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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
आदेश / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)–3, Rajkot [CIT(A) in short] vide appeal no.CIT(A)-3/0685/13- 14 dated 31/03/2014 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961(here-in-after referred to as "the Act") dated 25/02/2014 relevant to Assessment Year (AY) 2011-12.
The assessee has raised the following grounds of appeal:-
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 2 - 1. The Ld. CIT(A) has erred in law and facts in treating the assessee as not liable of earning income as exempt from income-tax for A.Y. 2011-12 and there by confirming total addition of Rs. 19,93,828/- and net addition of Rs. 17,33,984/-. The same needs cancellation.
The Ld. CIT(A) has erred in law and facts in treating the assessee as not liable of earning income as exempt from income-tax for A.Y. 2011-12 and confirming raising demand of Rs. 5,51,140/-. The same needs modification.
Without verifying his records, the Ld. CIT(A) has erred in law and facts in treating the assessee as not liable of earning income as exempt from income- tax for A.Y. 2011-12 and confirming assessment order is passed. The same needs modification.
The Ld. CIT(A) has erred in law and facts in treating the assessee as not liable of earning income as exempt from income-tax for A.Y. 2011-12 on the grounds that registration certificate U/s. 12A is not furnished by the assessee. The same needs modification.
Taking into consideration the legal, statutory, factual and administrative aspects, no demand ought to have been confirmed as raised without considering the matter properly. The same needs deletion.
6.1. Without prejudice, the Ld. CIT(A) has erred in not deciding the ground no. 6 of the ground taken before him, which runs as under :
Without prejudice, the Ld. A.O. has erred in law and facts in not granting deduction for expenses incurred to earn the income / receipts as mention in the accounts ignoring the settled law that no income can be earned without incurring expenses. The addition needs deletion.
6.2. Without prejudice, the Ld. CIT(A) has erred in not deciding the ground no. 6 of the ground taken before him although he has re-produced the above ground as well submissions made by the assessee there on without considering the same at all. The order passed by him needs cancellation.
6.3. Without prejudice, the Ld. CIT(A) has erred in law and facts in not granting deduction for expenses incurred to earn the income 7 receipts as mention in the accounts ignoring the settled law that no income can be earned without incurring expenses. The addition needs deletion.
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
Without prejudice, the assessment order is bad in law and deserves annulment.
The order passed U/s. 143(3) needs cancellation being bad in law.
Without prejudice, the demand is raised against the statutory provisions of the income-tax act. The same needs cancellation.
Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing assessment order. The assessment order made needs annulment. 11. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing appeal order. The assessment order made needs annulment. 12. The appellant also humbly prayed for refund of appeal fees for this appeal amounting to Rs. 10,000/- compel to be paid by the Ld. CIT(A). for not considering and deciding the ground no. 6 as mentioned at para's 6.1, 6.2 & 6.3 as mentioned above.
The appellant craves leave to add/alter/amend and/or substitute any or all ground of appeal before the actual hearing takes place.
Even though the assessee has raised as many as 13 grounds of appeal, but the effective grievance of the assessee revolves to the fact that CIT(A) erred in confirming the order of the AO by making disallowance under section 11 of the Act.
Briefly stated facts are that the assessee in the present case is a public charitable trust and claimed exemption under section 11 of the
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 4 - Act. However, the AO during the assessment proceedings found that the assessee was registered under section 12AA of the Act with effect from 1st April 2011. Therefore he was of the view that the assessee is entitled to exemption from the financial year 2011-12 corresponding to the assessment year 2012-13. As the year under consideration is the assessment year 2011-12, therefore, the AO disallowed the expenses claimed by the assessee. Accordingly, the AO treated the entire amount of expenditure claimed by it as its income and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to Ld. CIT(A). The assessee before the Ld. CIT(A) submitted that there is no change in the activities and objects of the trust. Therefore the registration certificate under section 12AA of the Act granted in the assessment year 2012-13 should have been treated as registered and granted for the assessment year under consideration as well.
The assessee also submitted that its case is covered under the proviso to section 12A(2) of the Act which states that the benefit of section 11 and 12 shall be applied to the assessee where the assessment proceedings are pending before the AO. Though such amendment is applicable with effect from 1st October 2014, the courts have held that such amendment is applicable retrospectively.
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 5 - 7. The assessee without prejudice to the above also submitted that it is entitled to the deduction under section 57(iii) of the Act on account of the expenses claimed against its gross receipts.
However, the ld. CIT(A) disagreed with the contention of the assessee by observing that the amendment made by way of proviso to section 12A(2) of the Act is applied prospectively. Accordingly the Ld. CIT(A) confirmed the order of the AO.
Being aggrieved by the order of Ld. CIT(A), assessee is in appeal before us. The Ld. AR before us filed written submission which is reproduced as under:
“Kind attention is invited to the hearing fixed of the above matter on 27-02-2019.
2.1 At the outset it may humbly be submitted that the appeal contains following two grounds, both are fully covered by the decisions as mentioned below: 1. The Ld. A.O. has determined income at Rs.19, 93,828/- which is gross receipts and has denied expenses of Rs.17,33,984/- for not obtaining registration U/s 12A. The Hon. Delhi High Court in the case of DDIT (Exemption) V/s Petroleum Sports Promotion board 362 ITR 235 Delhi (copy enclosed) has been pleased to hold that taxing the gross receipt of the assessee and not the income, is not permissible under the income tax Act. 2. The Hon. Court has thus hold that even in absence of registration U/s. 12A, then full play must be allowed to section 57(iii) and expenditure incurred has to be allowed.
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 6 - 3. The matter is also covered by the decisions of Hon. Present Bench in me case of Shri Ghelabhai Popatbhai Shingala ITA No. 742/RJT/2014 dated 31-1-2019 (copy enclosed) where the Hon. Bench hold that In the interest of justice and fair play,, we restore the matter to the file of assessing officer for fresh adjudication as per the provisions of law.
Thus the matter needs restoration to the Ld. A.O. for fresh adjudication to give deduction of expenses as per decision of the Hon. Delhi High Court Cited Supra 2.2 At Para 4 on Page No. 2 of the assessment order the Ld. A.O. while disallowing expenditure of Rs. 17,33,984/- has not given any grounds nor has taken any other objection except non obtaining of registration U/s 12A.
2.3. Thus, the Ld. A.O. has denied claim made U/s. 11(1) & 11(2) vide Para no. 9 of the assessment order. This is also erroneous since in view of decisions of the Hon. Delhi High Court in the case of DDI (Exemption) v/s. Petroleum Sports Promotion Board 362 ITR 235 (Del.) (copy enclosed) the same cannot be disallowed or it has to be allowed U/s. 57(iii). It is therefore submitted that the claim made by the assessee may kindly be directed to be allowed since the gross receipt of the assessee is Rs. 17,33,984/- and total claimed of exemption U/s. 11 of Rs. 19,93,828/- as per income and expenditure account duly audited by the Chartered Accountant together with computation of income were furnished along with the return of income. income
2.4. As per assessment order para 4 the Ld. A.O. has re-computed the mentioning as under:
Income derived on a/c. of disallowance of Rs. 19,93,828/- being exemption claimed U/s. 11 of the Act and withdrawn due to lack of certificate U/s. 12AA during the period under consideration. Rs. 17,33,984/- 2.5. Thus the entire receipt of the assessee has been taxed by the Ld. A.O. which is also not permissible as per decisions of the Hon. Delhi High Court as mentioned above.
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 7 - 3. It is therefore humbly prayed that the Ld. A.O. may kindly be directed to give deductions of expenses incurred by the assessee.
The appeal also contains the grievance of the assessee for not considering registration granted to the assessee by the C.I.T. vide order dated 27-9-2012, treating the same as applicable for A.Y. 2012-13. Since the assessment under appeal relates to A.Y. 2011-12, the assessment whereof is completed on 25-2-2014 , thus as on date of granting registration on 27-9-2012 it is evidence that assessment proceedings were pending as on that date for A.Y. 2011-12 which is under appeal and assessment whereof is completed thereafter on 25-2- 2014. Thus the amendments introduce vide finance (no. 2) Act 2014 was applicable to the case of assessee since it has been treated as retrospective by the following decisions:
Hon. IT AT Ahmadabad in the case of Bhanushali Mitramandal trust 2. Hon. IT AT Pune in the case of Shri vishvakalyan Jivraksha Pratishthan 3. Hon. IT AT Cochin Bench in the case of SNDP Yogam 4. Hon. IT AT Kolkata in the case of Shri Shri Ramkrishna Samiti 5. Hon. IT AT Amritsar in the case of St. Jude's
The Hon. IT AT Amritsar in the case of Punjab Educational Society vide order dated 20-11-2017 (copy enclosed) has been pleased to consider all the above decisions and also guidelines of the Hon Supreme Court in the decision as mention in the order and has been pleased to hold that the amendment is to be considered as retrospective. Since In the present case under appeal before this Hon. Bench and that was involved in the decisions of Punjab educational Society Cited supra contains the same assessment year involved i.e. identical assessment year. i.e. AY 2011-12 is involved and relates to entire identical matters. The details factual positions of the present case is submitted below. Since the appeal order at Para 5.2 itself contains the details of 12A certificate granted to the assessee vide order dated 27-9-2012 and assessment order at Para 4 Page 2 contains applicability of 12A with effect from 1-4-2011, i.e. for A.Y. 2012-13, thus the grievance of the assessee that it is to be
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 8 - considered for A.Y. 2011-12 treating the amendment as applicable retrospectively is fully covered by the decisions cited supra.
The of factual position is reproduced below :
The assessee filed return of income declaring Nil income. The Ld. A.O. during the course of scrutiny assessment called for certificate U/s. 12A which the assessee produced received from the CIT - III, Rajkot vide order dated 27-9-2012 which is applicable from A.Y. 2012-13. The Ld. A.O. therefore denied exemption U/s. 11 and disallowed an amount of Rs. 19,93,8287- treating the same as income derived on account of disallowance and ultimately made addition of Rs. 17,33,984/-.
Consequently demand of Rs. 5,51,1407- is raised only for the reason that registration U/s. 12A is applicable for A.Y. 2012-13. Since in A.Y. 2012-13 and in this year there is no change of the activities, nor object of the trust and no other changes are there, the case of the assessee ought to have been treated as registered U/s. 12A for this year also i.e. for A.Y. 2011-12 at par with A. Y. 2012-13 on deemed basis.
6.1. Copy of registration U/s. 12A received from Hon. CIT Sir is also enclosed here with. The assessee has obtained Form No. 12A (copy enclosed) from the Hon. CIT, Rajkot issued under no. CIT-Raj-III / 12AA / 79 / 2012-13 / 162 dated 27-9-2012 effective from A.Y. 2012-13. Thus the assessee has been held entitled for obtaining 12A in subsequent years
6.2. It is therefore humbly submitted that vide Finance (No. 2) Act 2014 a proviso has been inserted below the provisions 12A(2) which also provides that once a registration is granted in subsequent year, the same is to be considered as granted for preceding year also. In the case of assessee the registration U/s. 12A has been granted by the Hon. CIT Sir w.e.f. A.Y. 2012-13 and therefore the same can be considered for A.Y. 2011-12 also in lieu of amendments. Although the amendments is w.e.f. 1-10-2014, the same can be considered as retrospective in view of following judicial guidelines : 1.2. The matter can be considered as covered by the decisions of Hon. Calcutta High Court in the case of CIT v/s. Virgin Creators in G.A. No. 3200 / 2011 dated 23-11-2011. Which provides that such amendments can be considered as retrospective. This view has been followed by the
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 9 - Hon. IT AT Ahmedabad in the case of M/s. Alpha Projects. The Hon. ITAT Rajkot has also been pleased to follow the above views in the case of M/s. Vijya Printers Jetpur (ITA No. 11 / RJT / 2012) the order of the Vijya Printers passed by the Hon. ITAT, Rajkot has also been confirmed by the Hon. Gujarat High Court. 1.3. The Hon. Calcutta High Court in the above decisions has followed the decisions of the Hon. Supreme Court in the case of Allied Motors 224 ITR 677 (SC) & Alom Extrusions 319 ITR " 306 (SC) and in the case of R.B. Jodha Mal Kuthiala 82 ITR 570 (SC) where it is held that a provision which was inserted the remedy to make a provision workable requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well.
6.3. Therefore in view of the amendments as per Finance (No. 2) Act, 2014 which is to be treated as retrospective in view of decisions of the Hon. Calcutta High Court in the case of CIT v/s. Virgin Creators cited supra together with decisions of the Hon. Supreme Court the appeal of the assessee needs acceptance.
It is therefore prayed that the appeal on this issue may kindly be allowed. Alternatively
It is prayed that matter may kindly be restored to the Ld. A.O. since the assessee is facing utmost difficulties for issuance of notice U/s 226(3) where bank accounts are attached and a pios activities is ruined for uncalled payment of a paper demand of Rs. 5,51,1407-
In any case the most Hon. Bench may kindly consider
To allow appeal as prayed for ............... And /or 2. May restore the matter back to the file of Ld. A.O. for fresh adjudication as per decisions given in the case of Ghelabhai Popatbhai Shingala (copy enclosed) by this Most Hon. Vary Bench.
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 10 - 10. On the other hand, the Ld. DR vehemently supported the order of authorities below.
We have heard the rival contentions and perused the materials available on record. The issue in the instant case relates to the disallowance of the expenditure claimed by the assessee against the gross receipts and treating the same as income of the assessee on the ground that the assessee does not hold valid registration certificate under section 12AA of the Act for the year under consideration. As such the registration under section 12AA of the Act was granted with effect from the assessment year 2012-13, but the same was held as inapplicable for the year under consideration.
11.1. It is an undisputed fact that the registration under section 12AA of the Act was granted vide dated 27-09-2012 and the notice under section 143(2) for the assessment year under consideration was issued dated 17-09-2012. Thus, it is clear that the assessment proceedings were pending before the AO when the notice under section 143(2) was issued upon the assessee. As such we note that the assessee has made an application for registration under section 12AA of the Act in the financial year 2011-12.
11.2. Now the question arises whether the proviso to section 12A(2) of the Act can be held as applicable retrospectively. If yes then the issue on hand is covered in favor of the assessee by such amendment as discussed
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
- 11 - above. But such amendment was brought under the statute with effect from 1st October 2014 which implies that such an amendment cannot be applied retrospectively. However, regarding this, we note that several courts have held that such an amendment is applied retrospectively. In this connection we find support and guidance from the order of Ahmedabad Tribunal in the case of Shree Bhanushali Mitra Mandal Trust v. Income-tax Officer reported in 68 taxmann.com 250 wherein it was held as under:
“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 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.
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- 12 - 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.”
11.3. In view of the above, there remains no ambiguity that the amendment is applicable retrospectively. Therefore in our considered view, the assessee deserves to claim the benefit under section 11 of the Act for the year under consideration.
11.4. As we have decided the issue in favor of the assessee on account of the retrospective operation of the proviso to section 12A(2) of the Act, we are not inclined to adjudicate other points of contention raised by the AR in the written submission. Thus we set aside the order of Ld. CIT(A) and direct the AO to delete the addition made by him by disallowing the exemption under section 11 of the Act. Thus the ground of appeal of the assessee is allowed
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 11/03/2019
Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 11/03/2019 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
ITA No.178/Rjt/2016 Shree Santan Ashram Charitable Trust vs. ITO Asst.Year 2011-12
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-3, Rajkot 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण,राजोकट/DR,ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation .. 4.3.19 (word processed by Hon’ble AM in his computer by dragon) 2. Date on which the typed draft is placed before the Dictating Member …7.3.19 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….12.3.19 7. Date on which the file goes to the Bench Clerk…………………12.3.19 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………