2021 (1) TMI 886 - AT - Income Tax

Tribunal grants appellant's appeal for tax benefits under Income Tax Act

The Tribunal allowed the appellant's appeal, directing the Assessing Officer to consider the revised audit report and resolution filed by the appellant, ... Exemption u/s 11 - Non filing of Form No. 10B - HELD THAT:- The assessee has filed revised audit report in Form NO. 10B as well as the Resolution dated 22/5/2017 during the assessment proceedings itself. Merely filing Form No. 10 cannot be held as afterthought. CIT(A) though saying that the assessee is entitled for exemption u/s 11 with all the consequential benefits, thereafter cannot restricted the claim of the assessee which the assessee is entitled u/s 11 on the ground that filing of Form No. 10 was an afterthought. Therefore, we direct the Assessing Officer to take cognizance of the revised audit report in Form No. 10B as well as the Resolution dated 22/05/2017 and allow the consequential benefits to the assessee as enshrined in Section 11 of the Act. The appeal of the assessee is partly allowed. Issues:1. Disallowance of accumulated amount under section 11(2) of the Income Tax Act, 1961.2. Denial of exemption under sections 11 and 12 due to commercial nature of activities.3. Appeal against assessment order before CIT(A).4. Dispute over the eligibility for exemption under section 11.5. Consideration of revised audit report and resolution by the CIT(A).Issue 1: Disallowance of accumulated amount under section 11(2):The appellant challenged the disallowance of Rs. 52,00,000 accumulated and set apart under section 11(2) of the Income Tax Act, 1961. The Assessing Officer concluded that the activities of the appellant did not meet the definition of 'charitable purpose' as per the amended definition, thereby denying the exemption under sections 11 and 12. The CIT(A) partly allowed the appeal, acknowledging the appellant's eligibility for exemption under section 11. The appellant argued that the conditions for accumulation under section 11(2) were satisfied, citing precedents from the Hon'ble Gujarat High Court and the Supreme Court. The Tribunal directed the Assessing Officer to consider the revised audit report and resolution filed by the appellant and allow the consequential benefits under section 11.Issue 2: Denial of exemption due to commercial nature of activities:The Assessing Officer invoked the proviso to section 2(15) introduced by the Finance Act, 2008, to classify the appellant's activities as commercial in nature, thus denying the exemption under sections 11 and 12. The CIT(A) held that the appellant was eligible for exemption under section 11, but there was a dispute regarding the allowance of accumulated amount under section 11(2). The Tribunal emphasized that the filing of Form No. 10B and the Resolution by the appellant during the assessment proceedings should not be considered an afterthought and directed the Assessing Officer to allow the consequential benefits to the appellant as per Section 11 of the Act.Issue 3: Appeal against assessment order before CIT(A):The appellant filed an appeal before the CIT(A) challenging the assessment order passed by the Assessing Officer, who concluded that the appellant's activities did not qualify as charitable under the amended definition. The CIT(A) partly allowed the appeal, recognizing the appellant's eligibility for exemption under section 11.Issue 4: Dispute over eligibility for exemption under section 11:The appellant contended that the conditions required for accumulation under section 11(2) were satisfied and should have been allowed by the CIT(A), who had already acknowledged the appellant's eligibility for exemption under section 11. The Tribunal agreed with the appellant's argument and directed the Assessing Officer to consider the revised audit report and resolution filed by the appellant for allowing the consequential benefits under section 11.Issue 5: Consideration of revised audit report and resolution by CIT(A):The Tribunal noted that the appellant had filed a revised audit report in Form No. 10B and a Resolution during the assessment proceedings. The Tribunal held that the filing of Form No. 10B was not an afterthought and directed the Assessing Officer to consider these documents and allow the consequential benefits to the appellant as per Section 11 of the Act. The appeal of the appellant was partly allowed by the Tribunal.