Facts of the Case

The assessee trust was registered under section 12A of the Income-tax Act, 1961 on 28.10.1999. For Assessment Year 2018-19, the assessee filed its return of income on 21.09.2018 declaring nil income after claiming exemption under section 11. The return was processed under section 143(1) and later selected for complete scrutiny.

During assessment proceedings, the Assessing Officer noticed that the assessee had changed its objects and had filed Form 10A on 10.05.2018 seeking fresh registration under section 12AA. The CIT (Exemptions), Lucknow rejected the application vide order dated 22.11.2018. On this basis, the Assessing Officer treated the assessee as an AOP and denied exemption under section 11, completing the assessment under section 143(3) read with section 144B on 28.04.2021, assessing total income at ₹4,91,24,101.

The assessee’s appeal before the Commissioner of Income Tax (Appeals), NFAC was dismissed, leading to the present appeal before the Tribunal.

Issues Involved

  1. Whether exemption under section 11 is available for AY 2018-19 when registration under section 12AA was not in force due to change in objects of the trust.
  2. Whether subsequent grant of registration under section 12AA read with section 254 with effect from AY 2019-20 can operate retrospectively.
  3. Whether denial of exemption under section 11 and assessment of the trust as an AOP was justified in law.

Petitioner’s (Assessee’s) Arguments

The assessee contended that the order rejecting registration under section 12AA had been set aside earlier by the Tribunal and the matter was pending before the CIT (Exemptions). It was argued that exemption under section 11 should not have been denied merely because fresh registration was not granted during the year under consideration.

The assessee relied upon documents placed in the paper book, including earlier registration certificates, audit report in Form 10B, and subsequent orders granting registration under section 12AA read with section 254 of the Act.

Respondent’s (Revenue’s) Arguments

The Revenue submitted that the assessee was not having valid registration under section 12AA for Assessment Year 2018-19 due to change in objects and, therefore, was not eligible to claim exemption under section 11. It was further argued that the registration granted subsequently under section 12AA read with section 254 was effective only from Assessment Year 2019-20 and could not be applied retrospectively.

Court Order / Findings

The Tribunal observed that the assessee was not registered under section 12AA of the Act for Assessment Year 2018-19 consequent to change in objects of the trust. The registration granted by the CIT (Exemptions), Lucknow on 13.12.2022 under section 12AA read with section 254 was effective only from Assessment Year 2019-20.

Relying upon section 12A(2) of the Act and the statutory provisos thereto, the Tribunal held that exemption under sections 11 and 12 is available only from the assessment year immediately following the year in which registration is granted, unless the statutory conditions for retrospective benefit are satisfied, which were not applicable in the present case.

Accordingly, the Tribunal found no infirmity in the order of the CIT(A) and upheld the denial of exemption under section 11 for AY 2018-19. The appeal of the assessee was dismissed.

Important Clarification

The Tribunal clarified that where a trust changes its objects, it must obtain fresh registration under section 12AA to remain eligible for exemption under section 11. Subsequent grant of registration with prospective effect cannot cure the absence of registration for earlier years. Exemption under section 11 is strictly conditional upon valid registration for the relevant assessment year.

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