2014 (12) TMI 717 - AT - Income Tax

Tribunal upholds exemption under section 11 for 2005-06 and 2006-07, remands 2009-10 appeal for fresh consideration.

Assistant Director of Income Tax (Exemptions) Versus M/s. Chennai Metropolitan Development Authority

The Tribunal dismissed the Revenue's appeals for the assessment years 2005-06 and 2006-07, upholding the exemption under section 11 as allowed by the ... Validity of revised return filed u/s 139(5) – Claim of exemption not made by the assessee in the original return filed u/s.139(1) – Audit u/s.12(1)(b) has been conducted within the time frame envisaged u/s.139(5) or not - Held that:- Assessee is entitled for exemption under section 11 though the claim was made in the revised return filed subsequently on granting of registration u/s 12AA - registration u/s 12AA was granted to the assessee institution by the DIT(E) w.r.e.f. AY 2003-04- The Tribunal in the case of the assessee for the earlier assessment year, restored the assessment back to the file of the AO for reframing assessment in the light of the allowance of registration to the assessee u/s 12AA of the Act. When the assessee filed its original return of income at that time, assessee was not granted registration u/s 12AA and therefore, could not claim exemption u/s 11 and 12 of the Act in the original return of income - claim of the assessee for getting exemption u/s 11 and 12 of the Act on principal basis was agreed by the. Tribunal in view of registration allowed to the assessee u/s 12AA of the Act w.r.e including for the AYs - therefore, the Tribunal restored the matter back to the file of the AO for examining and verifying the facts and for allowing exemption u/s 11 and 12 of the Act as per law as both the parties agreed to it before the Tribunal – thus, there was no error in the order of the CIT(A) in directing the AO to allow exemption u/s 11 and 12 of the Act to the assessee – Decided against revenue. Entitlement for exemption u/s 11 – Effect of amendment u/s 2(15) w.e.f. 1.4.2009 - Whether the assessee is hit by newly inserted proviso to section 2(15) or not - Held that:- The assessee filed return of income for the AY 2009-10 on 29.9.2009 admitting Nil income – AO while in the scrutiny process of the view that the assessee as an AOP for this AY lost its character of charitable organization and not eligible for exemption u/s 11 – CIT(A) was of the view that the assessee is eligible for exemption u/s 11 & 12 of the Act as the same has been decided in assessee’s own case in the earlier assessment year – CIT(A) failed to note that the facts in appeals before him for the AYs 2005-06 and 2006-07 are not similar to that of AY 2009-10 - Provisions of section 2(15) was amended with effect from 1.4.2009 which are applicable to assessment year 2009-10, wherein a proviso was inserted – CIT(A) while disposing off the appeal for the AY 2009-10 did not go into the proviso to section 2(15) of the Act especially when the assessee is receiving various receipts for various services rendered by it – CIT(A) has not examined as to whether the assessee's activities fall under general public utility and whether they fall within the ambit of amended provisions of section 2(15) – thus, the matter is to be remitted back to the CIT(A) for fresh adjudication – Decided in favour of revenue. Issues Involved:1. Validity of revised returns filed under section 139(5) for assessment years 2005-06 and 2006-07.2. Eligibility for exemption under section 11 of the Income Tax Act for assessment years 2005-06, 2006-07, and 2009-10.3. Impact of the proviso to section 2(15) on the eligibility for exemption under section 11 for the assessment year 2009-10.Issue-wise Detailed Analysis:1. Validity of Revised Returns Filed Under Section 139(5):The Revenue argued that the revised returns filed under section 139(5) for the assessment years 2005-06 and 2006-07 could not be considered valid as the assessee did not claim exemption in the original returns filed under section 139(1). Additionally, the audit under section 12(1)(b) was not conducted within the stipulated time, nor was the audit report filed timely. The Revenue relied on the Supreme Court's decision in Goetze (India) Ltd. Vs. CIT and CIT Vs. Sun Engineering Works P. Ltd. to support their position. However, the Tribunal noted that the assessee was granted registration under section 12AA with retrospective effect from the assessment year 2003-04, and thus, the exemption claimed in the revised returns should be allowed. The Tribunal upheld the CIT(A)'s decision, which had followed the Tribunal's earlier ruling in the assessee's own case for the assessment years 2003-04 and 2004-05.2. Eligibility for Exemption Under Section 11 for Assessment Years 2005-06 and 2006-07:The Tribunal reviewed the orders of the lower authorities and the decision in the assessee's own case for the assessment years 2003-04 and 2004-05. It was observed that the registration under section 12AA was granted retrospectively, and thus, the exemption under sections 11 and 12 should be allowed even if claimed in the revised return. The Tribunal found no error in the CIT(A)'s order, which directed the Assessing Officer to allow the exemption, as the necessary details were available during the reassessment. Consequently, the appeals of the Revenue for these assessment years were dismissed.3. Impact of Proviso to Section 2(15) on Eligibility for Exemption Under Section 11 for Assessment Year 2009-10:For the assessment year 2009-10, the Revenue contended that the assessee's gross receipts exceeded Rs. 10,00,000 and that its activities fell under 'general public utility,' thus losing its character as a charitable organization due to the proviso to section 2(15). The Tribunal noted that the CIT(A) had not examined whether the assessee's activities fell within the ambit of the amended provisions of section 2(15). The Tribunal found that the CIT(A) had mistakenly followed the orders for the earlier assessment years without considering the impact of the newly inserted proviso. Therefore, the Tribunal set aside the CIT(A)'s order for the assessment year 2009-10 and restored the matter for fresh consideration, directing the CIT(A) to examine the applicability of the proviso to section 2(15) and the eligibility for exemption under section 11.Conclusion:The appeals of the Revenue for the assessment years 2005-06 and 2006-07 were dismissed, sustaining the CIT(A)'s order allowing exemption under section 11. However, for the assessment year 2009-10, the appeal was allowed for statistical purposes, and the matter was remanded to the CIT(A) for fresh adjudication in light of the amended provisions of section 2(15). The order was pronounced in the open court on 24.10.2014.