2020 (11) TMI 409 - AT - Income Tax

Tribunal directs reassessment of exemption claims, revenue appeal for examination, AY 2006-07 assessment set aside

Sriram Educational Trust Versus The Deputy Commissioner of Income Tax (Exemptions), Chennai And (Vice-Versa)

The Tribunal set aside the appeals to the Assessing Officer for reconsideration of exemption claims under Section 11, based on Form No. 10B and previous ... Exemption u/s 11 - assessee has filed Form No. 10 setting apart accumulation of income beyond stipulated date - HELD THAT:- An identical issue has been considered by the Tribunal for the assessment years 2006-07 to 2010-11. [2019 (3) TMI 1828 - ITAT CHENNAI] where after considering the relevant facts of the case, the Tribunal has restored the matter to the file of the A.O. to reconsider the issue raised by the assessee regarding claim of exemption u/s.11 of the Act. We further noted that facts of the impugned assessment years are identical to the case considered by the Tribunal for the earlier assessment years and further assessment of earlier assessment years will have bearing on the assessments framed by the A.O for these assessment years. Therefore, considering the facts and circumstances and also the fact that assessee’s claim of exemption u/s.11 needs to be examined from the assessment year 2006-07 onwards, the appeals filed by the assessee for both the assessment years are restored to the file of the A.O. to reconsider the issue of exemption claimed u/s.11 in the light of Form No.10B filed by the assessee for both the assessment years. Also take note of the Writ Petition filed by the assessee before the Hon’ble Madras High Court challenging cancellation of registration withdrawn by the CCIT u/s.10(23C)(vi) of the Act and the outcome of the Writ Petition before the Hon’ble High Court. Protective addition - addition made to the income of the assessee for the assessment year 2011-12 on the ground that once substantive assessment has been made for the assessment year 2006-07, protective addition made for the impugned assessment year cannot survive - HELD THAT:- Since the assessment for the assessment year 2006-07 has been set aside to the file of the A.O, the Assessing Officer will examine the issue of taxability of particular addition in appropriate assessment years in accordance with law. Accordingly, appeal of the revenue is also set aside to the file of the AO. Issues Involved:1. Non-disposal of objections raised by the appellant.2. Claim of depreciation not allowed.3. Wrong addition of unspent accumulation of AY 2005-06.4. Form 10 not considered.5. Error in computing the accumulation u/s 11(1)(a).6. Retrospective denial of exemption u/s 10(23C)(vi).Issue-wise Detailed Analysis:I. Non-disposal of objections raised by the appellant:The assessee contended that the Assessing Officer (AO) failed to dispose of objections raised against the reopening of assessment, despite the appellant's letter dated 12th May 2015. The CIT(A) did not consider this fact, leading to the appellant arguing that the reassessment proceeding should be void ab initio. The appellant cited the Supreme Court case of GKN Drive Shafts Vs ITO, emphasizing the necessity of addressing objections before proceeding with reassessment.II. Claim of depreciation not allowed:The appellant's claim for depreciation was not allowed by the CIT(A), who also did not consider additional grounds of appeal regarding this claim. The appellant referenced judgments from the Madras High Court and the Supreme Court, specifically CIT Vs Medical Trust of Seventh Adventists and CIT Vs Rajasthan & Gujarat Charitable Foundation, to support their claim for depreciation.III. Wrong addition of unspent accumulation of AY 2005-06:The CIT(A) sustained the addition of Rs. 6.63 crore related to unexpended accumulation from AY 2005-06. The appellant argued that there was no taxable income for AY 2005-06 due to the carry forward expenditure from AY 2004-05 being adjusted, thus nullifying the question of unexpended accumulation.IV. Form 10 not considered:The CIT(A) did not entertain the appellant's plea for accumulation of income as per Form 10 within the scope of Section 11(2) of the Income Tax Act. The appellant cited the Gujarat High Court decision in CIT Vs Mayur Foundation, which distinguished the Supreme Court judgment in CIT vs Nagpur Hotel Owners' Association, arguing that Form 10 can be filed even when the relevant assessment year is under appeal.V. Error in computing the accumulation u/s 11(1)(a):The appellant pointed out that the AO erred in computing the 15% accumulation under Section 11(1)(a) as 15% of gross receipts instead of gross receipts less revenue expenditure. This miscalculation resulted in a lesser amount of free accumulation, causing undue hardship to the appellant.VI. Retrospective denial of exemption u/s 10(23C)(vi):The AO denied the alternative exemption under Section 11, citing the rejection of condonation of delay in filing Form 10. The appellant argued that with the retrospective cancellation of registration under Section 10(23C)(vi), they should have been granted the alternative exemption without further compliance. An appeal against the cancellation of registration was pending before the Tribunal.Judgment:The Tribunal noted that the issues raised by the assessee for both assessment years were identical to those considered in earlier years (2006-07 to 2010-11). Therefore, the appeals were set aside to the AO to reconsider the exemption claims under Section 11, in light of Form No. 10B filed by the assessee. The AO was directed to redo the assessments considering the Tribunal's findings in earlier years and the pending writ petition challenging the cancellation of registration.For the Revenue's appeal regarding the deletion of Rs. 9.36 crores, the Tribunal directed the AO to examine the taxability of the addition in appropriate assessment years, as the assessment for AY 2006-07 had been set aside.Conclusion:The appeals filed by the assessee for AY 2011-12 and 2012-13, and the appeal filed by the Revenue for AY 2012-13, were allowed for statistical purposes, with directions to the AO to reconsider the issues in light of previous Tribunal findings and pending legal proceedings.