AGRICULTURAL MARKET COMMITTEE ,KUBEER vs. INCOME TAX OFFICER, WARD-1, NIRMAL

This are assessee’s appeals for the A.Ys 2003-04 to 2005-06 against the order of the CIT (A)-5, Hyderabad, dated 13.08.2018 denying the claim of exemption u/s 11 of the I.T. Act to the assessee.

Page 1 of 6

ITA Nos 2065 2066 and 2067 of 2018 AMC Kubeer.

registration u/s 12A of the Act. The DIT (E) dismissed the assessee’s application. Thereafter, the assessee filed an appeal before the ITAT and the ITAT directed the DIT (E) to condone the delay in filing of the application u/s 12A and adjudicate the issue afresh. Meanwhile, the AO took up the return of income of the assessee for assessment and the AO completed the assessment by denying exemption u/s 11 of the Act. Aggrieved, the assessee preferred an appeal before the CIT (A) who observed that consequent to the ITAT order, the DIT (E) has granted registration u/s 12A of the Act only w.e.f. 30.05.2007 i.e. the date of application filed by the assessee in Form No.10A. Therefore, the CIT (A) held that the assessee is not eligible for exemption prior to such date. Thus, the assessee was denied exemption for the relevant A.Y and is in appeal before us.

similar issue had come up before the Tribunal in the case of AMC

Bodhan and the Tribunal by following the decision of the Coordinate Bench at Ahmedabad in the case of Shree Bhanushali Mitra Mandal Trust vs. ITO (2016) 68 taxmann.com 250 (Ahmedabad Trib) has taken note of first proviso of section 12A of the Act and has directed the AO to allow the assessee’s claim of exemption u/s 11 A of the Act even for the A.Y prior to the date of registration if the assessments for those assessment years were pending or were reopened subsequently u/s 147 of the Act provided, the assessee satisfied the other conditions of section 11.

Page 2 of 6

ITA Nos 2065 2066 and 2067 of 2018 AMC Kubeer.

ITA Nos 2065 2066 and 2067 of 2018 AMC Kubeer.

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 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. 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 my 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 my 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.” 4. In the case of HMDA, the Coordinate Bench of this Tribunal, wherein one of us (JM) is a signatory to the order, considered the above decision and has held that once registration is granted, proviso to section 12A(2) was applicable even to the pending appeals for the Assessment Years prior to registration. For the sake of convenience and ready reference, the relevant portion of the Tribunal’s order is reproduced hereunder: “13. However, since this issue is to be considered in the assessments u/s 143(3) of the IT Act, we refrain from giving any finding on this issue at this stage. As regards the assessee’s prayer to grant registration w.e.f. 01-04-2002 as the assessments for the relevant assessment years were pending as on the date of registration is concerned, we find that the assessee has placed

Page 4 of 6

ITA Nos 2065 2066 and 2067 of 2018 AMC Kubeer.

reliance upon the decision of the Single Member Case ‘SMC’ at Ahmadabad in the case of Shri Bhanushali Mitramandali Trust Vs ITO reported in (2016) 68 taxman.com 205 Ahmadabad Tribunal wherein it was held that where the registration is granted in the subsequent year, the benefit of the same has to be applied in the earlier assessment years also under the first proviso to Sec. 12A(2) of the Act, and that such proviso is applicable even to appeals pending before the CIT(E). 14. The Ld. Counsel for the assessee had submitted that the application u/s 12A of the IT Act was initially rejected by the CIT(E) and the issue was restored to the file of the CIT(A) by the ITAT, and therefore, the earlier order of the CIT(E) got nullified and the assessee’s application for registration got restored and has to be considered as pending for consideration by the CIT(E). He submitted that at the time when the CIT(E) was considering the assessee’s application afresh, the assessee had filed a letter seeking registration w.e.f. 01-04-2002 and therefore the issue was very much before the CIT(E) while granting registration w.e.f. A.Y 2007-08. He submitted that as per the first proviso of 12A(2) of the IT Act, the registration granted in the subsequent year shall be applied to the earlier assessment years also, wherever the assessment proceedings are pending before the A.O. He submitted that the assessments in the case of the assessee for all the assessment years from 2003-04 on wards were pending before the A.O and hence the proviso was applicable and assessee should be granted registration w.e.f 01-04-2002. 15. The Ld. Sr. Standing Counsel for the Department, on the other hand, submitted that assessee’s application was already rejected by the CIT(E) and in the earlier application the assessee had never claimed the exemption w.e.f 01-04-2002 nor has it filed any application for condonation of delay giving reasons as to why the application could not be filed earlier. 16. Having regard to the rival contentions and the material on record, we find that by virtue of remand to the CIT(E) for re- consideration of the assessee’s application for registration u/s 12A of the IT Act, the assessee’s application has been revived. As on the date when the CIT(E) was considering the application for registration pursuant to the remand by the ITAT, the proviso to Sec. 12A(2) of the IT Act has come into the statute book and therefore it is very much applicable to all the pending assessments before the A.O. The SMC Bench of this Tribunal at Ahmadabad, in the case of Shri Bhanushali Mitramandali Trust Vs ITO (cited supra) has also held so. Particularly in the case of hand, we find that there is no change in the objects of the assessee from the earlier and in the subsequent assessment years and there is no finding that the assessee has carried on any activity not in accordance with its objectives. In view of the same, we are of the opinion that the assessee is eligible for registration u/s 12A of the IT Act w.e.f 01- 04-2002 and accordingly, we direct the CIT(E) to modify the order of registration u/s 12AA of the Act w.e.f. 01-04-2002 i.e from A.Y 2003-04 onwards. In the result the assessee appeal in ITA No. 03/HYD/2017 is allowed.” 5. Following the above decision, we set-aside the assessments and remand the same to the file of the Assessing Officer with a direction to allow the assessees claim of exemption u/s 11 of the Act even for the assessment years prior to the date of Registration where

Page 5 of 6

ITA Nos 2065 2066 and 2067 of 2018 AMC Kubeer.

the assessments were pending or were reopened subsequently u/s 147 of the Act, provided, the assessee satisfied the other conditions of section 11, particularly, since the application for grant of registration w.e.f 01/04/2012 is still pending before the DIT (E). Therefore, all the appeals of the respective assessees are treated as allowed for statistical purposes”.

Hyderabad, dated 15th November, 2019. Vinodan/sps Copy to: 1 Agricultural Market Committee, Kubeer, Kubeer Mandal, Adilabad Distt. 2 ITO Ward-1 Nirmal, Adilabad 3 CIT (A)-5 Hyderabad 4 Pr. CIT – 5 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File

By Order

Page 6 of 6