Has the ld.CIT(A) erred in allowing exemption when issue of eligibility of registration under section 12A of the Act has not attained finality?

The Income Tax Appellate Tribunal (ITAT) Ahmedabad heard appeals from the Revenue concerning a charitable trust's tax exemption. The core issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was correct in allowing exemption under section 11 of the Income Tax Act when the trust's registration under section 12A had not yet been finalised. The Revenue argued that the CIT(A) erred, but the CIT(A) had previously ruled in favour of the trust, directing that it be treated as a registered trust for exemption purposes, relying on an earlier ITAT decision.

IN THE INCOME TAX APPELLATE TRIBUNAL
 “D” BENCH, AHMEDABAD
(Conducted through Virtual Court)

BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT
AND
SHRI AMARJIT SINH, ACCOUNTANT MEMBER

ITA No.372 to 374/Ahd/2019
Asstt.Year : 2013-14 to 2015-16

DCIT (Exemptions)
Cir.2, Ahmedabad.
PAN : AAATP 2338 T
(Applicant) 

 Vs.

Paramount Charity Trust
Paramount Complex
Nr.Natubhai Circle
Gotri Road, Race Course
Vadodara 390 007.
(Responent)

Revenue by : Shri S.S. Shukla, Sr.DR
Assessee by : Shri Mehul Patel, AR

Date of Hearing : 09/04/2021
Date of Pronouncement: 18/05/2021

O R D E R

PER RAJPAL YADAV, VICE-PRESIDENT:

The above three appeals are directed at the instance of the Revenue against the orders of the ld.CIT(A)-9, Ahmedabad of even dated i.e. 12.12.2018 for the above three assessment years. All these three appeals are disposed of by this common order for the sake of convenience, since identical issue is raised in all these appeals.

2. Sole identical issue in all these appeals is that the ld.CIT(A) has erred in allowing exemption under section 11 of the Income Tax Act, 1961, since the issue of eligible of the registration under section 12A of the Act has not attained finality. 

3. As aforesaid, as the facts and issue raised in all the cases are similar except quantum, we take the facts from ITA No.372/Ahd/2019 for disposal of all these appeals.

4. Brief facts of the case, which can be noticed from the relevant assessment order is that assessee is a public charitable trust and registered with Charity Commissioner under No.E/2469/Vadodara dated 15.6.1997 and thus granted recognition under section 80G of the Act. It stated to be engaged in charitable activities viz. advancement of education, health, medical, relief to the poor, help affected people in times of natural calamities. The assessee is running a diagnostic centre in the name “Paramount Diagnostic and Research Centre” (MRI/CT scan centre). The assessee was granted registration under section 12A(a) on 1.1.1982 and till assessment year 2011-12, it was assessed in the status of charitable trust. Subsequently, vide order dated 30.9.2014, the ld.CIT-I, Baroda cancelled the registration granted to the assessee u/s.12A of the Act by observing that the trust’s activities were not being carried out in accordance with the objectives as declared for the purpose of section 12AA. Accordingly assessment under section 143(3) was finalized after rejection of exemption under section 11 of the Act and net surplus as per income expenditure statement was determined as income of the assessee. Assessee submitted that the department has accepted the claim of the assessee since more than 20 years and entitled to exemption under section 11 as the activities fall within the purview of “charitable purpose” defined in section 2(15) of the Act. The ld.AO did not accept the explanation of the assessee. He observed that income earned from diagnostic centre viz. Paramount Diagnostic and Research Centre (MRI/CT Scan) was not used for charitable purpose, rather it was allowed to be accumulated and applied for the business growth of the trust, which could not be termed as application of fund for charitable purpose. In view of the same, and also of view that no registration was granted to the assessee-trust, the claim of exemption under section 11 was rejected, and the income over expenditure was treated as income from business. Aggrieved by the order of the AO, the assessee went in appeal before the ld.first appellate authority. The ld.CIT(A) while considering the facts of the case allowed the claim of the assessee and directed the AO to treat the assessee as registered trust under section 12A and allow claim of the exemption under section 11 and 12 of the Act. The ld.CIT(A) relied on the order of the ITAT passed in the assessee’s case in ITA No.1548/Ahd/2018 order dated 27.4.2018, whereby identical issue was agitated. Dissatisfied with the order of the ld.CIT(A) Revenue now is in appeals before the Tribunal for all these three years. 

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