SHRI HINGULAMBIKA EDUCATION SOCIETY,GULBARGA vs. ITO (EXEMPTIONS), WARD-1, KALBURGI

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

The Order passed by the Ld. CIT(A), NFAC, for the Asst Year 2020-210, u/s 250 of the Income Tax Act 1961, is contrary to the 1 facts and merits of the case. Hence the Order passed by the CIT(A) - is bad in law.

Shri Hingulambika Education Society, Gulbarga

Page 2 of 42 The ld. CIT(A), NFAC erred in NOT deleting the entire 2 addition on account of the eligible Exemption as per Sec. 11 and 12 read with Sec. 12A(2) provisos. As held in various judicial precedents

The CIT (A) has erred in interpreting the intention of the 3 legislature while introducing the amended provisions of Sec.l2A(2) read with its provisos.

The CIT (A) NFAC has erred in not applying the Normal 4 computation provisions of the Income-tax Act and has simply endorsed the view of CPC without applying the principles of Natural Justice.

Therefore, the appellant prays the hon'ble ITAT to delete 5 the addition made by Ld. AO and sustained by Ld. CIT(A) and consequently, reduce the demand raised.

6 The appellant craves leave to add, amend, alter or delete any of the grounds that may be urged with the kind permission of the Hon'ble Tribunal at the time of hearing of the appeal.

TOTAL TAX EFFECT Rs.1,76,37,176/-

Page 3 of 42 request of the assessee to grant exemption u/s 154 of the Act vide order dated 29.7.2022. Against this assessee went in appeal before CIT(A)/NFAC on 12.8.2022. This appeal of the assessee has been dismissed vide NFAC order dated 30.11.2022. Against this assessee is in appeal before us. The ground nos.1 to 3 are inter-related. Hence, we adjudicate all the grounds herein collectively.

2.1. The ld. A.R. for the assessee submitted that the Assessee has applied for 12AA Registration. on 31.3.2021 by filing Form 10-A. The CPC has given on 27.05.2021 a Provisional Registration U/sec. 12AB, which was introduced wef 1.4.2021. As per the Provisions of the Act, all the pending Applications U/sec 12AA as on 31.3.2021 are treated as Applications U/sec 12AB and accordingly Form 10-AC Provisional Registration. is issued for 2021-22 to 2023-24 three Asst years. Based on this only the Assessee has filed its Return of Income on 31.5.2021 for the Asst Year 2020-21, as the relevant due date was extended due to Covid, 19.

2.2 As per the Second Proviso of Sec. 12A(2) the Assessee is entitled to Sec.11 Exemptions for Asst Year 2020-21, because of its Provisional and subsequent Regular Sec 12AB Registrations. Sec ll(l)(a) allows both the Revenue and Capital Expenditure, incurred in the same previous year, as Application of income of the Asst Year. The Assessee has incurred. Revenue expenditure of Rs. 3,01,23,273/- and Capital expenditure of Rs 2,10,07,527/- coming to a total of Ra 5,11,30,800/-. Thus, from its Gross Income of Rs 5,71,54,412/- these are allowable deductions. The Balance Rs.60,24,612/- is the Net surplus income. This is also exempt U/sec 11(l)(a) as it is (10.54%) below the general Threshold of 15% of Gross Income specified in this section.

Shri Hingulambika Education Society, Gulbarga

Page 4 of 42 The expression 'Applied' is explained in Radhasoami 2.3 Satsang Sabha (1954) 25 ITR 473 (Allahabad). Thus, as the Assessee has complied all the Provisions of Sec 11, including Form 10-B Audit Report for the relevant year, it is entitled to Sec.11 exemption and the ld. A.R. requested the Tribunal to delete the total addition made to the returned Nil income.

2.4 The ld. AR relied on the following decisions wherein the interpretation of the meaning of the Sec.l2A(2) Provisos is elaborated and the courts took a liberal view that the Application of Sec. 11 and 12 Exemption, when once a Registration is taken is retrospective and not prospective. a) ITO Vs. Centre for Cellular & Molecular Platforms. b) "A" Bench decision dt 28.08.2019.

2.5 The ld. A.R. submitted that here the related Asst year is 2013-14 and the Sec. 12AA registration is given on 21.09.2016 wef 2017-18 Asst Year as on the date of registration the demand for 2013-14 was already raised and the matter was pending in appeal. The Hon’ble court held the Exemption is applicable for 2013-14 Asst Year.

2.6 It was held in that judgement in Para. 26 that "It is, thus, a curative proviso, which is but merely declaratory of the previous law. It has, by removal of the hardship, rendered the procedure more relief- oriented. It adequately complies with the natural justice principle of fairness to all. Hence, it has to be presumed and construed as retrospective in nature, in order to give the section a purposive interpretation. "

2.7 The ld. A.R. further submitted that in the case of CIT(E) Vs. Shree Shyam Mandir Committee, reported in Shri Hingulambika Education Society, Gulbarga

Page 5 of 42 (2018) 400 ITR 466 (Raj.), Hon’ble Rajasthan High Court held that as per Sec.l2A(2) provisos the sec. 11 exemption is applicable for the Assessees Asst years 2003-04 to 2008- 09, as these assessments are pending in dispute as on the date of registration i.e. 29th Oct, 2010. Specifically, it was held in para 6.5 of this decision that though the provisions have come on statute book by 2014 Finance Act only, they operate retrospectively. At Para 6.10 the Hon’ble Court held as follows.

6.10 We hold that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to s. 12A(2) of the Act w.e.f. 1st Oct., 2014 should be read as retrospective in operation w.e.f. the date when the condition of eligibility for exemption under ss. 11 85 12 as mentioned in s. 12A provided for registration under s. 12AA ae a pre-condition for applicability of s. 12A.

2.8 The ld. A.R. further submitted that in the case of Sree Sree Ramakrishna Samity Vs. DCIT . 156 ITD 646 (2015) /44ITR (Trib) 678 (Kolkata) had also concluded the provisions of Sec.l2A(2) read with its provisos and the Explanatory memorandum attached to the Amended Provisions, are applicable retrospectively.

2.9 The ld. A.R. submitted that when all the above decisions equivocally state the principle that the intention and spirit of the statute is to grant the exemption retrospectively for all the pending assessments, reassessments whether they are in the original Asst Stage or at the Appeal Stage, in the present case no pending /outstanding demand is there. To comply the law, as the time is extended to file the return for an earlier year,

Shri Hingulambika Education Society, Gulbarga

Page 6 of 42 due to covid, the Assessee filed the Return on 31.05.2021 for 20-21 Asst year, though the registration is given for 21-22 Asst year, after obtaining the sec.12AA registration on 27.05.2021. Thus, the Assessee pleaded by applying the ratio of the above decisions to grant the sec. 11 Exemption to the Assessee.

3.1 Thus, the ld. A.R. submitted that as per the Provisos of Sec 12A(2) the assessee is having a Regular registration only from 21.09.2022. As on that date the 2020-21 assessment is pending and the 1st appeal in this respect is pending for disposal. Based on this the Assessee is entitled to Sec 11 Exemption as claimed the same in the return of income, satisfying all the conditions of the Law.

3.2 He further submitted that even after the 2021 Amendments to Sec.12A(2) and its provisos, there is no clarity, of application of the provisions for any earlier year Assessments, with regard to which Shri Hingulambika Education Society, Gulbarga

Page 7 of 42 registration date is relevant. Whether the word "Such Registration" in 2nd proviso, applies to provisional registration or Regular registration in the moot point in this case. Assessee pleads to apply the provisions as on the date of Regular Registration.

3.3 Hence, the ld. A.R. submitted that the Assessee’s claim that it has incurred Revenue expenditure of Rs 3,01,23,273/- and Capital expenditure of Rs.2,10,07,527/-coming to a total of Rs 5,11,30,800/- is eligible for deduction from Gross Income. Thus from its Gross Income of Rs. 5,71,54,412/- this Rs 5,11,30,800/- had to be deducted to arrive at the Surplus as per Sec 11 (1)(a). Assessee pleads that denying the same is against the principles of Law & Natural Justice.

3.4 He further submitted that the elaborate explanation given in CBDT Circular No. 1/2015 dt 21.01.2015, describing the background with which the provisos to Sec.12A(2) are brought on statute. It clearly states that once a registration is given, (after examining), the Sec.11 exemption shall be applied even for all earlier years. Para 8.1, 8.2 and 8.3 elaborately gives the meaning and effect of this Amendment.

3.5 He referred to decision of Hon’ble Supreme Court in the case of K.P. Varghese Vs ITO (Supreme Court of India)(1981) 131 ITR 597 (SC) Civil Appeal No. 412 of 1973 Date of Judgement/Order dt 04/09/1981. Here, the Hon’ble Supreme Court held that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature, the Court may modify the language so as to achieve the obvious intention of the Legislature.

Shri Hingulambika Education Society, Gulbarga Page 8 of 42 3.6 He submitted that the 2nd Proviso gives relief to those Assessees whose assessment proceedings are pending before the AO. The 3rd Proviso gives relief to those whose cases are not at all touched by the department, by prohibiting to issue Sec. 147 notice, for Income escaped Assessment u/ sec.

4. Further, the ld. A.R. submitted that as per the Provisions of the Act, Sec. 11,12 and 13 are a separate Code of computation of income. The Assessee is entitled to the same and has claimed 100% Exemption u/sec 11 as per Sec. 12A(2). Assuming for a moment, but not admitting, that the Assessee is not eligible for Sec.11 exemption, then as per normal 5 heads of Computation the Taxable Income has to be arrived at, after allowing Sec. 10 exemptions for wholly existing educational institutions Sec 10(23C)(ad) unconditional exemption is available if the Gross Receipts of such Institution are less than Rs. 1.0 Crore per annum. Here in the instant case the following Institutions are having less than Rs.1.0 crore Gross receipts. Hence, they are to be excluded while considering the total Gross receipts. High School 95,941 Girls Hostel 20,25,900 B.Ed. College 67,10,818

Shri Hingulambika Education Society, Gulbarga

Page 9 of 42 4.1 For other income, under the head "Other Sources" U/sec 57 the expenditure incurred, wholly and exclusively to earn the same has to be allowed as deduction. Here the Revenue expenditure is allowable. Further, the Depreciation is also allowable on commercial principles basis. The CPC has ignored all these principles and has arrived the Gross Receipts of the Total Year as Net Income and levied the Tax.

4.2 The ld. A.R. submitted that the assessee has furnished the Sec. 12AB registration details which are available in the Income- tax Portal. The Portal was not functioning normally in second half of 2021. Though the Sec. 143(1)(a) intimation says one can file an objection for the additions/adjustments made in the said intimation, the portal has not allowed the same. As there is no other option the Assessee has filed Sec. 154 Petition. Even this is rejected, without looking into the applicable legal provisions and the frame work. Thus the assessee pleaded to allow the eligible deductions to arrive the taxable income, as per law.

The ld. D.R. submitted that the second proviso to Sec 12A 5. (2) of the Income tax Act, 1961 (hereinafter referred to as 'Act') applies to assessee’s case. Ld. DR claims that the meaning of the word in second proviso of Sec 12A (2), "for pending Assessments as on the date of Such Registration", shall include the appeals pending disposal. Ld. AR has relied upon the following judgments to support his claim: A. Decision of Bangalore ITAT in the case of Centre for Cellular and Molecular Platforms in 2018.

Shri Hingulambika Education Society, Gulbarga

Page 10 of 42 B. Decision of Kolkata ITAT in the case of Sree Sree Ramkrishna Samity in ITA No. 1680-85/2012

C. Decision of Rajasthan High Court in the case of Shree Shyam Mandir Committee in of 2016 dated 23.12.2017.

5.1. The ld. D.R. submitted that the second proviso to Sec 12(A)(2) of the Act does not speak about merely the pending assessment proceedings but such assessment proceedings should be pending before the Assessing Officer. The ld. D.R. reproduced the second proviso to Sec 12(A)(2) of the Act for our reference in its written submissions as follows: "Provided further that where registration has been granted to the trust or institution under section 12AA or section 12AB], then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year:"

5.2. The ld. D.R. submitted that the facts of the case in Sree Sree Ramkrishna Samity (Supra) are not like that of the assessee. In Sree Sree Ramakrishna Samity (Supra), reassessment proceedings were pending before the Assessing Officer on the date of registration, which is not the case of the assessee as no assessment or reassessment proceedings were pending before the Assessing Officer. In the case of Centre for Cellular and Molecular Platforms (Supra), ITAT has relied upon the judgment in the case of Shree Shyam Mandir Committee (Supra), wherein it was held that appeal in continuation of original assessment proceedings and proceedings before the appellate

Shri Hingulambika Education Society, Gulbarga

Page 11 of 42 authorities is covered by the second proviso to Sec 12 (A) (2) of the Act.

5.3. The ld. D.R. submitted that after the judgment of the ITAT in Centre for Cellular and Molecular Platforms (Supra), Allahabad High Court in its judgment in the case of Commissioner of Income-tax (Exemption), Lucknow v. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan in OF 2019, dated 06.08.2019 has considered the issue. One of the questions of law framed by the Hon’ble High Court as recorded at para 3 of the Order which is reproduced hereunder for our ready reference:

"The appeal was admitted by this Court on following substantial questions of law, which are quoted for ready reference:—

5.4 The ld. D.R. submitted that while answering this question of law in negative, Hon'ble High Court has held as under: "14. If the facts of this case are taken into consideration then the assessee made an application for registration on 15.12.2014 i.e. in the assessment year 2015-16. The assessment in question is of the year 2011-12. In view of the above, whether the subsequent registration pursuant to the application dated 15.12.2014 would make the assessee entitled for the benefit of Section 11 & 12. It is in respect of the assessment year prior to the date of application. 'It is in the-circumstances that registration was finally given on 08.06.2015. We are required to consider proviso below sub-Section 2 of Section 12 A of the Act, 1961. The proviso provides that if registration has been given to the Trust or the Institution under Section 12 AA of the Act, 1961, then provisions of Section 11 & 12 of the Act, 1961 shall apply in respect of any income derived from the property held under the Trust or the institution for any assessment year proceeding, for which assessment is pending before the Assessing

Shri Hingulambika Education Society, Gulbarga

Page 12 of 42 Authority as on the date of registration. The Tribunal has given interpretation to the proviso to hold that irrespective of the date of application, the benefit of Section 11 & 12 of the Act, 1961 would be available to the assessee retrospectively, if the assessment proceedings were pending and pendency of such proceedings may be not only before the Assessing Officer, but even before the Tribunal.

15. According to us, the interpretation of the proviso has been given in ignorance of the main provision of Section 12A(2) of the Act, 1961. Whenever interpretation of the statutes has to be given it should be after making harmonious construction of the statute. For the purpose of proper interpretation of Section 12A of the Act, 1961, the Tribunal was required to make interpretation after taking into consideration the main provision along with the proviso and not by giving meaning to the proviso in ignorance of substantive provision.

16. The Tribunal has even ignored the basic principle of law in giving interpretation in charging provisions, the benefit is to be, given to the assessee but same principle is not applicable for an exemption notification or exemption clause, where the benefit of ambiguity must be given to the Revenue/State. It is also that burden to prove applicability of exemption would be on the assessee that it comes squarely within the parameters of the exemption notification or exemption clause. The Tribunal was required to make distinction between charging provision where benefit of ambiguity is given to the assessee and the exemption notification or clause where interpretation is to be given in the form of Revenue. The issue aforesaid has been recently considered and decided by the Apex Court in the Case of Commissioner of Customs (Import) v. Dilip Kumar & Company [2018] 9 SCC 1.

Shri Hingulambika Education Society, Gulbarga

Page 13 of 42 for registration was given on 15.12.2014 i.e. in the financial year 2014- 15. On registration of the Trust, benefit under Section 11 and 12 would be available to the assessee from the assessment year following the financial year in which application was given and not any previous year. The benefit of registration could not have been extended for the assessment year 2011-12, even if the matter was pending before the Tribunal when application for registration was submitted on 15.12.2014.

19. The Tribunal even ignored the fact that proviso not only require registration of the Trust or the Institution while the assessment proceedings are pending, but it refers to assessment proceedings before the assessing authority and not elsewhere. In a common parlance, whenever matter is pending before the Tribunal in appeal, considered to be pendency of the assessment proceedings. The aforesaid principle would be applicable in the instant case is another question because proviso qualifies not only pendency of the assessment proceedings, but should before the Assessing Officer not elsewhere, if in the proviso words "pendency of the assessment proceedings", would have been used then pendency of the appeal against the assessment could have been considered to be pendency of the assessment proceedings, but in the instant case the words used are "pendency of the assessment proceedings before the Assessing Officer". The assessment proceedings of the year 2O11-12 was not pending before the Assessing Officer, but before the Tribunal. The ' observation aforesaid is relevant on the facts of this case. This Court has otherwise given proper interpretation to the substantive provision as well as the proviso.

Shri Hingulambika Education Society, Gulbarga

Page 14 of 42 20. We have further gone through the instruction of the CBDT and find it to be contrary to the proviso to Section 12 A of the Act, 1961. The \ instruction of the CBDT cannot be forfeited, if it is against the statutory provisions. The provision is not to extend benefit in case assessment is pending but it should be before the Assessing Officer. In that case, pendency of the assessment can be treated to be pending before the Assessing Officer though pending before the Tribunal in Appeal. It cannot be in those cases where provision is very specific, because proviso not only refers to the pendency of the assessment when it is pending before the Assessing Officer. In few cases, the assessment proceedings is considered to be pending before the Tribunal due to pendency of the appeal but it is applicable in those cases where words used are pendency of the assessment proceedings and not with words "pending before the Assessing Officer". The interpretation therein is in reference to the words 'pendency of the assessment' and not in reference to the pendency of the assessment before the Assessment Officer. The instruction of CBDT cannot be applied if seems counter the statue." (emphasis added)

5.5 The ld. D.R. thus submitted that in the case of Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan (Supra), the Hon'ble Allahabad High Court has clearly held that the assessment proceedings pending before the Assessing officer, for the purpose of second proviso to Sec 12A(2) of the Act, shall include only the assessment proceedings which are pending before the Assessing Officer and not any appellate proceedings arising out of such assessment proceedings. Further, he submitted that the SLP filed by the assessee against the judgment of the Hon'ble High Court has been dismissed as withdrawn, by the Hon'ble Supreme Court in SLP APPEAL (C) NO(S). 28523 OF 2019 vide its order dated 08.04.2022 and as such issue has reached finality.

5.6. The ld. D.R. submitted that in the similar case in the case of Soundaram Chokkanathan Educational & Charitable Trust Vs. ITO in T.C.A. No. 1015 of 2019, the Shri Hingulambika Education Society, Gulbarga

Page 15 of 42 Hon'ble Madras High Court in its judgment dated 09.12.2019 has considered the decision in Shree Shyam Mandir Committee (Supra) and differentiated it. Hon'ble Madras High Court then relied upon the judgment of Division Bench of Hon'ble Allahabad High Court in the case of Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan (Supra) and decided the issue in the favour of Revenue, wherein the Hon’ble High Court has also observed and held as follows: "21. Accordingly the judgment of Gujarat High Court in Mayur Foundation (supra), would not apply. The view expressed therein cannot be applied to the facts of this case, otherwise an anomalous situation may emerge in a given case where for one or the other reason assessment proceedings before the Tribunal remain pending for years together or on a remand or for any other reason it comes before the Assessing Officer and such cases also subsequent application for registration and acceptance would result to extend benefit of sections 11 and 12 creating anomalous position if not meant for. This was not the object sought to be achieved by the legislature. If for one or the other reason, the proceedings in reference to the assessment years 1998-99 remains pending and the application for registration under section 12AA of the Act, 1961is filed the year 2014-15 followed by registration, if the proviso is applied, then benefit of sections 11 and 12 of the Act, 1961 would be given to the Trust or the Institution even for the year 1998-99, though the legislatures have not provided such arrangement or to extend the benefit in such cases. The provision is candid to govern only those cases where the application for registration is submitted followed by registration, to extend the benefit to the assessee front the following financial year of the date of application. Taking aforesaid into mind, we find reasons to allow the appeal preferred by the revenue and the substantial questions of law framed herein above are answered in favour of the Revenue and thereby we set-aside the order passed by the Tribunal." (emphasis added) 5.7 The ld. D.R. submitted that since the assessee has made its application for registration on 31.03.2021, it is not entitled for exemption for AY 2021-22 onwards and Shri Hingulambika Education Society, Gulbarga

Page 16 of 42 not for the year under consideration i.e. AY 2020-21 as claimed by the assessee. 5.8. Thus, in view of the above legal position, relying upon the judgments in the case of Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan. (Supra) and Soundaram Chokkanathan Educational & Charitable Trust (Supra), the ld D.R. requested that the appeal of the assessee may be dismissed, and the order of the Ld. CIT(A) dated 30.11.2022 may be confirmed.

5.9 The ld. D.R. submitted that the temporary registration u/s 12AB of the Act has been granted to the assessee on 27.5.2021 w.e.f. 1.4.2021 for 3 assessment years starting from assessment year 2021-22 and ending on 2023-24. Since on the date of registration being granted u/s 12AA/12AB on 27/05/2021, there was no assessment of the assessee Trust pending for AY 2020-21, the benefit of second proviso to section 12AA(2) cannot be given to the assessee. Assessee filed the return of income on 31/05/2021 which was after the registration was granted on 27/05/2021. Though the registration was granted to the Assessee Trust w.e.f 01/04/2021, the same was meant for AY 2021-22 to cover the entire assessment year from back date since the registration was granted on 27/05/2021.

5.10 The ld. D.R. submitted that the Second proviso to section 12AA(2) of Income Tax Act is very clear in its language:-

"provided further that - where registration has been granted to the Trust for institution under section 12AA or section 12AB, then, the provisions of section 11 and 12 shall apply in respect of any income derived from property held under Trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such pending assessment year. “

Shri Hingulambika Education Society, Gulbarga

Page 17 of 42 5.11 The ld. D.R. submitted that since the first condition of this proviso highlighted above is not met there is no question of considering the argument of the assessee Trust regarding objects and activities remaining the same.

5.12 The ld. D.R. submitted that the plea on the part of assessee Trust that ITR was filed for AY 2020-21 on 31.5.2021 due to extension in due date owing to covid pandemic does not come to rescue of the assessee Trust since the fact remains that on the date of grant of registration on 27.5.2021, the ITR had not been filed and there was no assessment pending before the department. It is a case of direct application of Income Tax Act without any ambiguities since Act does not mention any exception or leaves room for an alternate interpretation in this regard. In view of the above discussion and also considering the fact of the case, the order passed by CPC, Bengaluru was upheld by the NFAC and accordingly, the appeal taken by the assessee before NFAC was dismissed.

5.13 The ld. A.R. has replied to ld. DR’s argument by submitting that the Case law relied on by the Dept "Shri Kumar Simitra Devi Smarak Shikshan Samsthn Vs. Cit (2022) 138 Taxmann.com 197(SC) is not applicable to the present case based on the following facts.

5.13.1 The ld. AR submitted the facts of above case as follows: Asst year : 2011-12. In the Asst tax is levied as there is no Sec. 12A Registration. Then the Application is filed for Sec. 12A Registration on 15.12.2014. It was granted on 8.6.2015. As on the date of Registration the case is pending before the ITAT. The ITAT allowed the Sec. 11 and 12 exemption. The HC of Allahabad-Lucknow bench, on 6.8.2019 held that as on the date of Registration the Asst is not pending before the AO. The Assessee went in appeal before

Shri Hingulambika Education Society, Gulbarga

Page 18 of 42 SC. The SC held on 8.4.2022 that as on the date of Registration the Assessment is not pending before the AO. Hence the Sec.12A(2) proviso is not applicable. 5.13.2 He submitted that in this case, the Assessee the Appellant has applied on 31.3.2021 by filing Form 10-A for Sec.12AA Registration. The CPC has given on 27.05.2021 a Provisional Registration U/sec.12AB, which was introduced wef 1.4.2021. As per the Provisions of the Act, all the pending Applications U/sec.12AA as on 31.3.2021 are treated as Applications U/sec.12AB and accordingly Form 10-AC Provisional Registration is issued for 21- 22 to 23-24 three Asst years. Based on this only the Appellant has filed its Return of Income on 31.5.2021 for the Asst Year 2020-21, as the relevant due date was extended due to Covid-19. Thus here the Return is filed after applying and obtaining the provisional Registration. Thus, as in the case law relied upon, after levy of tax, Registration is not applied and obtained. After Applying for Sec. 12AA Registration only the Return is filed. Such Provisional Registration is also after due verification, on filing of Form 10-AB on 30.3.2022 is confirmed by Regular Registration in Form 10-AD on 21.9.2022. Thus, there is no element of after-thought in applying and obtaining the Registration after the levy of tax and during the course of proceedings before Tribunal as in the case relied on by Department.

5.14. The ld. A.R. further submitted that the second case law relied on by the Department is Soundaram Chokkanathan Educational 86 Charitable Trust Vs. ITO (430 ITR 440) (Mad.).

5.14.1 The ld. A.R. submitted that here the relevant Asst Year is 2013-14. The Registration is granted on 2.3.2016. The ITAT here held against the assessee, as the genuineness is considered only after the due Amendments to the Trust Deed are Shri Hingulambika Education Society, Gulbarga

Page 19 of 42 made on 23.2.2016. In the present case the Provisional Registration is obtained and then the Return of Income is filed. The Return is filed relying on the Sec.12A(2) provisos only, as they are amended in 2014. In the above case and here when there was no Amendment, the Return was filed and later on the benefit of the Sec,11 and 12 is pleaded in their Appeal proceedings. In the Present case, the total incidents have taken place after the introduction of the benevolent two provisos to sec.12A(2) in the Statute. Thus, the case law relied on is not applicable to the present case and is distinguishable from the facts of the case.

5.15 The ld. A.R. submitted that the third case law cited by the Department is Gurukul Vs. ITO (E) 140 Taxmann.com 309 (2022) (Patna Tribunal) decision dt 23.5.1922.

5.15.1 The ld. A.R. submitted that here the ITAT considered only the Main Section 12A(2) Applicability . It has not considered the Applicability of the Provisos introduced, for the benefit of Assessee far years, prior to the Date of granting Sec.12A Registration. Our case is pleading for the Applicability of benevolent Two proviso -1st and 2nd to Sec. 12A(2). The Unique peculiarity of our case as distinguished from all other DR quoted case laws is as follows.

5.16 The ld. A.R. submitted that all the above cases are as per the old Sec.12AA. In this case, the assessee is covered by the New Sec. 12AB i.e. Newly introduced from 1.4.2021. Here the provisional registration. is given first and after detailed examination, regular registration. is given confirming the provisional. Thus, as on the date of filing of our 2020-21 ROI there is provisional Registration to the Appellant. As on the Regular

Shri Hingulambika Education Society, Gulbarga

Page 20 of 42 registration the matter is pending before the CIT (Appeals). Thus, the benefit is squarely applicable to the Appellant.

5.16.1 He further submitted that the ROI is filed voluntarily, after obtaining the Provisional Registration, with an intention to comply the law hence forth. i.e. to be on the rolls of the Department regularly. In all the cases cited by the department without prior Registration the Returns are filed. Tax is levied. Then they obtained the Registration. after the 2014 Amendment has come. They pleaded the Applicability of benevolent provisions, retrospectively. Here the Appellant is pleading that as on the date of Application no Tax due is there. No Return is pending for Asst. In fact the Return is filed as per the Extended Due date for this Asst. year, within the time. Thus, this case is not comparable with any of the cases relied on by the Department.

5.17. The ld. A.R. submitted that the assessee is relying on the following case law, which is delivered by Amritsar Bench after the 1st cited SC decision. Leh Nutrition Project Vs. Deputy Commissioner of Income-tax in 2014 dated 16.11.2022.

5.17.1 The ld. A.R. submitted that here the Asst Year is 2010- 11, Registration is granted on 18.3.2011. As on the date of Registration the 2010-11 Asst year is pending before the Assessing Officer. Hence the ITAT held that Sec.11 Exemptions applicable. He stated that the Same analogy is applicable to the present assessee.

Page 21 of 42 Charitable Trust situated at Gulbarga, Karnataka carrying on its public charitable educational activities since 25.4.1981 and continued during the previous year under consideration for the assessment year 2020-21. The assessee was not enjoying all the benefits u/s 12AA of the Act. The assessee for the first time applied through online on 31.3.2021 and the CPC has given the registration u/s 12AA of the Act for the assessment year 2021-22 and onwards for 3 years provisionally vide Form No.10AC dated 27.5.2021. For the assessment year under consideration i.e. for the assessment year 2020-21 assessee filed return of income with nil income claiming exemption u/s 11 of the Act with audit report in Form No.10B on 31.5.2021. The claim of assessee u/s 11 of the Act has been denied by the CPC while processing return u/s 143(1) of the Act dated 24.12.2021. Later the assessee filed petition u/s 154 of the Act on 13.1.2022. This petition was also rejected by the CPC vide order dated 29.7.2022. Now the contention of the ld. A.R. is that as per second proviso to section 12A(2) of the Act, once an approval u/s 12AA of the Act or 12AB of the Act is granted to a Charitable institution, the assessee entitled for exemption u/s 11 of the Act for all the earlier previous years provided it has not changed its objectives in those years. In other words, for all pending assessments also, the assessee is entitled for exemption u/s 11 of the Act as this is the benevolent provision and to be considered liberally.

6.1 Now coming to address the issue before us, we need to consider section 12A(2) of the Act along with proviso to determine the issue raised before us. Section 12A(2) of the Act, provide that whenever application has been made for registration of trust or institution is made under section 12AA of the Act on or after first date of 2007, the provision of sections 11 and 12 of the Act, shall apply in relation to income of such Trust or Institution from the Shri Hingulambika Education Society, Gulbarga

Page 22 of 42 assessment year immediately following the financial year in which application is made.

6.2 If the facts of this case are taken into consideration, then the assessee made an application for registration on 31-03-2021 i.e. in the assessment year 2021-22. The assessment in question is of the year 2020-21. In view of the above, whether the subsequent registration pursuant to the application dated 31-03-2021 would make the assessee entitled for the benefit of sections 11 & 12? It is in respect of the assessment year prior to the date of application. It is in the circumstances that registration was finally given on 27-05-2021. We are required to consider proviso below sub-section 2 of section 12A of the Act. The proviso provides that if registration has been given to the Trust or the Institution under section 12 AA of the Act, then provisions of sections 11 & 12 of the Act, shall apply in respect of any income derived from the property held under the Trust or the institution for any assessment year proceeding, for which assessment is pending before the Assessing Authority as on the date of registration. The ld. CIT(A) has given interpretation to the proviso to hold that irrespective of the date of application, the benefit of sections 11 & 12 of the Act, would not be available to the assessee retrospectively, if the assessment proceedings were not pending and pendency of such proceedings may be only before the Assessing Officer.

6.3 According to us, the interpretation of the proviso has been given in ignorance of the main provision of section 12A(2) of the Act. Whenever interpretation of the statutes has to be given it should be after making harmonious construction of the statute. For the purpose of proper interpretation of Section 12A of the Act, the one has to requires to make interpretation after taking into consideration the main provision along with the proviso and not Shri Hingulambika Education Society, Gulbarga

Page 23 of 42 by giving meaning to the proviso in ignorance of substantive provision.

6.4 The CIT(A)/NFAC has even ignored the basic principle of law in giving interpretation in charging provisions, the benefit is to be given to the assessee but same principle is not applicable for an exemption notification or exemption clause, where the benefit of ambiguity must be given to the Revenue/State. It is also that burden to prove applicability of exemption would be on the assessee that it comes squarely within the parameters of the exemption notification or exemption clause. The CIT(A)/NFAC was required to make distinction between charging provision where benefit of ambiguity is given to the assessee and the exemption notification or clause where interpretation is to be given in the form of Revenue. The issue aforesaid has been recently considered and decided by the Apex Court in the Case of Commissioner of Customs (Import) v. Dilip Kumar & Company [2018] 9 SCC 1.

6.5 Section 12A extends benefit of exemption under sections 11 & 12 of the Act at the first instance to the cases referred under subsection (1) of section 12A. Sub- section (2) of section 12 A extends benefit even when application for registration of Trust or Institution has been made on or after first day of June 2007. It would however be in relation to the income of the Trust or the Institution from the assessment year immediately following the financial year in which application for registration was made. If the simple meaning of the provision of section 12A(2) is to be given, it governs those cases where application was moved for registration after first day of June, 2007. The benefit of sections 11 and 12 of the Act would be extended from the assessment year immediately following the financial year in which the application was given. In the instant case, the application for registration was given on Shri Hingulambika Education Society, Gulbarga

Page 24 of 42 31-03-2021 i.e. in the financial year 2020-21. On registration of the Trust, benefit under sections 11 and 12 of the Act would be available to the assessee from the assessment year following the financial year in which application was given and not any previous year. The benefit of registration could have been extended for the assessment year 2020-21, even if the matter was pending before the AO when application for registration was submitted on 31-03- 2021 as the due date for filing return of income for AY 2020-21 is available to assessee.

6.6 The proviso to sub-section 2 applies in a given circumstances. In the instant case, the application for registration was submitted on 31-03-2021 and the registration was given on 27-05-2021. Since registration has been given on 27-05-2021, the benefit of sections 11 & 12 would be available for the following financial year in which application was made if the assessment proceedings for the relevant assessment year was pending till the date of registration.

6.7 The CIT(A)/NFAC even ignored the fact that proviso not only require registration of the Trust or the Institution while the assessment proceedings are pending, but it refers to assessment proceedings before the assessing authority.

6.8 The Hon'ble Supreme Court in the case of Commissioner of Customs (Import) v. Dilip Kumar & Co. [2018] 9 SCC 1, in which the Hon'ble Supreme Court has explained as to how the exemption provisions have to be interpreted and such interpretation to lean in favour of the Revenue. Further, we also agreed with the view expressed in Paragraph 20 of the aforementioned judgment, wherein it has been held that the Shri Hingulambika Education Society, Gulbarga

Page 25 of 42 instruction issued by the CBDT cannot be forfeited as it is against the statutory provisions.

6.9 In the present case, admittedly, assessee applied for approval u/s 12AA of the Act on 31.3.2021. Consequent to this application, approval was granted u/s 12AB of the Act for the assessment year 2021-22 and onwards for 3 years provisionally. Now the contention of ld. A.R. is that once approval is granted u/s 12AB of the Act, it reckons back to earlier assessment year 2020-21 as per the second proviso to section 12A(2) of the Act as the assessment is pending for assessment year 2020-21, since the application has been made before the end of assessment year i.e. 31.3.2021 and there is time limit to file return of income upto 31.5.2021. Now we need to consider section 12A(2) of the Act along with provision to determine the issue raised before us. Section 12A(2) of the Act provides that whenever application has been made for registration of Trust or Institution is made u/s 12AA of the Act on or after first date of June, 2007, the provision of section 11 & 12 shall apply to in respect of any income derived from property held under the Trust or the institution for any assessment year preceding to the aforesaid assessment year, for which assessment proceedings are pending before the AO as on the date of such registration and the objects and activities of such Trust or institution remained the same for such preceding assessment year.

6.10 In the instant case, the application for registration was made on 31.3.2021 for the first time and the registration granted by the CPC for the assessment year 2021-21 and onwards for 3 assessment years. Since the registration has been given for the assessment year 2021-22 on 27.5.2021 and the assessment for Shri Hingulambika Education Society, Gulbarga

Page 26 of 42 the assessment year 2020-21 was pending while making application on 31.3.2021, the proviso to section 12A(2) of the Act is applicable and the exemption u/s 11 & 12 of the Act would be available for the following financial year in which application was made with the assessment proceedings for the relevant assessment year is pending till the date of registration. Admittedly, the assessment for the assessment year was pending and since there is time available to file return of income upto 31.5.2021 and in this case consequent to filing of return for the assessment year 2020-21 on 31.5.2021, the return of income was processed u/s 143(1) of the Act for the AY 2020-21 on 31.5.2021. In our opinion, exemption u/s 11 & 12 of the Act would be available for the following financial year in which application is made as the assessment proceedings for the assessment year 2020-21 is pending as the due date for filing return of income is still available.

6.11 It has to be noted that for the assessment year 2020-21, date of filing the return of income u/s 139(4) of the Act and revised return u/s 139(5) of the Act was extended up to 31.5.2021 and in the present case, the assessee has filed the return of income on 31.5.2021. In our opinion, when there is a time limit to file return of income u/s 139 of the Act and if it has filed the return of income within the time allowed u/s 139 of the Act, the assessee cannot be denied the benefit of applicability of proviso to section 12A(2) of the Act.

6.12 In our opinion, similar issue came for consideration before this Tribunal in the case of Centre for Cellular & Molecular Platforms in for the assessment year 2013-14 dated 28.8.2019, wherein held as under:

Shri Hingulambika Education Society, Gulbarga “3. We have considered the rival submissions. We find that in the present case, the issue in dispute is this whether the assessee is eligible for exemption u/s. 11 and 12 of the IT Act or not. It is noted by ld. CIT(A) on page no. 8 of his order that during the course of appellate proceedings, the assessee has raised this ground regarding benefit u/s. 11 and 12 of the IT Act and this ground was raised on 11.04.2017 for the first time. It is noted by ld. CIT(A) that report was called for from the AO and he reproduced the relevant portion of the remand report from the AO dated 07.08.2017. As per the relevant portion of the remand report reproduced by him, it is noted that assessee has made an application for registration u/s. 12AA of the IT Act on 30.03.2016 and was granted 12AA registration by CIT(E) on 21.09.2016. It is further reported by the AO in the remand report that the provisions of sub-section 2 of section 12A clearly states that the provisions of section 11 and 12 shall apply in relation to the income of such trust or institution from the Assessment Year immediately following the financial year in which such application is made and since in the present case, the assessee has made the application for registration u/s. 12AA on 30.03.2016, the assessee can claim benefit of section 11 and 12 from A. Y. 2017-18. Before the ld. CIT(A), this was the claim of the assessee that since the registration of the assessee concern has been granted w.e.f. 21.09.2016, it comes into effect during the course of pendency of first appeal proceedings and the proviso to sub-section 2 of section 12A should be construed liberally and the assessee should be granted exemption u/s. 12A of the IT Act. The ld. CIT(A) has referred to various judicial pronouncements and held that the assessee is eligible for exemption u/s. 11 and 12 of the IT Act for the present year. Before us, reliance has been placed by the learned AR of the assessee on the judgement of Hon'ble Rajasthan High Court rendered in the case of CIT(E) Vs. Shree Shyam Mandir Committee (supra). Para nos. 7.2 to 8.5 of this judgment of Hon’ble Rajasthan High Court are relevant and hence, the same are reproduced hereinbelow for ready reference. “7.2 When section 12A of the Act was amended by introducing new provisos to sub-section (2) of s. 12A by Finance Act, 2014 with effect from 01.10.2014, the assessment orders passed by the assessing officer in respect of the present assessee were pending in appeal before the first appellate authority. During such pendency, the assessee was granted registration u/s. 12AA of the Act on 29.07.2013 w.e.f. the assessment year 2013-14. Those appeals were the continuation of the original proceedings and that the power of the Commissioner of Income-tax was co-terminus with that of the assessing officer [ADIT (Exemption) in the present case] were two well established principles of law. In view of the above and going by the principle of purposive interpretation of statues, an assessment proceeding which is pending in appeal before the appellate authority should be deemed to be 'assessment proceedings pending before the assessing officer' within the meaning of that term as envisaged under the proviso. It follows there-from that the assessee which obtained registration u/s. 12AA of the Act during the pendency of appeal was entitled for exemption claimed u/s. 11 of the Act.

Shri Hingulambika Education Society, Gulbarga

Page 28 of 42 7.3. The explanatory Memorandum to Finance (No. 2) Bill, 2014 which sought to amend section 12A explains the objects and reasons for making such amendments. The explanation makes it clear that it was in order to provide relief to such trusts in respect of which, due to absence of registration u/s. 12AA tax liability got attached though otherwise they were eligible for exemption by fulfilling other substantive conditions that the amendment was brought in. That being so, denying such benefit to a trust like the assessee who had obtained registration u/s. 12AA during the pendency of the appeals filed against the orders of the assessing authority, by narrowly interpreting the term, 'pending before the assessing officer' so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute and, as such, liable to be interfered with. Moreover, under the Scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions to a religious or charitable trust. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemptions under sections 11 and 12 by the assessee and the grant or rejection of such application by the commissioner. Thus, in our view, sections 12A and 12AA are only procedural in nature. Hence, it is not the registration u/s. 12AA by itself that offers immunity from taxation. A receipt whether it is revenue or capital in nature is to be decided at the assessment stage. Being procedural in nature, in our view, liberal interpretation will give effect to the intention of the amendment, thereby removing the hardship in genuine cases like the present assessee under consideration. 7.4. Taking into account the above facts and circumstances of the issue, we are of the view that the AO was not justified in taking a stand that registration u/s. 12A was not applicable to the assessee for the AYs under dispute and the condonation petition for delay in filing the application for registration u/s. 12A [for the AYs under dispute] has not yet been decided by the CBDT and, therefore, the total incomes of the assessee were to be assessed as per commercial principles. The CIT(A) was also not justified in taking a similar stand that of the AO, without taking cognizance and intention of the amendment to s. 12A of the Act. If no judicious or a liberal view is not taken either by the assessing authority or the appellate authority as in the case under consideration, the very purpose for which such an amendment to s. 12A of the Act enacted, in our view, would be defeated. We are also supported by the order of Kolkata Bench of ITAT in case of Sree Sree Ramkrishna Samity v. DCIT (ITA No. 1680/2012, order dated 09.10.2015) where it was held that amendment to Section 12A w.e.f. 01.10.2014 is retrospective. The relevant finding of the Hon'ble Kolkata Bench in case of Sree Sree Ramkrishna Samity v. DCIT (supra) read as follows:

Shri Hingulambika Education Society, Gulbarga

Page 29 of 42 "6.10. We hold that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under section 11 & 12 as mentioned in section 12A provided for registration u/s. 12AA as a pre-condition for applicability of section 12A." Further, the Kolkata Tribunal observed as under: "6.11. We also hold that though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e. to make it workable rather than redundant. Applying this legal maxim, it would be just and fair to hold that the amendment in section 12A is brought in the statute to confer benefit of exemption u/s. 11 of the Act on the genuine trusts which had not changed its objectives and had carried on the same charitable objects in the past as well as in the current year based on which the registration u/s. 12AA is granted by the DIT (Exemptions)." 7.5 In light of the aforesaid reasoning and order of the Tribunal in case of Sree Sree Ramkrishna Samity (supra), we direct the Director of Income-tax (Exemption) to grant registration to the assessee trust for all the assessment years under dispute, subject to the following conditions, namely: "i) The registration U/s. 12AA (1)(b)(i) of the Income Tax Act, 1961 does not automatically exempt the income of the Trust/Institution. The question of taxability of the income of the Trust/Institution shall be examined and decided upon by the Assessing Officer at the time of assessment based on the conduct of the activities, compliance with various statutory and other requirements, etc., as referred to in Sections 2(15), 11, 12 & 13 of the Income Tax Act, 1961, without prejudice to the fact of granting merely in principle registration by DIT(E). (ii) With effect from the Assessment Year 2009-10, the advancement of any object of general public utility other than relief of the poor, education and medical relief as defined in section 2(15) of the Income Tax Act shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration,

Shri Hingulambika Education Society, Gulbarga

Page 30 of 42 irrespective of the nature of use or application, or retention, of the income from such activity. (iii) Amendments to the Deed/Memorandum, Rules and Regulations, if any, of the Trust/Institution shall be made only with the prior approval of the Commissioner of Income Tax (Exemptions) or any other prescribed authority under the Income Tax Act, 1961. (iv) The registration may be withdrawn on violation of any of the stipulations laid down in the Income Tax Act, 1961, (v) The SOCIETY/TRUST shall regularly file its Income Tax Return."

3. Allied Motors (P) Ltd. ETC. vs. Commissioner of Income Tax, (1997) 224 ITR 0677, wherein it has been observed as under:-

"In the case of Goodyear India Ltd. v. State of Haryana and Anr. [1991] 188 ITR 402 (SC) this Court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. Therefore, in the well known words of Judge Learned Hand, one cannot make a fortress out of the dictionary; and should remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B Jodha Mai Kuthiala v. Commissioner of Income-Tax, [1971] 82 ITR 570 (SC) , TC 40R.279, this Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole.

Shri Hingulambika Education Society, Gulbarga Page 31 of 42 to deduction under Section 43B. The High Court has held the amendment to be clarificatory and, therefore, retrospective. The Gujarat High Court in the above case held the amendment to be curative and explanatory and hence retrospective. The Patna High Court has also held the amendment inserting the First proviso to be explanatory in the case of Jamshedpur Motor Accessories Stores v. Union of India and Ors. [1991]189ITR70(Patna). It has held the amendment inserting first proviso to be retrospective. The special leave petition from this decision of the Patna High Court was dismissed. The view of the Delhi High Court, therefore that the first proviso to Section 43B will be available only prospectively does not appear to be correct. As observed by G.P. Singh in his Principles of Statutory Interpretation, 4th Edn. Page 291, "It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended." In fact, the amendment would not serve its object in such a situation unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained."

Page 32 of 42 trust or institution unless the following conditions are fulfilled, namely :- (aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;... (2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:

Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding Assessment year. Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year"

Shri Hingulambika Education Society, Gulbarga

Page 33 of 42 17. The first issue before us is as to whether the two provisos to Section 12A(2) are applicable to all the appeals before us, respectively, as contended by the Id. Counsel for the assessee, or whether, since the provisos have been brought in w.e.f. 01-10-2014 and they have not been made applicable, retrospectively, the same are not applicable for earlier periods, as submitted by the department.

18. Now, a bare reading of the first proviso to Section 12A(2) shows that it has not been made applicable retrospectively. It has been inserted in the Act w.e.f. 0110-2014, by virtue of the Finance (No. 2) Act, 2014. Thus, ordinarily, it ought to be taken as applicable only prospectively, and not retrospectively. However, the law is well settled to the effect that if the proviso brought in as a procedural or beneficial one, intending to remove hardship, it is applicable retrospectively.

Shri Hingulambika Education Society, Gulbarga Page 34 of 42 23. In Vijay v. State of Maharashtra [2006] 6 SCC 286, the Hon'ble Supreme Court went to the extent of holding that "where a law is enacted for the benefit of the community as a whole, even in the absence of a provision, the statute may be held to be retrospective in nature."

Shri Hingulambika Education Society, Gulbarga Page 35 of 42 of the hardship, rendered the procedure more relief-oriented. It adequately complies with the natural justice principle of fairness to all. Hence, it has to be presumed and construed as retrospective in nature, in order to give the section a purposive interpretation.

5. CBDT Circular No. 1/2015, dated 21.1.2015, reads as under:- "8.1 The provisions of section 12A of the Income-tax Act, before amendment by the Act, provided that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA of the said Act has been granted. In case of trusts or Shri Hingulambika Education Society, Gulbarga

Page 36 of 42 institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively.

8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organisations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfil other substantive conditions. However, the power of condonation of delay in seeking registration was not available. 8.3 In order to provide relief to such trusts and remove hardship in genuine cases, section 12A of the Income-tax Act has been amended to provide that in a case where a trust or institution has been granted registration under section 12AA of the Income-tax Act, the benefit of sections 11 and 12 of the said Act shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. 8.4 Further, it has been provided that no action for reopening of an assessment under section 147 of the Income-tax Act shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. 8.5 However, the above benefits would not be available in the case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA of the Income-tax Act or a registration once granted was cancelled."

4. We find that in this case also, it is noted by Hon’ble Rajasthan High Court that registration was granted to the assessee u/s. 12AA of the IT Act on 29.07.2013. Under these facts, it was held by Hon’ble Rajasthan High Court that appeal is continuation of original assessment proceedings and proceedings before appellate authorities is covered by the proviso to subsection 2 of section 12A of the IT Act. In the present case also, the facts are similar and hence, respectfully following this judgment of Hon’ble Rajasthan High Court, we decline to interfere in the order of ld. CIT(A).

Shri Hingulambika Education Society, Gulbarga

Page 37 of 42 6.13 In the case of Soundaram Chokkanathan Educational & Charitable Trust Vs. ITO in Tax Case (Appeal) No.1015 of 2019 dated 9.12.2020, the Hon’ble High Court of Madras has held as under:

“Admittedly, the application for registration was filed by the assessee only on 23rd Feb., 2016. It appears that the application was not processed as the CIT (Exemptions) was not satisfied that the activities of the assessee trust as mentioned in the deed of trust would qualify for an exemption. This necessitated the assessee to amend the various clauses and covenants in the trust deed and the amended deed of trust was considered by the CIT (Exemptions) and an order was passed on 2nd March, 2016, granting registration w.e.f. 1st April, 2015. Therefore, on facts, the assessee is precluded from contending that the first proviso under s. 12A should be made applicable to them and they should be granted with the benefit from the asst. yr. 2013-14, because the factual position being that only after the deed of trust was amended, the application was considered on 23rd Feb., 2016 that too registration having been granted w.e.f. 1st April, 2015 only. Therefore, the Tribunal rightly held against the assessee, stating that there is nothing on record to show that the exemption activities, operations and genuineness of its claims for the asst. yr. 2013-14 was examined. Since registration has been granted only after the deed of trust was amended, the assessee cannot contend that they are to be granted benefit from the asst. yr. 2013-14. Apart from that the other question, which will also stare at the assessee is that the appeal, whiff was filed before the CIT(A) was against the order passed in a rectification petition under s.

6.14 In the case of Nevda Educational Trust & Anr. Vs. ITO & Anr. In & 264/Agra/2016 dated 21.11.2017 where the Agra Tribunal has held as under: 23. “The amendment to section 12AA of the IT Act, by way of introducing the first proviso in section 12A(2) by the Finance (No.2) Act 2014, has been held to be retrospective by the Kolkata ITAT in the case of 'Sree Sree Ramkrishna Samiti, Siliguri vs. DCIT' (supra). It is this decision which the CIT(A) has followed and, in our considered opinion, correctly so. No decision to the Shri Hingulambika Education Society, Gulbarga Page 38 of 42 contrary has been cited before us. The assessee was granted registration w.e.f. 01.04.2013. As per the said proviso to section 12A(2), in such a case, the provisions of section 11 and 12 of the Act shall apply in respect of any income derived from property held under the trust of any assessment year preceding the assessment year immediately following the financial year in which the application for registration is made (on or after 01.06.2007), for which, assessment proceedings are pending before the AO as on the date of registration and the objects and activities of the trust remain the same for such preceding assessment year.

24. In the assessee's case, though the application for registration was initially rejected, the Tribunal restored the matter to the Id. CIT, vide order dated 05.02.2014. The CIT granted registration by allowing that very application. It is also undisputed that the objects and activities, which are educational in nature, remain unchanged. As such, the aforesaid proviso to section 12A(2) is squarely applicable. Therefore, as rightly held by the Id. CIT(A), the AO should have granted the benefit of sections 11 and 12 of the Act to the assessee.”

6.15 In the case of Leh Nutrition Project Vs. DCIT {36 NYPTTJ 1353 (Asr)} in dated 16.11.2022 for the assessment year 2010-11 it was observed that:- a) The assessee filed application for registration u/s 12AA of the Act on 18.3.2011. b) Return filed on 24.3.2011. c) Registration granted for financial year 2010-11 (AY 2011- 12) on 20.7.2011. d) The assessee sought relief u/s 11 of the Act for the AY 2010-11. 6.16 The Tribunal held that ld. CIT(A) & AO erred in law in denying the benefit of exemption u/s 12AA of the Act for the AY 2010-11 and allowed the appeal of the assessee, though the return of income for the assessment year 2010-11 was filed on 24.3.2011 after application made for registration u/s 12AA of the Act i.e. on 18.3.2011. 6.17 On applying above ratio also, the claim of assessee to be allowed.

Shri Hingulambika Education Society, Gulbarga

Page 39 of 42 6.18 Without prejudice to the above, the ld. A.R. argued the ground no.4 that it is an admitted fact that the assessee has applied for approval u/s 12AA of the Act on 31.3.2021 and which has been granted for the assessment year 2021-22 and onwards, for 3 years provisionally vide Form 10AC on 27.5.2021. The assessee filed the return for the assessment year 2020-21 vide acknowledgement no.365206821310521 declaring nil income claiming exemption u/s 11 of the Act along with Form No.10B audit report on 31.5.2021. The assessee’s return was processed by CPC vide intimation u/s 143(1) of the Act dated 24.12.2021 proposing the levy of tax on the gross receipts of income without allowing any expenditure during the previous year and thereby exemption u/s 11 of the Act has been denied. Thereafter, assessee filed petition u/s 154 of the Act on 13.1.2022 seeking rectification of the intimation issued u/s 143(1) of the Act, which has been rejected by CPC. Now the contention of ld. A.R. is that while processing the return by CPC u/s 143(1) of the Act cannot be done as much as this is a very debatable issue and the power u/s 143(1) of the Act is very limited only. In our opinion, u/s 143(1) of the Act read with proviso mandates that “no such adjustment shall be made unless an intimation is given to the assessee of such adjustment either in writing or in electronic mode” and, under the second proviso to section 143(1), “the response received from the assessee, if any, shall be considered before making any such adjustment and in case where no response is received within 30 days of the issue of such intimation, such adjustment shall be made”. Thus, the scope of permissible adjustment u/s 143(1)(a) of the Act is thus much border and as long as an adjustment fits the description u/s 143(2)(a)(i) to (v) read with explanation to section 143(1) of the Act, such an adjustment, subject to compliance with the First

Shri Hingulambika Education Society, Gulbarga

Page 40 of 42 and second proviso to section 143(1) of the Act, is indeed permissible. It is further, important to take note of the fact that unlike the old scheme of “prima facie adjustments” u/s 143(1)(a) of the Act, the scheme of present section 143(1) of the Act does not involve a unilateral exercise. The very fact that an opportunity being provided to the assessee for such adjustments to be made u/s 143(1) of the Act in writing or by electronic mode, and the response received from the assessee, “if any”, to be considered before making any adjustment to make to the process of making adjustment u/s 143(1) of the Act under the present legal position, and interactive and cerebral process. Thus, as per our considered view when an assessee raises the objection to the proposed adjustment u/s 143(1) of the Act, CPC has to dispose of such objection before proceeding further in the matter one way or other and such disposal of objection is a quasi-judicial function. The AO of CPC has the discretion to go ahead with the proposed adjustment or to drop the same. In other words, AO, CPC has to set out the reasons for making any adjustments and it is mandatory to AO, CPC to dispose the objection before proceeding further in the matter by giving specific reasons and it is not an empty formality or meaningless ritual and he has to apply the mind and he has to do the same by proper application of mind. In the present case, the issue dealt by the AO (CPC) is not a simple issue and it is highly debatable and controversial issue for making such adjustment and to have a discussion with the assessee is very much necessary. There was no discussion in the order of the lower authorities over order passed u/s 154 of the Act or in the CIT(A) order as to what discussion the AO/CPC made while making impugned adjustments vide writing or electronic mode. Hence, the assessee has filed rectification application u/s 154 of the Act for rectification of the mistake

Shri Hingulambika Education Society, Gulbarga

Page 41 of 42 apparent on record i.e. adjustment of debatable issue u/s 143(1) of the Act. Hence, in our view, the debatable and controversial issue is beyond the scope of provisions u/s 143(1) of the Act. As per provisions of the section 12A(2) read with second proviso, once approval granted u/s 12AA or section 12AB of the Act to a Charitable institution, the assessee is entitled for exemption from the assessment year immediately following the financial year in which application was made. Further second proviso to section 12A(2) of the Act stipulates that the exemption u/s 11 of the Act is available to assessee, if such assessment proceedings are pending before the AO as on the date of such registration and objects and activities of such Trust or institution remain the same for such preceding assessment year. These phrases are very debatable and, in our opinion, the present issue dealt by AO, CPC is very debatable and this issue could not have been taken by AO, CPC u/s 143(1) of the Act as this issue requires deeper examination of the provisions of the Act. In view of this discussion, we find that the assessee’s claim of exemption u/s 11 of the Act cannot be denied while processing the return u/s 143(1) of the Act, which is beyond the scope of these provisions as this is highly debatable and controversial. On this count also, assessee’s claim is to be allowed. In view of the above discussion, we allow this ground of appeal of the assessee.

7. Ground No.5 of the assessee’s appeal is infructuous in view of our findings in earlier paras.

8. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 22nd June, 2023 Sd/- Sd/- (Beena Pillai) (Chandra Poojari) Judicial Member Accountant Member Bangalore, Dated 22nd June, 2023. VG/SPS

Shri Hingulambika Education Society, Gulbarga