2013 (5) TMI 198 - AT - Income Tax

Tribunal upholds CIT(A) decision granting exemption under Section 11

The Tribunal dismissed the revenue's appeal as the CIT(A) correctly granted exemption under section 11, directing the assessment to be finalized at nil ... Computation of income as NIL - whether CIT(A) erred in directing to compute the income at NIL ignoring that the assessment was made at returned income as claim, u/s 11 of IT. Act, 1961 not made in return, could not be allowed by AO without filing of revised return by the assessee? - Held that:- CIT(A) did not allow any new exemption or deduction to the assessee but had simply corrected the assessment order with an observation that the assessee society was exempted u/s 11 of the Act, therefore the assessment was to be made at nil income and the CIT(A) directed the AO to finalize the assessment accordingly as the assessee society has been granted registration u/s 12A and when the assessee society has applied more than 85% of its total receipts for the objects and charitable purposes of the society, then certainly the assessee society was entitled for exemption u/s 11. No infirmity, ambiguity or any other valid reason to interfere with the impugned order. Against revenue. Issues Involved:1. Appeal against CIT(A) order directing to compute income at NIL under section 11 of the Income Tax Act, 1961.2. Authority of CIT(A) to allow exemption under section 11 of the Act.3. Interpretation of judicial pronouncements - Goetz (India) Ltd. and Elel Hotels & Investment Ltd.4. Assessment based on returned income despite eligibility for exemption under section 11.Analysis:Issue 1: Appeal against CIT(A) order directing to compute income at NIL under section 11The appeal was filed by the revenue against the order of CIT(A) directing to compute the income at NIL for the assessment year 2009-10. The Assessing Officer had allowed exemption under section 11 of the Act as the assessee society was eligible for it. However, the assessment was finalized on the returned income of Rs. 1,85,50,256/-, which the CIT(A) corrected by granting exemption under section 11 and directing the assessment to be finalized at nil income.Issue 2: Authority of CIT(A) to allow exemption under section 11The CIT(A) had the authority to correct the assessment order and grant exemption under section 11 of the Act. The Assessing Officer had observed that the assessee society was eligible for exemption under section 11 as it had applied more than 85% of its total receipts for charitable purposes. The CIT(A) rightly held that the income should be computed at nil in such cases where exemption under section 11 is applicable.Issue 3: Interpretation of judicial pronouncementsThe judgment of Goetz (India) Ltd. and Elel Hotels & Investment Ltd. were referred to in the appeal. It was clarified that the Assessing Officer is bound by the claims made in the return by the assessee, and the CIT(A) has powers co-terminus with the Assessing Officer. The CIT(A) can correct omissions made by the Assessing Officer but cannot do what the Assessing Officer was not empowered to do. In this case, the CIT(A) rightfully corrected the assessment to grant exemption under section 11.Issue 4: Assessment based on returned income despite eligibility for exemption under section 11Despite the eligibility of the assessee society for exemption under section 11, the assessment was finalized on the returned income. The CIT(A) rectified this error and directed the assessment to be finalized at nil income, which was in line with the provisions of the Act and the observations made by the Assessing Officer regarding the eligibility for exemption.In conclusion, the Tribunal dismissed the appeal of the revenue as the CIT(A) had correctly granted exemption under section 11 and directed the assessment to be finalized at nil income based on the eligibility criteria met by the assessee society. The judgment reaffirmed the authority of the CIT(A) to correct assessment orders and grant exemptions in accordance with the provisions of the Income Tax Act, 1961.