2020 (1) TMI 857 - AT - Income Tax

Tribunal remands case for fresh adjudication, emphasizing restored registration under Section 12AA.

The Tribunal set aside the CIT (Appeals) orders and remanded the case for fresh adjudication, emphasizing the restored registration under Section 12AA. ... Exemption u/s 11 - Cancellation of registration u/s 12AA - assessee is actively involved in commercial activities with profit element and no charitable purpose is involved - HELD THAT:- We are of the opinion that the decision based on the granting of Registration under Section 12A is crucial and whereas the CIT (Appeals) has confirmed the action of Assessing officer, though Registration u/sec 12A of the Act is pending before the Tribunal. We found the CIT(Appeals) has passed the order on 25.2.2014, But the co-ordinate Bench of Tribunal in [2015 (7) TMI 198 - ITAT BANGALORE] setting aside the cancellation of Registration under Section 12AA of the Act by DIT (Exemptions) was passed on 10.4.2015. Hence the assessee could not get the order on hand at the time of hearing before the CIT(A). We considering the facts, circumstances, submissions and the decision of the co-ordinate Bench in setting aside the cancellation of Registration under Section 12AA of the Act are of the opinion that the decision making has to be considered afresh based on the Registration u/sec 12A. Accordingly, we set-aside the order of CIT(A) and to meet the ends of justice, Restore this issue to the file of CIT(Appeals) to adjudicate afresh considering the Registration under Section 12AA of the Act available to the assessee and pass Reasoned and speaking order. - Decided in favour of assessee for statistical purposes. Issues Involved:1. Jurisdiction of the Additional Director of Income Tax.2. Applicability of proviso to Section 2(15) of the Income Tax Act.3. Denial of exemption under Section 11 of the Income Tax Act.4. Taxability of income from property taxes, building license fees, betterment charges, development charges, supervision charges, and road cutting charges.5. Entitlement to depreciation on assets.6. Allowability of development expenses as revenue expenses.7. Chargeability of interest under Section 234B of the Income Tax Act.Issue-wise Detailed Analysis:1. Jurisdiction of the Additional Director of Income Tax:The assessee challenged the jurisdiction of the Additional Director of Income Tax, arguing that the order was bad in law due to non-compliance with the relevant notifications and delegation of power. The Tribunal found that the jurisdictional challenge was a significant issue but did not explicitly rule on it, focusing instead on other grounds for decision.2. Applicability of Proviso to Section 2(15) of the Income Tax Act:The Assessing Officer (AO) and the CIT (Appeals) held that the assessee’s activities were hit by the proviso to Section 2(15) of the Act, which excludes entities engaged in trade, commerce, or business from being considered as charitable. The Tribunal noted that the assessee's activities included commercial elements, such as the sale of sites and apartments, and ruled that the income from these activities could be considered commercial. However, the Tribunal also referred to the Karnataka Industrial Area Development Board case, where it was held that the applicability of the proviso to Section 2(15) should be determined by the assessing authority and not be a ground for cancellation of registration under Section 12A.3. Denial of Exemption under Section 11 of the Income Tax Act:The CIT (Appeals) denied the exemption under Section 11, considering the assessee’s activities as commercial. However, the Tribunal highlighted that the registration under Section 12AA was reinstated by the Tribunal in a previous order, which was not available during the CIT (Appeals) hearing. The Tribunal emphasized that the registration under Section 12AA should be considered, and the exemption under Section 11 could not be denied solely based on commercial activities.4. Taxability of Income from Property Taxes, Building License Fees, Betterment Charges, Development Charges, Supervision Charges, and Road Cutting Charges:The CIT (Appeals) and AO treated these incomes as business income and applied the proviso to Section 2(15). The Tribunal did not provide a detailed analysis on this specific issue but implied that the treatment of such income should be reconsidered in light of the restored registration under Section 12AA.5. Entitlement to Depreciation on Assets:The CIT (Appeals) denied depreciation on assets whose cost was claimed towards the application of income in earlier years. The Tribunal did not explicitly address this issue in detail but indicated that all related issues should be reconsidered by the CIT (Appeals) in light of the restored registration under Section 12AA.6. Allowability of Development Expenses as Revenue Expenses:The assessee argued for the allowance of development expenses as revenue expenses. The Tribunal did not provide a specific ruling on this issue but directed the CIT (Appeals) to reconsider all issues afresh, including the treatment of development expenses.7. Chargeability of Interest under Section 234B of the Income Tax Act:The assessee contested the chargeability of interest under Section 234B. The Tribunal did not specifically address this issue but directed the CIT (Appeals) to reconsider all issues, including the chargeability of interest under Section 234B.Conclusion:The Tribunal set aside the orders of the CIT (Appeals) and restored the issues to the file of the CIT (Appeals) for fresh adjudication, considering the restored registration under Section 12AA of the Act. The Tribunal emphasized the need for a reasoned and speaking order, providing the assessee with adequate opportunity for hearing. All related appeals were allowed for statistical purposes, directing the CIT (Appeals) to reconsider all issues in light of the restored registration under Section 12AA.