DIAMOND EXPOTERS ASSOCIATION LTD,MUMBAI vs ITO WD (E) 1(2), MUMBAI

Income Tax Appellate Tribunal, “D”

Before: HON’BLE SH. SANDEEP GOSAIN, JM & HON’BLE SH. N. K. PRADHAN, AM

For Appellant: Shri Chetan Karia, AR, Shri B. Jayakumar, DR

ITO WD (E) – 1(2), M/s Diamond Exporters Mumbai Association Ltd. बिधम/ Pin- 501-502, Mehta Bhavan, Vs. 311, Ram Mohan Roy, Mumbai-400 004 स्थायीलेखासं./जीआइआरसं./ PAN No. AAATD3855G (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant by : Shri Chetan Karia, AR प्रत्यथीकीओरसे/Respondentby : Shri B. Jayakumar, DR सुनवाईकीतारीख/ : 02.11.2018 Date of Hearing घोषणाकीतारीख / : 28.01.2019 Date of Pronouncement आदेश / O R D E R

Per Sandeep Gosain, Judicial Member:

The present Appeal filed by the assessee is against the order of Ld. CIT (Appeal) – 1, Mumbai dated 21.01.16 for AY 2012-13 on the grounds mentioned herein below:-

M/s Diamond Exporters Association Ltd. 1) The Learned Commissioner of Income Tax (Appeals) erred in denying the benefits of Section 11 of the income Tax Act, I96i(" the Act") and thereby erred in appreciating the retrospective amendment brought out in Section 12A of the Act , by insertion of the proviso w.e.f 1/10/2014; 2) The Learned Commissioner of Income Tax (Appeals) erred in confirming addition of Rs. 2O,oo,ooo/-, paid to Gemmological Institute of India towards conducting Research in connection with the Diamond industry, in absence of Registration under Section 12AA of the Act ; 3) The appellant prays that: i) Benefits of Section 11 of the Act be restored; ii) addition of Rs. 2O,oo,ooo/- may be deleted; iii) recovery of demand in dispute may be stayed; iv) personal hearing may be granted; v) any other relief your honours may deem fit. 4) The Appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.

2. The brief facts of the case are that the return of income for the year under consideration was filed on 28.09.12 along with the M/s Diamond Exporters Association Ltd. Income & Expenditure Account, Balance Sheet and Audit Report in Form 10B declaring total income at Rs. 16,55,060/-. However, the A.O completed the assessment vide order dated 04.03.2015 u/s. 143(3) of the I.T. Act, 1961 at taxable income of Rs. 41,77,475/-. Aggrieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, dismissed the appeal of the assessee.

Now before us, the assessee has preferred the present appeal by raising the above grounds.

Ground No. 1 to 3 3. These grounds raised by the assessee are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in denying the benefits of Section 11 of the Income Tax Act, 1961, by appreciating the retrospective amendment brought out in Section 12A of the Act, by insertion of the proviso w.e.f. 1/10/2014, therefore we thought it fit to dispose of the same by this common order.

M/s Diamond Exporters Association Ltd. 4. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the assessee is contained in paras 5.2 of its order and the same is reproduced below:-

5.2. I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the submissions of the appellant and also discussed the case with the AR of the appellant. The contentions and submissions of the appellant are being discussed and decided here in under: i. Ground No. 1 relates to the denial of benefit u/s.

11.

The Assessing Officer has denied the benefit of exemption u/s. 11 on the ground that no 12A certificate was applied for by the appellant and hence it was not registered u/s. 12A. The appellant submitted that it has now applied for the same and has got registration u/s. 12A vide order dated 24.9.2015. However, on perusal of this certificate issued by CIT(E),Mumbai, it is noted that application was filed on 30.03.2.015 and registration has been granted with effect from A.Y.

M/s Diamond Exporters Association Ltd. 2015-16. The appellant in this regard submitted that as per the amendment in section 12A w.e.f. 1.10.2014, the registration granted by the CIT would apply for the assessment under consideration. ii. In this regard, it is noted that the amendment has been brought in section.12A-and following proviso has been added w.e.f. 1.10.2014.

“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 income derived from property 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".

On perusal of the above it is very clear that the same refers to the A.Y. preceding the aforesaid assessment year for which assessment proceedings are pending before the AO as on the date of registration. In the case of under consideration, registration has been granted on 14.09.15, while the assessment has M/s Diamond Exporters Association Ltd. already been completed on 04.03.15. Accordingly, this proviso is not applicable to the facts of the appellant’s case. iii. Appellant has relied upon the decision of the ITAT Kolkata in the matter of Sree Sree Ramkrishna Samity Vs. DCIT (ITAT Kolkata) (supra). However on perusal of this judgment it is noted that the facts in the two cases are different. In the case before Hon'ble ITAT, as mentioned in paragraph 6.4 of the order, assessment proceedings were pending before the assessing officer for assessment years 2003-04 to 2008-09 as on the date of granting registration under section 12AA on 29.10.2010 with effect from 1.10.2010. Observing that the assessment proceedings were pending in that case, the Hon'ble ITAT observed as under:

6.13. We hold that since the only reason for denial of exemption u/s 11 was absence of. registration u/s 12AA (which was granted to assessee society on 29.10.2010 with effect from 1.4.2010) for the relevant assessment years and on no other ground, the benefit of change in law as above by Finance Act 2014 should be available and for all the years, the benefit of exemption should be available on the date of registration as all the assessments were pending as shown above.

M/s Diamond Exporters Association Ltd. As against this, there is no assessment proceedings pending in case of the appellant in the year under consideration. Accordingly the findings of Hon'ble ITAT in the above mentioned case are not applicable to the facts of the appellant's case. iv. In view of the facts and legal position as discussed above, I am of the consider opinion that the AO has rightly denied exemption u/s. 11 to the appellant. Ground No. 1 of appeal is, therefore, dismissed. v. The appellant in Ground no. 2 has raised the issue of denial of exemption for donation of Rs. 20,00,0007- given to Gemmological Institute of India. Since denial of exemption u/s. 11 has been upheld in preceding ground, action of the AO is upheld. Ground No. 2 of appeal is, therefore, dismissed.

After having gone through the facts of the present case, we find from the records that AO had denied the benefits of exemption u/s 11 of the I.T. Act on the ground that no certificate u/s 12A was applied by the assessee because it was not registered u/s 12A and hence, he was not entitled to get benefit u/s 11 of the I.T. Act.

M/s Diamond Exporters Association Ltd.

On the contrary, Ld. AR reiterated the same arguments as were raised by him before Ld. CIT(A) and submitted that it has now applied for the same and has got registration u/s 12A vide order dated 24.09.15.

From the record, we notice that the order of assessment in the present case was passed on 04.03.15 and the application for registration u/s 12A was filed by the assessee on 30.03.15 and ultimately, the registration was granted to the assessee w.e.f AY 2015-16 vide order dated 24.09.15. In order to support its contentions, Ld. AR drawn our attention to the amendment which was brought u/s 12A w.e.f. 01.10.14 is as under:-

M/s Diamond Exporters Association Ltd.

We further notice that Ld. CIT(A) after considering the submissions of the assessee, had reached to the conclusion that the amendment brought u/s 12A w.e.f. 01.10.14 refers to the assessment year preceding the assessment year for which assessment proceedings are pending before the AO as on the date of registration and also held that the registration in the present case was granted on 14.09.15, whereas the assessment had already been completed on 04.03.15, thus Ld. CIT(A) concluded that this proviso is not applicable to the facts of the assessee’s case.

Ld. AR on this point had relied upon the decision of the Coordinate Benches of ITAT in the case of Sree Sree Ramkrishna Samity Vs. DCIT (ITAT Kolkata in to 1685/2012), SNDP Yogam Vrs. ACIT (ITAT Cochin in ITA No. 503-506 & 569/2014), St. Judge’s Convent School Vrs. ACIT (2017) 164 ITD 594/77 taxmann.com 173(Amritsar Trib) and Shyam Mandir Committee Vrs. ACIT (ITAT Jaipur in ITA No. 651/JP/2013).

11. On the other hand, Ld. DR relied upon the orders passed by the revenue authorities.

M/s Diamond Exporters Association Ltd.

12.

After having heard the counsels for both the parties at length and from the records, we notice that the order of assessment in the present case was passed on 04.03.15 and the application for registration u/s 12A was filed by the assessee on 30.03.15 and ultimately, the registration was granted to the assessee on 24.09.15. It is important to highlight that at that time, the appeal of the assessee before Ld. CIT(A) was pending and the same was decided ultimately on 21.09.16, which shows that the assessee got the registration u/s 12A during the course of appellate proceedings. Thus in this way, according to Ld. AR, when once the appeal was pending before Ld. CIT(A), when the registration u/s 12A was granted would be ‘deemed’ to be the assessment proceedings pending before AO. On this proposition, we draw strength from the judgment relied upon by Ld. AR in the case of SNDP Yogam Vrs. ACIT (ITAT Cochin in & 569/2014), wherein it was categorically held that assessment proceeding in appeal before the appellate authority should be deemed to be assessment proceedings pending before the AO within the meaning of that term as envisaged under proviso to Section 12AA is concerned, it was held that ‘narrowly M/s Diamond Exporters Association Ltd. interpreting the term, ‘pending before the AO’ so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute, therefore clarifies that appeals before the CIT(A) were continuation of the original proceedings and that the power of the CIT was co-terminus with that of the AO.

13.

Keeping in view the principles laid down as mentioned above and taking into consideration the facts of the present case, we are of the considered view that under the facts of the present case, when the assessee got registration certificate u/s 12A on 24.09.15, at that time, the appellate proceedings were pending before Ld. CIT(A). Thus according to the decision of the Coordinate Bench in the case of SNDP Yogam Vrs. ACIT (supra), wherein it was categorically held that assessment proceeding in appeal before the appellate authority should be ‘deemed’ to be assessment proceedings pending before the AO within the meaning of that term as envisaged under proviso to Section 12AA is concerned. It was further held by the Coordinate Bench that the appeal before Ld. CIT(A) were to be taken as continuation of the original proceedings and that the powers of M/s Diamond Exporters Association Ltd. Ld. CIT(A) were co-terminus of that of AO. Therefore keeping in view the above principles laid down, we are of the view that the assessee had fulfilled the criteria of proviso of section 12A of the I.T. Act. 13.1 Further, following the decision in SNDP Yogam (supra), we set aside the order of the Ld. CIT(A) and restore the matter to the file of the AO to pass a de novo order after examining the following issues:

(i) The registration U/S.12AA (1)(b)(i) of the Income Tax Act, 1961 does not automatically exempt the income of the Trust/Institution. The question of taxability of the income of the Trust/Institution shall be examined and decided upon by the Assessing Officer at the time of assessment based on the conduct of the activities, compliance with various statutory and other requirements, etc., as referred to in Sections 2(15), 11, 12 & 13 of the Income Tax Act, 1961, without prejudice to the fact of granting merely in principle registration by DIT(E).

(ii) With effect from the Assessment Year 2009-10, the advancement of any object of general public utility other than relief of the poor, education and medical relief as defined in section M/s Diamond Exporters Association Ltd. 2(15) of the Income Tax Act shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.

13.2 Needless to say, the AO would give reasonable opportunity of being heard to the assessee before the finalizing the order. We also direct the assessee to file the relevant documents/evidence before the AO.

14.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 28th Jan, 2019. Sd/- Sd/- ( N. K. Pradhan) (Sandeep Gosain) Accountant Member Judicial Member मुंबई Mumbai;ददनांकDated : 28.01.2019 Sr.PS. Dhananjay

DIAMOND EXPOTERS ASSOCIATION LTD,MUMBAI vs. ITO WD (E) 1(2), MUMBAI