assessee held registration under section 12A as per the judgment of the High Court, which was upheld by the Supreme Court. The CIT(A) found that the assessee had applied more than the prescribed percentage of its income for charitable purposes and had not violated any conditions under section 11. The CIT(A) also rejected the argument that the fund transferred to the State Government did not amount to charitable purposes. The ITAT upheld the order of the CIT(A) as there was no contrary material available on record.In conclusion, the ITAT dismissed the appeal filed by the Revenue, upholding the order of the CIT(A) granting the assessee exemption under section 11 of the Income Tax Act for the Assessment Year 2006-07.