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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI C.M. GARG
BEFORE SHRI C.M. GARG, JUDICIAL MEMBER Assessment Year: 2016-17 Shree Khathu Shyam Jangid Brahman Vs. ITO (E), Dharamshala, Ward, c/o RRA Taxindia, Faridabad. D-28, South Exension, Part I, New Delhi – 110 049. PAN: AAJTS0636B (Appellant) (Respondent) Assessee by : Shri Somil Agarwal, Advocate & Shri Deepesh Garg, Advocate Revenue by : Shri Om Prakash, Sr. DR Date of Hearing : 07.06.2022 Date of Pronouncement : 08.07.2022 ORDER This appeal filed by the assessee is directed against the order dated 18.11.2019 of the CIT(A)-2, Gurgaon, relating to Assessment Year 2016-17.
I have heard arguments of both the sides on the application of the assessee dated 03.06.2022 stating that there is no delay in filing appeal before the Tribunal in view of orders of Hon’ble Supreme Court dated 10.11.2020 which was extended from time to time extending the limitation of filing appeals w.e.f. 15.03.2020 and finally, the Hon’ble Supreme Court passed order on 10.01.2022 15.03.2020 to 28th February, 2022 shall stand excluded, thus, there is no delay in filing appeal before the Tribunal. The ld. Sr. DR did not controvert the said submission and keeping in view orders of Hon’ble Supreme Court (supra), I hold that since limitation period was extended by the Hon’ble Supreme Court, therefore, it is safely inferred that there was no delay in filing the appeal before this Tribunal by the assessee. Thus, I proceed to adjudicate the appeal as filed within time.
Although the assessee has raised as many as five grounds of appeal in its appeal, the main effective ground of the assessee is that the income/surplus of the assessee is entitled to the benefit of sections 11 and 12 in terms of first proviso to section12A(2) of the Act as the assessee has been granted registration u/s 12AA of the Act on 15.09.2020.
The ld. Counsel for the assessee, placing reliance on the order of the ITAT, Ahmedabad Bench in the case of Shree Bhanushali Mitra Mandal Trust vs. ITO, dated 22.02.2016, in submitted that the first proviso to sub-section (2) of section 12A was brought to the statute with retrospective effect with a view not to affect the genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in 2011-12 has been duly fulfilled by the said trust. The ld. Counsel pointed out that the benefit of retrospective application alone could be the inention of the legislature and this point is further strengthened by the 2 Explanatory Notes to Finance (No.2) Act, 2014 issued by the Central Board of Direct Taxes vide its Circular No.01/2015 dated 21.1.2015.
Elaborating the facts of the present case, the ld. Counsel submitted that the AO passed his order on 10.12.2018 and the appeal of the assessee was dismissed by the ld. CIT(A)-2, Gurgaon on 18.11.2019 and registration u/s 12AA of the Act was allowed to the assessee on 15.09.2020. Therefore, in view of the first proviso to sub-section (2) to section 12A of the Act and in view of various orders and judgments of coordinate Benches of ITAT including the judgment of the Hon’ble High Court of Rajasthan in the case of CIT (E) vs. Shree Shyam Mandir Committee dated 23.10.2017 reported as 400 ITR 466 (Raj), if the proviso brought into the statute as a procedural or beneficial one intending to remove the hardships, it is applicable retrospectively. The ld. Counsel for the assessee also placed reliance on the order of the ITAT, Pune Bench dated 27.02.2016 in the case of M/s Shri Vishwakalyan Jivraksha Pratishthan vs. ITO to submit that the amendment thereby removing hardships in genuine cases has to be given retrospective effect. The ld. Counsel also placed reliance on the judgment of ITAT Kochin Bench in the case of SNDP Yogam vs. ACIT (2017) 186 TTJ 277 (Coch) and submitted that the appeal of the assessee was pending and during the pendency the assessee was granted registration under section 12AA of the Act, therefore, going by the principle of 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 w.e.f. 01.10.2014 should be viewed as retrospective in operation. The relevant paras 7.2 to 7.4 of this order read as follows:- “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. 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 4 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. Dy. CIT [2016] 156 ITD 646/[2015] 64 taxmann.com 330 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 (supra) read 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 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 12 A."
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 magisvaleat 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)."
On the issue of applicability and benefit of registration u/s 12A of the Act on pending appeals before the appellate authorities, the ITAT, Ahmedabad Bench in the case of Shree Bhanushali Mitra Mandal Trust vs. ITO reported as (2016) 47 CCH 197 (Ahmedabad Tribunal), as vehemently relied by the ld. Counsel of the assessee in paras 7.1 to 7.4 held thus:-
“7.1 To examine the first issue, necessarily I have to analyze the relevant provision, namely, the amendment to Section 12A by Finance Act, 2014 w.e.f. 01.10.2014 by way of insertion of provisos to Section 12A(2) of the Act which is reproduced below for ready reference: "[(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 6 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: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]" 7.2 It is also relevant to reproduce the explanatory notes to the provisions of Finance (No.2) Act, 2014 as given in CBDT Circular No.01/2015 dated 21.01.2015 in reference F. No.142/13/2014-TPL, which read as follows: "Para 8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organizations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfill other substantive conditions. However, the power of condonation of delay in seeking registration was not available." This clearly goes to prove that the first proviso to section 12A(2) was brought in the statute only as a retrospective effect with a view not to affect genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in section 11 to 13 have been duly fulfilled by the said trust. The benefit of retrospective application alone could be the intention of the legislature and this point is further strengthened by the Explanatory Notes to Finance (No.2) Act, 2014 issued by the Central Board of Direct Taxes vide its Circular No. 01/2015 dated 21.1.2015. Apparently the statute provides that registration once granted in 7 subsequent year, the benefit of the same has to be applied in the earlier assessment years for which assessment proceedings are pending before the ld. A.O., unless the registration granted earlier is cancelled or refused for specific reasons. The statute also goes on to provide that no action u/s147 could be taken by the AO merely for non-registration of trust for earlier years. 7.3 In the instant case, it is not in dispute that registration was granted w.e.f. 17.12.2013 by the order of CIT(A) dated 08.05.2014. It is also not in dispute that objects and activities of the assessee trust are charitable in nature during the relevant financial year. When Section 12A of the Act was amended by introducing new provisos to sub-section (2) of Section 12A by Finance Act, 2014 with effect from 01.10.2014, the assessment orders Asst. Year 2011-12 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 17.12.2013 w.e.f. the assessment year 2013-14. The appeal is 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 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. 7.4 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.
In view of the above, we find that the AO as well as the ld. CIT(A) denied benefit of sections 11 and 12 of the Act to the assessee on the sole ground that the assessee was not having registration u/s 12A of the act for AY 2016-17. It has not been disputed by the ld. Sr. DR that the assessee was granted registration u/s 12AA of the Act vide order dated 15.09.2020 by CIT (Exemptions), Chandigarh.
In the present case, the assessee was not having registration u/s 12A of the Act till pronouncement of first appellate order on 18.11.2019 and, thereafter, the aggrieved assessee chose to file appeal before the Tribunal challenging the orders of the authorities below. In view of order of ITAT Pune Bench in the case of Marathwada Auto Cluster vs. ITO, (2018) 53, CCH 238 (Pune) and order of ITAT Kochin Bench in the case of SNDP Yogam (supra), in a case where appeal is pending before the Tribunal, then, after grant of registration u/s 12AA of the Act w.e.f. 15.09.2020 as per retrospective operation of first proviso to sub-section (2) of section 12A of the Act. Further, as per order of ITAT Ahmedabad Bench in the case of Shree Bhanushali Mitra Mandal Trust (supra) and ITAT Kochin Bench in SNDP Yogam (supra), as per the said proviso to sub-section (2) to section 12A of the Act, the provisions of sections 11 and 12 of the Act shall apply in respect of any income derived by the trust of any assessment year preceding to the year in which registration u/s 12A of the Act was granted for the assessment year for which proceedings are pending before the AO as on the date of suchregistration and as per orders of the ITAT Pune (supra) and ITAT Kochin Bench (supra) the retrospective benefit of the said first proviso to sub-section (2) to section 12A of the Act is also available in the cases where appeal is pending before the appellate authorities including CIT(A) and Tribunal (ITAT). Therefore, respectfully following the order of the ITAT Pune Bench in the case of Marathwada Auto Cluster (supra), the sole grievance of the assessee in the present appeal is allowed and the AO is directed to allow benefit of section 11 and 12 of the Act to the assessee in terms of first proviso to sub-section (2) of section 12A of the Act.