2017 (11) TMI 511 - AT - Income Tax

Tribunal grants registration to assessee under Section 12AA, remands assessments for reconsideration.

HMDA, Hyderabad Versus CIT (Exemptions), JCIT, Range-10, DCIT, Central Circle-10 (1), ACIT, Central Circle-10 (1), Hyderabad

The Tribunal allowed the assessee's appeal, directing the CIT(E) to grant registration under section 12AA from 01-04-2002 onwards. It remanded the ... Non granting registration u/s 12AA - whether objectives of the assessee are charitable in nature and that it is not carrying on any activity for profit? - effect of registration granted in the subsequent year - Held that:- We find that by virtue of remand to the CIT(E)for re-consideration of the assessee’s application for registration u/s 12A of the IT Act, the assessee’s application has been revived. As on the date when the CIT(E) was considering the application for registration pursuant to the remand by the ITAT, the proviso to Sec. 12A(2) of the IT Act has come into the statute book and therefore it is very much applicable to all the pending assessments before the A.O. The SMC Bench of this Tribunal at Ahmadabad, in the case of Shri Bhanushali Mitramandali Trust Vs ITO (2016 (4) TMI 578 - ITAT AHMEDABAD) has also held so. Particularly in the case of hand, we find that there is no change in the objects of the assessee from the earlier and in the subsequent assessment years and there is no finding that the assessee has carried on any activity not in accordance with its objectives. In view of the same, we are of the opinion that the assessee is eligible for registration u/s 12A of the IT Act w.e.f 01-04-2002 and accordingly, we direct the CIT(E) to modify the order of registration u/s 12AA of the Act w.e.f. 01-04-2002 i.e from A.Y 2003-04 onwards. - Decided in favour of assessee. Issues Involved:1. Denial of registration under section 12AA of the Income Tax Act (IT Act) for the assessment years (A.Ys) 2002-03 to 2006-07 and from A.Y 2009-10 onwards.2. Applicability of the proviso to Section 2(15) of the IT Act.3. Retrospective effect of registration under section 12AA.4. Consideration of the Circular No. 21 of 2016 issued by the Central Board of Direct Taxes (CBDT).Detailed Analysis:1. Denial of Registration under Section 12AA:The assessee appealed against the order of the Commissioner of Income Tax (Exemptions) [CIT(E)], Hyderabad, dated 26-12-2016, which denied registration under section 12AA of the IT Act for A.Ys 2002-03 to 2006-07 and from A.Y 2009-10 onwards. The CIT(E) granted registration only for A.Ys 2007-08 and 2008-09, citing that the assessee's activities exceeded the threshold limit of Rs. 25 lakhs from rental income and advertisements, thus falling under the proviso to Section 2(15) of the IT Act.2. Applicability of the Proviso to Section 2(15) of the IT Act:The CIT(E) applied the second proviso to Section 2(15) of the IT Act, which states that if the aggregate value of receipts from activities in the nature of trade, commerce, or business exceeds Rs. 25 lakhs, the entity would not be considered charitable. The CIT(E) observed that the assessee’s income exceeded this limit for several years, thus denying registration from A.Y 2009-10 onwards.3. Retrospective Effect of Registration under Section 12AA:The assessee argued that the registration should be granted retrospectively from 01-04-2002, as the assessments for the relevant years were pending. The CIT(E) did not grant the registration retrospectively, stating that the application for registration was made only on 02-03-2007, and no reasons were provided for the delay. The Tribunal, however, found that the application was revived by the remand from the ITAT, and the proviso to Section 12A(2) was applicable, thus directing the CIT(E) to grant registration retrospectively from 01-04-2002.4. Consideration of CBDT Circular No. 21 of 2016:The assessee relied on CBDT Circular No. 21 of 2016, which instructs that registrations under section 12A should not be canceled due to the application of the proviso to Section 2(15). The Tribunal held that the CIT(E) should not have denied registration for the subsequent years based on the proviso to Section 2(15), as the circular is binding on revenue authorities. The Tribunal emphasized that the applicability of Section 13(8) and the proviso to Section 2(15) should be considered during assessment proceedings under Section 143(3) of the IT Act.Conclusion:The Tribunal allowed the assessee's appeal, directing the CIT(E) to grant registration under section 12AA from 01-04-2002 onwards. It also remanded the assessments for the relevant years back to the Assessing Officer (A.O) for reconsideration in light of the granted registration. The Tribunal emphasized that the applicability of Section 13(8) and the proviso to Section 2(15) should be considered during the assessment proceedings, not at the stage of granting registration. Thus, the appeals of the assessee and the revenue for statistical purposes were allowed.