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Income Tax Appellate Tribunal, “SMC” BENCH, PUNE
Before: SHRI MANISH BORAD & MS. ASTHA CHANDRA
आदेश / ORDER PER ASTHA CHANDRA, JM : Two appeals filed by the assessee are directed against the two separate order(s) both dated 05.09.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”] pertaining to Assessment Years (“AYs”) 2011-12 and 2012-13. Since the issue(s) involved in both the appeals are identical, these were heard together and are being disposed of by this common order.
This is the second round of appeal before the Tribunal. Briefly stated, the facts of the case are that the assessee is a trust registered under Society Registration Act, 1860. It is also registered under the Bombay Public Trust Act, 1950 effective from 14.02.2011. For AY 2011- 12, the assessee filed return of income on 26.09.2011. For AY 2012-13, the return was filed on 28.11.2013. During the AY 2011-12, assessee received donation amounting to Rs.34,92,076/- which the Ld. Assessing Officer (“AO”) in the initial/ original assessment, treated as taxable income of the assessee and raised a demand of Rs.17,58,884/- vide his order dated 29.06.2016 passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the “Act”). Similarly, for AY 2012-13, the Ld. AO completed the assessment vide order dated 30.06.2016 treating the trust as AOP taking surplus of Rs.2,93,770/- as taxable income and raised demand of Rs.1,37,083/-. The assessee challenged such assessment order(s) before the Ld. CIT(A) which was confirmed and thereafter on further appeal to the ITAT, Pune, the matter was remanded back the to the file of the Ld. AO with specific direction to consider the fact of grant of registration to the assessee trust u/s 12AA of the Act, vide its consolidated order dated 18.03.2019 for AYs 2011-12, 2012-13 and 2013-14 in to 191/PUN/2019. The Ld. AO/NeAC, however, again completed the assessment vide separate order(s) both dated 16.04.2021 for AYs 2011-12 and 2012-13 passed u/s 147 r.w.s. 254 of the Act denying the assessee‟s claim of getting benefit of exemption section 11 and 12 of the Act on subsequent registration under section 12AA of the Act granted on 02.12.2016, observing commonly for both the AYs involved as under: “6. ……………………………….. The reply of the assessee has been considered but found not acceptable. The assessee did not submit any additional reply in reference of Show Cause Notice. There is no merit in the submission of the assessee. There are the statutes in the Act which can be clearly read and understood as such, the meaning therein in any manner should not be explode out, as has been allegedly done by the assessee while claiming that the assessee should be given the benefit of exemption considering it to have been registered since it has filed application for registration when the assessment was pending. The assessee has categorically overruled and purposely failed to interpret the provisions of section 2(24)(ii - a) sections 12A(1)(a)/12A and section 11(1)(d) of the Act.”
3. Aggrieved, the assessee filed appeal(s) for both the AYs before the Ld. CIT(A) who dismissed the appeal(s) of the assessee and upheld the order(s) of the Ld. AO for both the AYs vide his separate appellate order(s) both dated 05.09.2024, by commonly observing as under : “5. Examination of the issue and decision: 5.1 I have carefully gone through the Assessment Order, grounds of appeal
1. , statement of facts, written submissions uploaded by the appellant in the matter and remand report furnished by the AO. 5.2 Ground No.
1. In this ground the appellant has challenged the disallowance of Rs. 35,08,047/- claimed exempt u/s 12. A by the appellant. The AO made the disallowance as the appellant did not have certificate u/s 12AA of the Act. The certificate dated 02.12.2016 u/s 12AA furnished by the appellant has the assessee trust registered from F.Y. 2016-17 onwards. The main contention of the appellant is that the appellant's appeal for the relevant AY was pending before first appellate authority and therefore as per proviso to sub-section (2), section 12AA, the appellant is eligible for the exemption for AY 2011-12. I have carefully considered the submission made by the appellant, however I do not find any merit in these. First and second proviso to section 12A (2) inserted by Finance Act, 2014 w.e.f 01.10.2014 reads as under:- "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 to 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 order. Provided further that no action under section 147 shall be taken by the assessing officer in case of such trust or institution for nay assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year. It is evident from the plain reading of first proviso to section 12A(2) that it is applicable only in case of assessment year, for which assessment proceedings are pending before the assessing officer as on the date of such registration. In the present case, on the date of grant of registration u/s 12AA i.e. 02.12.2016 no assessment proceedings were pending before the Assessing Officer in the present case. The pendency of appeal before first appellate authority cannot be treated as assessment proceedings pending before the assessing officer and thus First proviso to section 12A (2) does not come to rescue of the appellant. Therefore, the assessing officer's decision in denying of claim of exemption by the appellant u/s 11 and 12 in absence of registration u/s 122AA is upheld and ground No. 1 is dismissed. 5.3 Ground No.
2. This ground is general in nature and does not require separate adjudication. Hence, this ground is dismissed for statistical purposes.
In the result, the Appeal is dismissed.”
4. Dissatisfied, the assessee is in appeal before the Tribunal raising the following common grounds of appeal:
“1. The Learned Assessing Officer (AO) erred in law and on facts by holding that the trust, not being registered under Section 12A of the Income Tax Act, 1961, is ineligible for claiming exemption under Section 11 of the Act. The AO ignored the fact that the trust was subsequently granted registration under Section 12AA, vide order dated 18/03/19, for AYs 2011-12 to 2013-14 while the proceedings were pending before the CIT(A).
2. The AO further failed to consider the directions of the Hon'ble ITAT, Pune, to take into account the fact of registration under Section 12AA and misinterpreted the proviso to sub-section (2) of Section 12A of the Act, as introduced by the Finance (No. 2) Act, 2014, which applies retrospectively to pending proceedings.
3. The Learned CIT(A) erred in upholding the order of the AO, dismissing the appeal without considering the subsequent grant of registration under Section 12AA and the clear legislative intent behind the amendment to Section 12A by the Finance (No. 2) Act, 2014, which allows for exemptions even in cases where registration is granted subsequently.
The assessee craves leave to amend or add any additional grounds of appeal on or before the date of hearing.”
The Ld. AR submitted that proviso to section 12A(2) of the Act allows trusts with pending assessment proceedings to claim exemptions u/s 11 and 12 upon subsequent registration obtained under section 12A of the Act. He submitted that the initial assessment order(s) for AYs 2011-12 and 2012-13 were passed on 29.06.2016 and 30.06.2016 respectively. The assessee filed appeal against the said assessment order(s) on 06.08.2016. The registration under section 12AA was granted on 02.12.2016. The Ld. AO/ CIT(A) denied the assessee‟s claim of exemption under section 11 of the Act disregarding the directions of the Coordinate Bench of the Tribunal in the first round of appeal vide its order dated 18.03.2019. Consequent thereto, the Ld. AO passed the impugned assessment order(s) under section147 read with section 254 of the Act on 21.04.2021 which has been confirmed by the Ld. CIT(A) vide his impugned order dated 05.09.2024. The above sequence of proceedings/ events confirms that the assessment proceedings were pending during appeal when registration was granted to the assessee. He submitted that there are several judicial precedents in favour of the assessee wherein it has been held that the trust is eligible for claiming exemption under Section 11 of the Act on subsequent registration granted under Section 12AA while the proceedings were pending before the CIT(A). Relying on the decision of the ITAT, Pune in the case of ITO Vs. M/s. Shri Vishwakalyan Jivraksha Pratishthan (ITA No. 2013/PUN/2014 for AY 2011-12), dated 22.07.2016 and the decision of the ITAT, Kolkata in the case of ITO (Exemption) Vs. St. Xavier‟s School, Burdwan (2018) (ITA No. 2101–2105/Kol/2016 for AYs 2008-09 to 2012-13), dated 11.05.2018, the Ld. AR prayed that the addition(s) made by the Ld. AO should be deleted upholding the legislative intent of section 12A(2) and judicial precedents to grant the exemption u/s 11.
5.1 Further, on being questioned by the Bench with regard to the fairness of the proviso to Section 12A(2) of the Act, which allows trusts with pending assessment proceedings to claim exemptions u/s 11 & 12 upon subsequent registration viz-a-viz the trusts whose assessments are finalized, the Ld. AR submitted as under :
“1. Legislative Intent and Fairness: o The proviso to Section 12A(2), introduced by the Finance (No. 2) Act, 2014 (w.e.f. 01/10/2014), aims to provide relief to trusts facing tax liability due to delayed registration despite fulfilling substantive charitable conditions. The Explanatory Memorandum to the Finance (No. 2) Bill, 2014, states: "To provide relief to such trusts... where due to absence of registration u/s 12AA, tax liability got attached though otherwise eligible for exemption." o This provision is narrowly tailored, applying only to trusts with pending proceedings and consistent charitable activities, ensuring no unfair advantage. Trusts without pending proceedings face no prejudice, as they could comply earlier, while the appellant received registration during appeal pendency (02/12/2016).
2. Judicial Precedents: o In ITO vs. St. Xavier's School, Burdwan (2018) (ITAT Kolkata, the tribunal held that denying exemptions by narrowly interpreting "pending before the Assessing Officer" to exclude appellate proceedings violates the statute's intent, allowing exemptions for registration granted during appeals. o Similarly, ITO vs. Shri Vishwakalyan Jivraksha Pratishthan (2016) (ITAT Pune) supported retrospective exemptions when registration is obtained during proceedings, emphasizing substantive eligibility over procedural delays. o These rulings clarify that appellate proceedings are extensions of assessment proceedings, aligning with the proviso's purpose and ensuring equitable application.
Trust's Compliance: o The appellant, a trust registered under the Society Registration Act, 1860, and BPT Act, 1950 (No. F-27645, Pune, 14/02/2011), received Rs. 34,92,076 in donations for charitable purposes (Building Fund). It obtained Section 12AA registration on 02/12/2016 during appeal pendency (06/08/2016), meeting the proviso's conditions. o The Assessing Officer's disregard of ITAT's remand directive to consider the 12A grant and CIT(A)'s narrow interpretation of the proviso (order dated 05/09/2024) denied the trust its substantive right to exemption.
4. Pendency of Proceedings: o The table below summarizes key dates, confirming that assessment proceedings were pending during appeal when registration was granted: Event Date Return Filed 26/09/2011 AO‟s Initial Order 29/06/2016 Appeal Filed to CIT(A) 06/08/2016 Section 12AA Registration 02/12/2016
AO‟s Order u/s 147 r.w.s. 254 16/04/2021 CIT(A) Order 05/09/2024 ITAT Appeal Filed 21/12/2024
6. The Ld. DR, on the other hand, supported the order of the Ld. AO/CIT(A).
We have heard the Ld. Representatives of the parties, perused the material on record, the paper book filed by the Ld. AR on behalf of the assessee as well as the judicial precedents relied upon by the Ld. AR. The facts of the case are not in dispute. It is a second round of appeal before the Tribunal. We find that at the earlier proceedings, the Co-ordinate Bench of the Tribunal has set aside the impugned issue to the file of the Ld. AO with a direction to finalize the same afresh as per law after taking into consideration the fact of registration granted to the assessee trust u/s 12AA of the Act. Pursuant thereto, rejecting the aforementioned contention(s) of the assessee, the Ld. AO passed the fresh assessment order(s) once again taking the similar view that the assessee is not eligible for claim u/s 11 and 12 of the Act inspite of having been granted registration u/s 12A of the Act subsequently. The Ld. CIT(A) too upheld the order of the Ld. AO for the reasons recorded in the preceding paragraphs. Before us, the Ld. Counsel for the assessee has contended that as per proviso to section 12A(2), 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 said proviso as the present appeals are the continuation of the original proceedings and that the power of the CIT(A) is co-terminus with that of the AO and therefore, the assessee which obtained registration under section 12AA of the Act during the pendency of appeal is entitled for exemption claimed u/s 11of the Act.
7.1 The proviso to sub-section (2) section 12A reads as under: “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”
7.2 From the sequence of key dates of proceedings narrated above, it is evident that the assessment proceedings were pending during appeal when registration u/s 12AA was granted to the assessee on 02.12.2016. We have perused the order of the Co-ordinate Bench of the Tribunal in the case of M/s. Shri Vishwakalyan Jivraksha Pratishthan (supra). The relevant extract of the said order of the Tribunal is reproduced below :
“8. The Cochin Bench of the Tribunal in the case of SNDP Yogam Vs. Assistant Director of Income Tax (Exemption) (supra) while dealing with the issue relating to retrospective applicability of newly inserted proviso to section 12A(2) has held that the amendment is retrospective in nature. The relevant extract of the findings of Tribunal are as under : “7.1 ………….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. 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. 7.2 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 11of 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 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.”
The Kolkata Bench of the Tribunal in the case of Sree Sree Ramkrishna Samity Vs. Deputy Commissioner of Income Tax (supra) while dealing with the issue where the benefits of exemption u/s. 11 and 12 were denied to the assessee only for the reason that the assessee is not registered u/s. 12A of the Act held that the legislature has brought proviso to section 12A(2) to prevent genuine hardship that is caused to the assessee due to non-registration u/s 12AA and accordingly, the amendment to section 12A(2) has to be construed as retrospective in operation.
The Commissioner of Income Tax (Appeals) has accepted the contentions of the assessee by placing reliance on the decision of Hon'ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Programme for Community Organisation reported as 248 ITR 1 (SC). The Commissioner of Income Tax (Appeals) held : “11. This leaves the matter of computation of income which has been complicated by applying the provisions u/s. 57 of Income-tax Act. Voluntary contributions or Donations by their inherent nature do not fall the category of 'Income' unlike other income. These contributions have been deemed as income by virtue of Sec. 12(1) of Income-tax Act. Voluntary contributions received towards corpus of the trust are excluded u/s. 11(1)(a) from the scope of income u/s. 11(1) of Income-tax Act. Therefore, even if exemption is not allowable in view of non registration u/s. 12AA of Income-tax Act, the income of the Trust is required to be computed not in accordance with the provisions of Act but in accordance with the provisions of Act but in accordance with the normal rule of accountancy, in a commercial sense without reference to the head of income specified in See.
This is a matter of settled law. The Hon'ble Supreme Court in CIT Vs. Programme for community organization, 248 ITR 1 (SC) had approved Kerala High Court‟s decision in the same case in 228 ITR 620 (Ker) as to the manner of computation stating that income has to be computed on commercial basis and not headwise or statutory basis wherein Expenditure would be charge on the income, while the net income along with donations other than corpus donations will form eligible base out of which the appellant is expected to apply 75% (now 85%). Therefore, in my opinion, the manner of computation of income will be the same though the appellant will not be entitled to exemption u/s. 11 & 12 of the Income-tax Act being not registered u/s. 12AA of Income-tax Act and the question of taxability of donation u/s. 57 and deduction u/s. 57(iii) of Income-tax Act does not arise. Accordingly, the Assessing Officer is directed to delete the addition of `40,92,237/-.”
The ld. DR has not been able to controvert the well reasoned findings of the Commissioner of Income Tax (Appeals). Thus, in view of the facts of the case and the decisions of Tribunal holding the amendment to provisions of sub-section (2) to section 12A to be retrospective in nature, coupled with the fact that the assessee was subsequently granted registration u/s. 12AA of the Act, we are of the considered view that the Commissioner of Income Tax (Appeals) has rightly deleted the addition made by the Assessing Officer. Accordingly, the appeal of the Revenue is dismissed being devoid of any merit.”
7.3 Similar view has been taken by the Kolkata Bench of the Tribunal in the case of M/s. St. Xavier‟s School (supra). No contrary decision / material has been brought on record by the Revenue to rebut the above contention of the assessee.
7.4 We also note that the Ld. AO passed the impugned order for AYs 2011-12 and 2012-13 vide order dated 16.04.2021 and the Ld. CIT(A) dismissed the assessee‟s appeal(s) for both the AYs vide order dated 05.09.2024. At the time of passing of the impugned orders, the assessee trust was already registered u/s 12A of the Act vide registration certificate dated 02.12.2016. Having said so, we also note that the said proviso further stipulates that the objects and activities of the trust should remain the same for such preceding assessment year (in the present case AY 2011-12 and AY 2013-14). There is nothing on record before us which suggests that such exercise of examining whether objects and activities of the assessee trust were the same for AYs 2011-12 and 2012-13 under consideration or not even post obtaining the registration u/s 12A of the Act subsequently on 02.12.2016, has been done by the lower authorities. In this view of the matter coupled with the facts and legal position set enumerated above, we deem it fit, in the interest of justice, to set aside the impugned order(s) of the Ld. CIT(A) and restore the matter to the file of the Ld. AO with a direction to re-examine the claim of the assessee afresh specifically taking into consideration the objects and nature of the activities carried out by the assessee in AYs 2011-12 and 2012-13 and allow the said claim as a result of such verification thereof as per fact and law after affording reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to file the relevant details/documentary evidence in support of its claim before the Ld. AO as may be required/ called upon during the fresh proceedings. We direct and order accordingly. The common ground nos. 1 to 3 raised by the assessee in both the AYs involved are accordingly allowed for statistical purposes.
Order pronounced in the open court on 18th June, 2025.