The division bench of the Delhi High Court confirmed the Income Tax exemption granted to the Viswa Hindu Parishad (VHP) for the period in which they were banned by the government under UAP Act.
While upholding the orders of the ITAT and the CIT(A), the bench allowed the exemption under Sections 11 and 12 of the Income Tax Act to the Organization.
Assesses’ registration under section 12A was withdrawn by the IT department after they were banned in 1993 by the Government after the demolition of the Babri Masjid. Though the ban was removed in the year 1995, the IT exemptions under ss. 11 and 12 were denied to the assessee as they failed to submit audit reports along with the returns within the time prescribed. Assessee explained that this was due to seizure of the accounts during the time of ban. On 1999, the assessee again granted with registration.
For the assessment year 1993-04, the first appellate authority quashed the order of the Revenue and held that the AO was not justified in taxing the whole receipts and the corpus fund of the Assessee since the corpus fund was a carry forward of the earlier years and the same is a capital receipt in terms of Sections 11(1)(a) and 12 of the Act. The CIT(A) also considered the fact that the Assessee had been held to be a charitable organization in the past years.
Against the above order, the department approached the ITAT contending that the first appellate authority went wrong in allowing exemption under s. 11 to the assessee in the absence of an order under s. 12A of the Act. The department further argued that the CIT(A) ought not to have allowed IT exemption to the assessee considering the fact that they were banned under the UAPAct. However, the ITAT rejected both the contentions and held in favour of the assessee. Aggrieved by the order, the revenue preferred another appeal before the High Court.
Dismissing the appeal, the division bench comprising of Justice S.Muralidhar and Justice Anil Kumar Chawla observed that exemption can be allowed to the Assessee under Section 11 of the Act although the Assessee was not registered under Section 12A(a) of the Income Tax Act, 1961 since the amendment section 12 of the IT Act made in the year 1997 did not apply to the Assessee as their application for registration was pending during that time.
“Therefore, the question of the Assessee having to get itself registered under Section 12 AA did not arise. By the time the ITAT answered the above question, the registration under Section 12 A (a) was granted. The registration related back to the date of the application i.e. 23rd June 1973.”
With regard to the second question, i.e, Could the Assessee be granted exemption under Section 11 of the Act when there was a failure on its part to comply with the provisions of Section 12A (b) of the Income Tax Act, the bench observed that the assessment order was passed on 29th February 1996 and the Assessee’s audit report was ready on 12th March 1996.
Aligning with the contentions of the CIT(A), the bench confirmed that even if there was a non-compliance with Section 12 A (b) of the Act by the Assessee, they cannot be denied of the IT exemptions under Sections 11 and 12. “The corpus fund had been present in the earlier years and was a capital receipt. Even as per the original return, the Assessee did not have any excess over expenditure which could have been taxed. The ITAT committed no error in concurring with the CIT (A).”
Read the full text of the Order below.
