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

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 assessments for the relevant years back to the Assessing Officer 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 assessment proceedings under Section 143(3) of the IT Act. The appeals of the assessee and the revenue for statistical purposes were allowed.

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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.

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