Benefit of registration u/s 12AA can not be denied on the ground that it is sub-judice

Benefit of registration u/s 12AA can not be denied on the ground that it is sub-judice before the High Court unless registration granted has been withdrawn

ABCAUS Case Law Citation:
ABCAUS 2242 (2018) (03) ITAT

The appellant assessee was a section 25 company fully owned Government of India company and its entire capital was held by the President of India through Ministry of Social Justice & Empowerment.

The assessee had applied for registration u/s 12AA of the Income Tax Act, 1961 (the Act) which was denied.

However, the Tribunal directed the CIT (Exemptions) to allow registration u/s 12A and in view of the said order, the CIT (Exemptions) granted registration u/s 12A. For the relevant year, the assessee filed return declaring nil income after claiming exemption u/s 11 of the Act.

However, the registration granted to the assessee on the directions by the Tribunal was challenged before Hon’ble High Court.

During the course of the assessment, the Assessing Officer made disallowances and did not allow the benefit of exemption available u/s 11 of the Act. The Assessing Officer held that assessee was engaged in manufacturing, purchase and sale of goods and therefore, in view of insertion of proviso to section 2(15), the assessee was not carrying out charitable activities.

The Assessing Officer denied the exemption u/s 11 of the Act by holding that the registration u/s 12AA was granted to the assessee on the directions issued by the Tribunal and for which the Revenue had filed appeal before Hon’ble High Court. The Assessing Officer therefore, did not consider the registration u/s 12AA as the issue of grant of registration u/s. 12AA was sub-judice before Hon’ble High Court, therefore the status of the assessee as was taken as ‘Company’ and total income was computed in accordance with normal provisions of the Act applicable in the cases of Domestic Companies.

The learned CIT(A) confirmed the applicability of section 2(15) and held that the object activity of the appellant were not in the nature of relief to poor or medical relief and hence the provisions of section 2(15) was clearly applicable on the appellant’s case.

The ITAT observed that lower authorities held that since the assessee was engaged in the business of manufacturing, buying and selling of artificial limbs and accessories therefore, they were hit by the proviso to section 2(15) of the Act.

It was further observed that the Assessing Officer also denied the exemption in view of the fact that Revenue had challenged the order of Tribunal by which it had directed learned CIT(A) to grant exemption. However, the Revenue was not able to demonstrate that the registration granted to the assessee u/s 12AA of the Act has been withdrawn. Therefore, unless the said registration was withdrawn, the assessee will be eligible for exemption u/s 11 of the Act unless it was hit by the provisions contained in section 13 of the Act.

The Tribunal noted that the assessee was also aggrieved that its submissions had not been considered. Therefore the ITAt remitted the issue back to the office of CIT(A) to decide the issue afresh keeping in view the registration available to the assessee u/s 12AA.