Whether benefit of Section 11 is available for earlier years if 12A granted before order u/s 143(1)?

Respected Members

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Short note of today's case law for quick reference:

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[2024] 113 ITR (Trib) (S.N.) 60 (ITAT[Pune])

[BEFORE THE INCOME-TAX APPELLATE TRIBUNAL — PUNE "SMC" BENCH]

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INDIAN MEDICAL ASSOCIATION

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ADDITIONAL/JOINT COMMISSIONER OF INCOME-TAX (APPEALS)

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DR. DIPAK P. RIPOTE (Accountant Member) and VINAY BHAMORE (Judicial Member)

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June 26, 2024.

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1) The assessee, the Indian Medical Association was a registered trust holding a certificate of registration dated 26/08/2014 issued by the Charity Commissioner.

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2) The assessee had applied for registration u/s 12AA of the Income-tax Act, 1961 on 15/07/2016

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3) The assessee received registration under section 12AA of the Act by order dated 20/10/2016.

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4) For the A.Y. 2016-17 the assessee claimed benefit under section 11 of the Act.

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5) By an order u/s 143(1) dated 02.01.2018, the assessee’s claim to deduction under section 11 of the Act was rejected.

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6) The CIT (A) dismissed the assessee’s appeal on the ground that the registration u/s 12A was prospective and hence not applicable to A.Y 2016-17.

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7) On further appeals, ITAT held that:

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? According to section 12A(2) of the Act, if any assessment proceeding was pending during the pendency of registration u/s 12AA of the Act, then the registration granted shall be applicable to the pending assessment proceedings.

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? The CBDT Circular No. 1 of 2015 explained section 12A(2) of the Act.

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? The proviso to section 12A(2) was introduced to remove hardship caused to genuine trusts.

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? It had not been alleged by the Department that the assessee’s activities or objects were not charitable in nature, rather it was an admitted fact that the assessee’s objects and activities were charitable in nature.

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? The order u/s 143(1) was issued on 02.01.2018 and registration u/s 12AA of the Act was granted on 20.10.2016, which meant that at the time of issue of the order u/s 143(1), the assessee already had registration under section 12AA of the Act.

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? Therefore, in terms of the proviso to section 12A(2) of the Act, the assessee was eligible for deduction under section 11 of the Act for the A.Y. 2016-17 as it had received registration u/s 12AA of the Act before the order u/s 143(1) for the assessment year 2016-17.

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? In principle also only the profit can be taxed and not the entire receipt if benefit of section 11 is to be denied.

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? Therefore, the CPC had erred in taxing entire receipt of the assessee u/s 143(1) of the Act.