Facts of the Case

The assessee, a charitable educational institution, filed its return of income for Assessment Year 2015-16 declaring NIL income, claiming exemption under Sections 11 and 12 of the Income-tax Act, 1961 on gross receipts of ₹69,06,720. The return was accompanied by audited financial statements showing application of income towards charitable and educational purposes.

The return was processed by CPC, Bangalore, and exemption under Sections 11 and 12 was denied through an intimation under Section 143(1) dated 28.02.2018 on the ground that the assessee was not registered under Section 12AA for the relevant assessment year.

The assessee had been granted registration under Section 12AA subsequently on 05.09.2017. The assessee contended that in view of the proviso to Section 12A(2), exemption under Sections 11 and 12 ought to have been allowed for AY 2015-16 since the intimation under Section 143(1) was issued after the grant of registration.

The learned CIT(A) rejected the contention and upheld the denial of exemption. The assessee carried the matter in appeal before the ITAT.

 

Issues Involved

  1. Whether exemption under Sections 11 and 12 can be allowed for an assessment year prior to the year of registration under Section 12AA.
  2. Whether the proviso to Section 12A(2) applies where assessment proceedings were already concluded by intimation under Section 143(1).
  3. Whether gross receipts could be taxed without allowing deduction of expenditure when exemption under Section 11 is denied.

 

Petitioner’s Arguments

The assessee contended that registration under Section 12AA was granted on 05.09.2017, and since the intimation under Section 143(1) for AY 2015-16 was passed on 28.02.2018, the benefit of Section 11 should be extended by virtue of the proviso to Section 12A(2). It was further argued that even otherwise, taxing the gross receipts without allowing expenditure incurred for educational purposes was unjustified.

 

Respondent’s Arguments

The Revenue submitted that for AY 2015-16, the assessee was not registered under Section 12AA during the relevant period, and therefore, Sections 11 and 12 were not applicable. It was further contended that the proviso to Section 12A(2) applies only where assessment proceedings are pending, whereas in the present case, proceedings stood concluded by issuance of intimation under Section 143(1).

 

Court Order / Findings

The Income Tax Appellate Tribunal observed that the assessee applied for registration under Section 12AA in Financial Year 2017-18 and registration was granted on 05.09.2017. In terms of Section 12A(2), the benefit of Sections 11 and 12 becomes available from the assessment year immediately following the financial year in which the application is made, unless assessment proceedings for an earlier year are pending.

The Tribunal held that for Assessment Year 2015-16, the return had already been processed under Section 143(1) and therefore no assessment proceedings were pending as on the date of grant of registration. Consequently, the proviso to Section 12A(2) was held to be inapplicable.

The Tribunal further held that in the absence of registration under Section 12AA for the relevant assessment year, exemption under Sections 11 and 12 could not be allowed. Accordingly, the action of CPC and the learned CIT(A) was upheld.

 Important Clarification

The Tribunal clarified that the proviso to Section 12A(2) is conditional and prospective in nature, and its benefit can be availed only where assessment proceedings are pending on the date of registration. Once proceedings stand concluded by an intimation under Section 143(1), the benefit of retrospective application of Sections 11 and 12 is not available. The appeal was accordingly dismissed.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1770880009_BHARTIYASHIKSHASAMMITTEEKASHIPRADESHALLAHABADVS.DCACIT2CPCALLAHABAD2.pdf 

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