2024 (6) TMI 927 - AT - Income Tax

Assessee without section 10(23) registration cannot claim section 10(23C) exemption for non-filing Form 10BB audit report

Sri Ramalingeswara Swamy Temple Versus Asstt. Director of Income Tax, Exemption Ward-1 (4) Hyderabad

ITAT Hyderabad held that assessee without registration under section 10(23) cannot claim exemption under section 10(23C) for non-filing audit report in ... Exemption claimed u/s 10(23C) - exemption disallowed due to non-filing of the required audit report in Form 10BB before the specified date - HELD THAT:- As submitted by the assessee during the course of appellate proceedings that the assessee does not enjoy the registration u/s 10(23) of the Act, therefore, the assessee is not entitled to claim exemption u/s 10(23) of the Act. However, it was submitted instead of taxing the gross receipts, the net income was required to be taxed after allowing the allowable expenditure. In our view, the assessee is required to be assessed as AOP and the assessee is entitled to the deduction of expenses from the gross receipts as available to any other AOP. We deem it proper to remand back the matter to the file of the Assessing Officer with a direction to tax only the net income after giving deduction of expenditure claimed by the assessee in the form of regular expenditure, salary, puja expenditure and all other expenditure which are admissible in law. We further find that the CIT (A) without adjudicating ground No.1 raised by the assessee before him has decided the issue of eligibility of the assessee to claim section 10(23) of the I.T. Act. In our view, once the assessee has no registration u/s 10(23) of the Act, then the income of the assessee is required to be computed by applying the normal provisions of the I.T. Act as AOP and therefore, in our considered opinion, the net income only was required to be taxed. Since the learned CIT (A) had not adjudicated the above ground, therefore, we deem it proper to remand back this issue to the file of the learned CIT (A) to decide the issue afresh after granting due opportunity of being heard to the assessee to furnish the evidence and making its submission - we remand the issue to the file of the learned CIT (A) for fresh adjudication. Issues involved: The judgment involves the delay in filing appeals, denial of exemption claimed u/s 10(23C), interpretation of tax laws regarding the computation of net income, and the remand of the case for fresh adjudication.Issue 1: Delay in filing appealsThe assessee filed appeals with a delay of 30 days, which was condoned upon submission of a condonation petition and valid reasons for the delay. The delay was not opposed by the learned DR, and thus the appeals were considered.Issue 2: Denial of exemption u/s 10(23C)For A.Y. 2019-20, the assessee, a Trust, claimed exemption of administrative expenditure u/s 10(23C) of the Act. However, the exemption was disallowed by the Assessing Officer due to non-filing of the required audit report in Form 10BB before the specified date. The CIT (A) dismissed the appeal based on relevant circulars and legal precedents, leading the assessee to appeal before the Tribunal.Issue 3: Computation of net incomeThe Tribunal considered the nature of the assessee as a temple and the requirement for auditing books of account under the Act. It was noted that the assessee was not registered u/s 10(23) of the Act, leading to the rejection of the return of income. The Tribunal directed the Assessing Officer to tax only the net income after deducting allowable expenditures, treating the assessee as an Association of Persons (AOP) and remanded the matter for fresh adjudication.Issue 4: Fresh adjudication by CIT (A)The Tribunal remanded the grounds raised by the assessee for A.Y. 2019-20 and 2020-21 to the CIT (A) for fresh adjudication, as the issues were similar and required further examination. Both appeals were allowed for statistical purposes, emphasizing the need for a reevaluation of the matters by the CIT (A) in light of the Tribunal's directions.