NA vs. ARI MALESAR BEHDIN ANJUMAN,NAVSARIVS.INCOME TAX OFFICER, EXEMPTION WARD, SURAT

सुनवाईकीतारीख/ Date of hearing: 05.02.2020 उ�घोषणाक�तार�ख/Pronouncement on: 07.02.2020 आदेश /O R D E R

PER SANDEEP GOSAIN, JM:

Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 2 of 14

(II) Non-granting of deduction of Rs.10,00,340: On the facts and circumstances of the case and as per law, the learned CIT(A) was not justified in confirming not granting of deduction in respect of amount applied for the objects of the Trust. (III) Disallowance of exemption u/s.11(1)(d) of the Act: ON the facts and circumstances of the case and as per law, the CIT(A) was not justified in not granting exemption u/s.11(1)(d) of the Act in respect of voluntary contributions received as forming part of corpus trust or received for specific purposes. (V) Miscellaneous: The appellant craves leave to add, alter or vary any of the grounds of appeal.”

4. Being aggrieved by the order of the ld.AO the assessee preferred appeal before the ld.CIT(A), the ld.CIT(A) submitted that the assessee had applied for registration on 03.03.2016 during the pendency of the assessment proceedings. However, the registration was granted on 28.03.2016, but the assessment order was passed on 15.03.2016. The Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 3 of 14 ld.CIT(A) considering the case of both the parties dismissed appeal filed by the assessee.

7. Ground No.(I) (1) : The ld.AR raised this ground thereby challenging the order of ld.CIT(A) in confirming order of non-granting of exemption u/s.11 of the Income Tax Act. The ld.AR reiterated the same arguments as was raised by him before the ld.CIT(A) which are contained in para no.6 of the order of ld.CIT(A) and the same are reproduced below: “6. Submission of A R during appellate proceedings :- 6.1 During the hearing, the AR filed two written submission dated 14.11.2017 and 30.01.2018. The same were gone through and placed on record. The AR also relied upon large number of case laws in support of his contention. The gist of the AR ‘s contention is reproduced below:- " (1) in the above matter, I reproduce proviso to sec. 12 A(2) of the Act. Provided that where registration has been granted to the Trust or Institution u/s 12 AA 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 A Y, 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 remain the same for such preceding A Y. Gist of the decisions cited by the appellant Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 4 of 14

Assessment years involved A.V.2006-07 to 2009-10 and 2011-12

Application for 12A made on 30-1-2013 29-7-2013 12AA registration granted Assessments concluded on 23-3-2013 •€€€€€€ A.Y.2006-07 (143(3) r.w.s 147) 19-3-2013 •€€€€€€ A.Y.2007-08, A.Y.2008-09 and A.Y.2009- 10(143(3) r.w.s 147) 12-3-2014 •€€€€€€ A.Y.2011 -12((143(3) r.w.s 147)

30-1-2013 Returns filed on 19-3-2013 •€€€€€€€€€€€€€€€€A.Y.2007-08 to 2009-10 •€€€€€€€€€€€€€€€€ A.Y.2006-07 and A.Y.2011-12

In the above case, application was made during the subsistence of the assessment proceedings, however, registration was granted subsequent to the conclusion of the assessment proceedings, the Hon'ble Tribunal held that relief u/s.11 cannot be denied if the registration was obtained during pendency of appeal before CIT(A). The Tribunal also held that proviso to section 12A(2) had retrospective application. In the case of the appellant too, application for 12A was made prior to the conclusion of assessment proceedings and it received registration u/s. 12A after the assessment was over. Hence, during the pendency of the appeal, the assesses deserves to be granted relief u/s. 11 in terms of decision of Cochin Bench. (2) St. Jude's Convent School V/s ACIT, Cir. Ill, Jalandhar (164-ITD-594) Amritsar. Assessment years involved A.Y.2006-07 to A.Y.2012-13 Application for 12A made on 2-11-2012 25-2-2013 12AA registration granted The Tribunal held that first proviso to section 12A(2) had retrospective operation. Further it held that considering the decision of Shree BhanushaliMitraMandal Trust (Ahmedabad Tribunal)(68-taxmann.com-250), the appellant proceedings before the appellate authorities are deemed to be assessment proceedings pending before the A.O. Also, it held that subsequent grant of registration u/s.12A, operates retrospectively for all the years under consideration. (3) Sree SreeRamkrishna Samiti V/s DCIT, Cir.2, Siliguri (Calcutta) 156-ITD-646 Assessment years involved A.V,2003-04 to 2008-05

Application for 12A made on Although not mentioned in the tribunal order, per section 12AA(2), the application could not h a v e e xc e e d ed 6 mo n t hs p r i or t o t he registration 20-10-2010 1-4-2010 30-3-2010 12AA registration granted 29-10-2010 12AA Registration made effective from Reassessment proceedings u/s.148 started on Assessments concluded on Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 5 of 14

The Tribunal held that as long as objects of the society were charitable in nature in years earlier to year in which registration u/s.12A was granted and no adverse findings were given with regard to existence of the assessee society for charitable purposes, benefit of exemption u/s.11 was to be given. Besides, the tribunal states that receipts brought to tax only on the pretext that the assessee society is not having registration us.12A in A.Y.2003-04 2008-09 does not hold good since proviso to section 12A(2) has to be construed as retrospective in operation. (4) Punjab Education Society V/s ITO-IT, Moga (88-taxmann.com 113) Amritsar Assessment year invoTveH A.Y, 2011-12

12AA registration granted 3-4-2012 A.Y.2012-13 Registration granted from 29-9-2011 Returns filed on 27-9-2012 Case was selected for scrutiny on The Tribunal held that first proviso to section 12A(2) with effect from 1-10-2014 has to be applied retrospectively. (5) Shree BhanushaliMitraMandal Trust V/s, ITO Ward-3, Vapi (68- taxmann.250) Ahmedabad. Assessment year involved A.Y.20H--I2

Application for 12A made on Although not mentioned in the tribunal order, per s ec t io n 1 2 A A( 2) , t h e a p p l ic at i o n c o u ld n ot h a v e ex ce e d e d 6 m o n t hs pr ior t o t he registration 17-12-2013 A.Y.2013-14 12AA registration granted 8-5-2014 Registration u/s.12A granted from 31-3-2012 CIT(A) order Return filed on The Tribunal held that exemption u/s.11 could not be denied to a trust if it got registration during pendency of appeal, It further held that whether assessment proceedings, which is pending in appeal before appellate authority should be deemed to be 'assessment proceedings pending before A.O. It also held that proviso to section 12A(2) had retrospective application. The AR of the appellant strongly argues that case of the appellant is covered by the decision of IT AT Ahmedabad and other cases cited with retrospective application of Proviso to section 12A(2). As also, it is contended that even if the registration is available before the CIT(A), the benefit u/s. 11 cannot be denied in v ie w of d ec is io n s o f Ah m e d a b a d T r i b u n a l in c as e of S hr e e BhanushaliMitraMandal Trust as well as SNDP Yogam. TheA.R. further states that the decision being of jurisdictional Tribunal is binding. In the matter, supplementing my earlier submission regarding retrospective applicability of proviso to sec. 12 A(2), I attach decision in case of Shree Bhanushali Mitra Mandal Trust ( 68. Taxmann. com 250) ( ahd trib) which is no unclear terms states that the proviso becomes not only applicable retrospectively but also states that assessment proceedings which is pending in appeal before appellate authority, should be deemed to be assessment proceedings pending before AO... C o n s id e r in g t h e ab o v e, i t is ur g e d t o a ll o w th e a pp e a l a n d oblige…………………………….."

Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 6 of 14

■ The assessee educational institution had filed its return of income and claimed that it was registered under Section 12AA(1)(b)(i) with the competent authority, with effect from Assessment Year 2012-13, therefore, it being a charitable society which was running an educational institution, could not be denied exemption for the reason that its gross receipts had exceeded Rs.1 crore in Assessment Year 2011-12. It was further averred that as the assessee society had applied its income purely for the accomplishment of its objects as per section 11(5), therefore, its income could not be subjected to tax. ■ During the course of the assessment proceedings, the Assessing Officer observed that the assessee had shown excess of income over expenditure, which was transferred to its reserve and surplus account. The Assessing Officer observed that the assessee society was neither registered under section 12A nor approved under section 10(23C)(vi). Therefore, he made an addition to its returned income. ■ On appeal, the Commissioner (Appeals) upheld the addition made by the Assessing Officer. ■ In instant appeal the assessee contended that the assessee submitted that though the case of the assessee was squarely covered by the first proviso of section 12A(2), however, the Commissioner (Appeals) had wrongly concluded that the same was not applicable to the case of the assessee. As the said statutory provision was made available on the statute to mitigate the hardships being faced by charitable institutions, therefore, the same being a beneficial provision was to be accorded a retrospective applicability. Thus, impugned additions was to be deleted. HELD

■ The issue involved in the present appeal lies in a narrow compass. In the present appeal, it is sought for adjudicating as to whether the Commissioner (Appeals) was right in concluding that the first proviso of section 12A(2) would be applicable to the facts of the present assessee, or not. The first proviso of section 12A(2) had been made available on the statute vide the Finance (No.2) Act, 2014, with effect from 1-10-2014. That a perusal of the Explanatory notes of the Memorandum to Finance (No. 2) bill, 2014 explaining the objects and reasons for making available the first proviso to section 12A(2) on the statute reveals that it was in order to mitigate the hardships caused to charitable institutions, which despite having satisfied the substantive conditions rendering them eligible for claim of exemption, however, for technical reasons were saddled with tax liability in the prior years, due to absence of registration under section 12AA. The issue, as to whether the beneficial provisions made available on the statute by the legislature in all its wisdom, vide the Finance (No. 2) 'Act', 2014 with effect from Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 8 of 14

1-10-2014 were to be given a retrospective effect, or not, had already deliberated upon and adjudicated by this Tribunal in bunch matters of St. Jude's Convent School v. Asstt. CIT [2017] 164 ITD 594/77 taxmann.com 173 (Asr.). [Para 7] ■ After giving a thoughtful consideration to the aforesaid observations of the Tribunal and persuaded to be in agreement with the view taken therein. There is no reason to take a different view, thus, the first proviso of section 12A(2) as had been made available on the statute vide the Finance (No. 2) 'Act', 2014, with effect from 1-10-2014, being a beneficial provision intended to mitigate the hardships in case of genuine charitable institutions, thus, find to be in agreement with the view taken by the Tribunal in the aforesaid appeals. Thus, the first proviso of section 12A(2) would be applicable to the case of the present assessee. Therefore, the order of the Commissioner (Appeals) is set aside and, consequently, the addition sustained by here is deleted. [Para 8]

ORDER Ravish Sood, Judicial Member - The present appeal is directed against the order passed by the CIT(A)-4, Ludhiana, dated 30.06.2016, which in itself arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961, (for short 'Act'), dated 30.08.2013. The assessee assailing the order of the CIT (A) had raised before us the following grounds of appeal:— "1. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming an addition of Rs.34,31,521/- (as surplus of the Society) as the Society is not approved u/s 10(23C)(vi) or (via) of the Act during the period under consideration.

2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in holding that the amended provisions of the section 12A/12AA of the Act w.e.f 01.10.2014 as applicable to pending assessments orders does not have retrospective effect as such confirmed the addition.

3. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in rejecting the additional ground of appeal that the society which was Registered u/s 12A/12AA of the Act on 03.04.2012, was not registered during the period under consideration."

2. Briefly stated, the facts of the case are that the assessee which is an educational institution had filed its return of income for A.Y 2011-12 on 29.09.2011, declaring total income at Rs. Nil. The return of income filed by the assessee was processed as such under Sec. 143(1) of the 'Act' on 21.08.2012. The case of the assessee was thereafter taken up for scrutiny assessment and a notice under Sec. 143(2), dated 27.09.2012 was issued to the assessee.

3. That during the course of the assessment proceedings it was observed by the A.O that the assessee society during the year under consideration had shown excess of income over expenditure of Rs.34,31,521/-, which was transferred to its Reserve and Surplus account. The A.O observing that the gross receipts of the assessee society, which was neither registered under Sec. 12A nor approved under Sec. 10(23C)(vi) of the 'Act' had during the period 01.04.2010 to 31.03.2011 relevant to A.Y 2011-12 exceeded 1 crore, therefore, called upon the assessee to explain as to why the same may not be brought to tax in its hands. The main thrust of the assessee in its reply to the aforesaid query was that as it was registered under Sec. 12AA(1)(b)(i) of the Income tax 'Act', 1961 with the competent authority, vide the latters order No. CIT III/JB/LDH/12A/292/2011-12, dated 03.04.2012 with effect from AY 2012-13, therefore, it being a charitable society which was running an educational institution, thus, could not be denied exemption for the reason that its gross receipts had exceeded Rs.1 crore in A.Y 2011-12. It was further averred that as the assessee society had applied its income purely for the accomplishment of its objects as per Sec. 11(5), therefore, its income could not be subjected to tax. However, the A.O not finding favour with the contentions of the assessee, Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 9 of 14 therein being of the view that as the assessee society had neither applied for the grant of registration under Sec. 12AA with the prescribed authority i.e. Commissioner of Income Tax, nor was approved under Sec. 10(23C)(vi) or (via) by the Chief Commissioner of Income tax in A.Y 2011-12, therefore, did not find favour with the explanation of the assessee and made an addition of Rs.34,31,521/- to its returned income.

averred before the CIT(A) that as the assessee society was granted registration under Sec. 12AA by the Commissioner of Income tax- III, Ludhiana on 03.04.2012, and objects and activities of the assessee society during the year under consideration, i.e. AY: 2011- 12 were the same as were there before the A.O at the time of grant of registration, therefore, as per the amended provisions of Sec. 12A/12AA of the Income tax, 1961, as were made available on the statute vide the Finance Act, 2014 with effect from 1st October, 2014, the addition of Rs.34,31,521/- made by the A.O was liable to be deleted. The assessee submitted before the CIT(A) that the first proviso to Sec. 12A(2) was made available on the statute in order to mitigate the hardships cause to the charitable institutions. It was submitted by the assessee that where registration under Sec. 12AA was granted to an assessee under Sec. 12AA, then the assessee would also be entitled for the benefit of Secs. 11 and 12 in the prior years, subject to satisfaction of two fold conditions, viz. (i) that assessment proceedings in such preceding years was pending before the A.O on the date of grant of registration; and (ii) the objects and activities of the assessee during the said year were the same which had been considered by the Commissioner of Income Tax while granting the registration. It was thus submitted by the assessee that as in its case on 03.04.2012 when the registration under Sec. 12AA was granted by the CIT, the assessment proceedings for the year under consideration, viz. A.Y 2011-12 were pending, and the objects and activities of the assessee society had also not witnessed any change, therefore, the first proviso of Sec. 12A(2) was clearly attracted. Thus it was submitted by the ld. A.R that the provisions of Secs. 11 and 12 were clearly applicable to its case, and resultantly the addition of Rs.34,31,521/- made by the A.O was liable to be set aside.

5. The CIT(A) after deliberating on the contentions of the assessee was however not persuaded to accept the same. The CIT(A) deliberating on the claim of the assessee as regards the applicability of the first proviso of Sec. 12A(2), observed that as the same was made available on the statute by the legislature vide the Finance (No. 2) Act, 2014, with effect from 01.10.2014 and was not given a retrospective effect, therefore, the same was not applicable to the case of the assessee wherein the exemption under Sec. 12AA had been already been granted to the assessee on 03.04.2012 for AY 2012-13 onwards. Thus, on the basis of the aforesaid observations the CIT(A) declined to accept the aforesaid contention of the assessee. The CIT(A) observed that during the year under consideration the assessee as a matter of fact was not covered by the exemption contemplated under Sec. 12A or under Sec. 10(23C)(vi). It was further observed by the CIT(A) that as the assessee society was not registered under Sec. 12AA during the year under consideration, therefore, it was not eligible for claim of exemption under Secs. 11 and 12 of the 'Act'. Thus, on the basis of her aforesaid observations the CIT(A) upheld the addition made by the A.O and dismissed the appeal of the assessee.

6. The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. That at the very outset of the hearing of the appeal the ld. Authorized Representative (for short 'A.R') for the assessee submitted that though the case of the assessee was squarely covered by the first proviso of Sec. 12A(2) of the 'Act', however, the CIT(A) had wrongly concluded that the same was not applicable to the case of the assessee. The ld. A.R. in order to drive home his aforesaid contention, drew our attention to the first proviso of Sec. 12A(2), which was made available on the statute vide the Finance (No. 2) Act, 2014 with effect from 01.10.2014. The ld. A.R submitted that as the said statutory provision was made available on the statute to mitigate the hardships being faced by charitable institutions, therefore, the same being a beneficial provision was to be accorded a retrospective applicability. The ld. A.R in order to buttress his aforesaid contention took support of the memorandum explaining the provisions of the Finance (No.2) bill, 2014, in context of the incorporation of the first proviso Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 10 of 14 to Sec.12A(2). The ld. A.R in order to fortify his aforesaid claim that retrospective effect was to be given to the aforesaid statutory provision, therein relied on the judgment of the Hon'ble Supreme Court in the case of CIT v. Vatika Township (P.) Ltd. [2014] 367 ITR 466/227 Taxman 121/49 taxmann.com 249. The ld. A.R submitted that the issue that the first proviso of Sec. 12A(2) was to be given a retrospective effect had already been looked into and adjudicated by the Income Tax Appellate Tribunal, Cochin Bench, Cochin in the following cases:- (i) SNDP Yogam v. Asstt. DIT (Exemption) [2016] 161 ITD 1/68 taxmann.com 152 (Cochin - Trib.) (ii) Santhula Charitable Trust v. Dy. DIT (Exemption) [ITA No. 538/Coch/2015, dated 10.06.2016.] The ld. A.R further submitted that a similar view had also been taken by the ITAT, "B" Bench, Pune in the case of Shri Vishwa Kalyan Jivraksha Pratisthan v. ITO (ITA No. 2013/PN/2014); dated 22/07/2016 and ITAT, Ahmedabad, 'SMC' Bench in the case of Shri Bhanushali Mitra Mandal Trust v. ITO (ITA No. 2515/Ahd/2015; dated 22.02.2016. The ld. A.R in order to support his aforesaid claim took us through the order of the ITAT, Cochin Bench in the case of SNDP Yogam (supra). The ld. A.R drew our attention to Page 10 - Para 7.3 of the order, wherein the Tribunal after deliberating at length on the explanatory notes of the Memorandum to Finance (No. 2) bill, 2014, had therein concluded that the amendment to Sec. 12A with effect from 01.10.2014 was retrospective in nature. It was submitted by the ld. A.R that as the assessee had filed its income tax return on 28.09.2011, which was subjected to summary assessment under Sec. 143(1) on 21.08.2012, thus, in the backdrop of the fact that the assessee was granted registration under Sec. 12AA on 03.04.2012, and the objects and activities of the assessee society had not witnessed any change during the year under consideration, viz. A.Y 2011-12, as against those at the time of grant of registration by the Commissioner of Income tax, therefore, the first proviso of Sec. 12A(2) was clearly applicable to the case of the assessee. It was thus submitted by the ld. A.R. that the CIT(A) by misconceiving the scope and gamut of applicability of the first proviso of Sec. 12A(2) had erred in sustaining the addition of Rs.34.31,521/-, which therein was liable to be struck down. Per contra, the ld. Departmental Representative (for short D.R) placed reliance on the order of the A.O and the CIT(A). It was submitted by the ld. D.R that as the appeal of the assessee did not merit acceptance, therefore, the same was liable to be dismissed.

8. We have given a thoughtful consideration to the aforesaid observations of the Tribunal and are persuaded to be in agreement with the view taken therein. We thus finding no reason to take a different view, thus, are of the considered view that the first proviso of Sec. 12A(2) as had been made available on the statute vide the Finance (No. 2) 'Act'. 2014, with effect from 01.10.2014, being a beneficial provision intended to mitigate the hardships in case of genuine charitable institutions, thus, find ourselves to be in agreement with the view taken by the Tribunal in the aforesaid appeals. We thus, are of the considered view that the first proviso of Sec. 12A(2) would be applicable to the case of the present assessee. We therefore set aside the order of the CIT(A) and consequently delete the addition of Rs.34,31,521/- sustained by her. The Ground of appeal

Nos. 1 to 3 raised by the assessee before us is allowed in terms of our aforesaid observations.

9. The appeal of the assessee is allowed in terms of our aforesaid observations.”

10. We have also gone through the decision of Co-ordinate Bench of ITAT Cochin Bench, in SNDP Yogam vs. ADIT(Exemption) [2016] 68 taxmann.com 152 (Cochin Tribunal) and other cases as relied upon by the assessee in his written submissions. From the totality of the facts and circumstances as enumerated above, we hold that since the only Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 13 of 14 reason for denial of exemption u/s.11 of the Act to the assessee was absence of registration u/s.12AA [which was granted to the assessee on 28.03.2016] for the relevant assessment year and on no other ground. The benefit of change in Law as above by Finance Act, 2014 should be available and for the year under consideration, the benefit of exemption should be available on the date of registration as the assessment of the year was pending because as per chronology of events the assessee had already applied for registration u/s.12A on 03.03.2016 and the assessment order was passed on 15.03.2016. However, the registration u/s.12AA of the Act was granted on 28.03.2016 and the same was also produced during the First Appellate Authority. After having given the thoughtful consideration to the aforesaid facts and circumstances and also the observations of the Co-ordinate Bench of Tribunal, we are in agreement with the view taken therein by the Co-ordinate Benches. Thus, we find no reason to take different view, therefore, we are of the considered view that the first proviso of section 12A(2) as had been made available to the statute vide the Finance Act, no.2 [2014], being a beneficial provision intended to mitigate the hardship in case of charitable institutions, thus find ourselves to be in agreement with the view taken by the Tribunal in the aforesaid appeals. We, therefore, are of the considered view that first proviso of section 12A(2) would be applicable to the case of the present assessee. Therefore, we set-aside the order of the ld.CIT(A), consequently delete the additions. Therefore, Navsari Malesar Behdin Anjuman Vs. ITO, Exemption Ward, Surat / A.Y. 2013-14 Page 14 of 14 this ground raised by the assessee is allowed and other grounds raised by the assessee are consequential in nature and same were also allowed in terms of our aforesaid observations.