2023 (11) TMI 864 - AT - Income Tax

Tribunal Overturns Denial of Tax Exemption for School Trust, Highlights Assessing Officer's Duty to Grant Lawful Benefits.

The Tribunal allowed the appeal of a charitable trust running a school, quashing the intimation u/s. 143(1) that denied exemption u/s. 12A for the ... Exemption under section 12A - intimation under section 143(1) - deduction under section 10(23C)(iiiad) - assessment of income of an AOP - power of Assessing Officer to grant statutory benefitsIntimation under section 143(1) - exemption under section 12A - Intimation under section 143(1) which denied benefit of exemption under section 12A was erroneous and subject to quashing. - HELD THAT: - The CIT(A) directed the AO to consider an alternate claim, thereby recording that the intimation under section 143(1) required modification. The Tribunal observed that the adjustments made by the AO in the intimation under section 143(1) - specifically denial of the assessee's claim to exemption under section 12A - were not permissible to be effected by way of an intimation. In view of the CIT(A)'s direction and the impropriety of making such adjustments in an intimation under section 143(1), the intimation issued by the AO was held to be erroneous and was quashed. [Paras 4]Intimation under section 143(1) quashed; adjustments denying section 12A exemption cannot properly be made in such an intimation.Deduction under section 10(23C)(iiiad) - power of Assessing Officer to grant statutory benefits - assessment of income of an AOP - Assessee entitled to have alternate claims (including deduction under section 10(23C)(iiiad) or deductions available when assessed as an AOP) considered by the AO. - HELD THAT: - The Tribunal noted that the assessee had contended eligibility for deduction under section 10(23C)(iiiad) on the basis that total receipts were below the statutory threshold and that Form 10B/10BB filing requirements did not arise. The CIT(A) accepted the assessee's alternate contention that deductions available when the entity's income is assessed as an AOP ought to be considered. The Tribunal further held that the AO, being the tax assessor, must grant any benefit to which the assessee is entitled under law and directed that the AO consider the alternate claim afresh as indicated by the CIT(A). [Paras 4, 5]AO directed to consider the assessee's alternate claims including deduction under section 10(23C)(iiiad) or deductions when assessed as an AOP and grant benefits if permissible under law.Final Conclusion: Appeal allowed; the intimation under section 143(1) quashed and the Assessing Officer directed to consider the assessee's alternate claims (including deduction under section 10(23C)(iiiad) and deductions when assessed as an AOP) and grant any relief permissible under law. Issues:The appeal involves the denial of exemption u/s. 12A of the Act to a charitable trust running a school for the assessment year 2014-2015.Summary:Issue 1 - Denial of Exemption u/s. 12A of the Act:The assessee, a charitable trust running a school, filed an appeal against the denial of exemption u/s. 12A of the Act for the assessment year 2014-2015. The assessee's total receipts were approximately Rs. 13 lakhs during the relevant assessment year. The assessee contended that it was entitled to the benefit of deduction u/s. 10(23C)(iiiad) of the Act as its total receipts were below Rs. 1 crore, and there was no requirement to file Form 10BB in such circumstances. The intimation u/s. 143(1) denying the exemption was challenged, and the appeal sought its annulment. The CIT(A) accepted the alternate claim of the assessee for deductions when the income was assessed as an Association of Persons (AOP). The Tribunal noted that the intimation was erroneous per se, and adjustments made by the Assessing Officer (AO) in the intimation u/s. 143(1) were not permissible. Consequently, the intimation u/s. 143(1) was quashed, and the appeal of the assessee was allowed.Issue 2 - Grant of Deduction u/s. 10(23C)(iiiad) of the Act:The Senior DR argued that the assessee did not raise the claim for deduction u/s. 10(23C)(iiiad) of the Act, and without such a claim, it could not be considered. However, the CIT(A) directed the AO to consider the alternate claim of the assessee concerning the assessment of income u/s. 57 of the Act. The Tribunal observed that the AO should have granted the assessee the benefit of deduction u/s. 10(23C)(iiiad) of the Act when the exemption u/s. 12A was denied. It emphasized that the AO is not only a tax collector but also a tax assessor, and if any benefit is due to the assessee, it must be granted as permissible under the law.In conclusion, the appeal filed by the assessee was allowed, and the intimation u/s. 143(1) denying the exemption u/s. 12A of the Act was quashed. The Tribunal highlighted the importance of granting due benefits to the assessee as per the provisions of the law.