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Income Tax Appellate Tribunal, BENCH ‘D’ KOLKATA
Before: Hon’ble Shri P.M.Jagtap, AM & Shri S.S.Viswanethra Ravi, JM ]
These five appeals by the Revenue are against common order dated 29.08.2016 passed by C.I.T-(A)-25, Kolkata for A.Y’s 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13.
The brief facts of the case are that the assesee is a recognised educational school and conducts its activities in the name and style as M/s. St. Xavier’s School in Burdwan. On information, the AO reopened the case of the assessee by issuing notice u/s 148 of the Income Tax Act, 1961 (Act). In response to which, the assessee filed return of income declaring total income at ‘nil’. Notices u/s 143(2) and 142(1) of the Act were issued, in compliance of which, the AR and the accountant of the assessee appeared before the AO.
During the reopening proceedings, the AO found the assessee claimed exemption u/s 11 of the Act on gross receipt of Rs.1,66,30,938/- being the activities of charitable in nature. On examination of record the AO found that no registration u/s to 2105/Kol/2016 M/s St.Xavier’s School, Burdwan A.Yrs.2008-09 to 2012-13 12A or approval u/s 10(23)(c)(vi) of the Act was granted to the assessee and denied the benefit of claim u/s 11 of the Act and determined the income of the assessee at Rs.23,50,390/- vide its order dated 10.03.2014 u/s 143(3)/147 of the Act.
The CIT(A) having satisfied that the income tax department has granted registration u/s 12A of the Act to the assesee on 03.09.2013 w.e.f. 25.03.2013 and granted the benefit u/s 11 of the Act in terms of the provision of 1st proviso to sub- section of section 12A of the Act. The relevant portion of which is reproduced herein below: “Thus to solve, to connect, and regularize the otherwise incongruous paradox, thereby I invoke the later inserted 1st Proviso to sub-section (2) to the Section 12A, and also that the powers of the CIT(A) are co-terminus with that of the AO, thus that as the appellant had been granted registration u/s 12A dated 03.09.2013, the provisions of Section 11 shall apply to these earlier AYs 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13 – for the reason that the assessment proceedings for these 5 AYs were pending at the time of grant of the registration u/s 12A.
Thus the Appeals are Allowed in the context of Appeal Ground No.5 – that the appellant educational institution had been granted registration u/s 12A dated 03.09.2013.”
5. In challenge, the ld. DR before us contends that the CIT(A) without giving an opportunity to the AO held the assessee is entitled to claim benefit u/section 11 of the Act having invoking co-terminus powers arbitrarily. The ld. DR relied on the order of the AO.
None appeared on behalf of the assesee. After hearing the ld. DR, we find the issue is covered by the decision of Co ordinate Bench of Cochin Tribunal Tribunal in the case of SNTP Yogam vs ADIT (E) in to 507 and 569/Cochin/2014 for A.Yrs.2006-07 to 2009-10 and 2010-11, we proceed to dispose of the appeal perusing the materials available on record. There is no dispute with regard to granting of registration u/s 12A of the Act and it was given effect from 25.03.2013. The AO denied the benefit u/s 11 of the Act only for the reason that no registration was granted ITA Nos.2101 to 2105/Kol/2016 M/s St.Xavier’s School, Burdwan A.Yrs.2008-09 to 2012-13 by the income tax department to claim exemption u/s 11 of the Act. The CIT(A) was of the opinion that assessments for all these A.Ys. 2008-09 to 2012-13 are pending with the authorities precisely before CIT(A), thereby, held the first proviso as inserted through Finance Act, 2014 w.e.f. 01.10.2014 is applicable to the present case. We find the issue is identical to facts of case decided by the Cochin Tribunal in the case of SNTP Yogam vs ADIT (E) in to 507 and 569/Cochin/2014 for A.Yrs.2006-07 to 2009-10 and 2010-11, which held that the insertion of first proviso to sub-section 2 to section 12A of the Act and effect thereto is retrospective in nature. The relevant portion of which is reproduced below : “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 he 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 ITA Nos.2101 to 2105/Kol/2016 M/s St.Xavier’s School, Burdwan A.Yrs.2008-09 to 2012-13
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. 7.4.Taking into account the above facts and circumstances of the issue, we are of the view that the AO was not justified in taking a stand that registration u/s 12A was not applicable to the assessee for the AYs under dispute and the condonation petition for delay in filing the application for registration u/s 12A [for the AYs under dispute] has not yet been decided by the CBDT and, therefore, the total incomes of the assessee were to be assessed as per commercial principles. The CIT (A) was also not justified in taking a similar stand that of the AO, without taking cognizance and intention of the amendment to s. 12A of the Act. If no judicious or a liberal view is not taken either by the assessing authority or the appellate authority as in the case under consideration, the very purpose for which such an amendment to s. 12A of the Act enacted, in our view, would be defeated. We are also supported by the order of Kolkata Bench of ITAT in case of Sree Sree Ramkrishna Samity vs. DCIT (ITA No. 1680/2012, order dated 09.10.2015) where it was held that amendment to Section 12A w.e.f. 01.10.2014 is retrospective. The relevant finding of the Hon’ble Kolkata Bench in case of Sree Sree Ramkrishna Samity vs. DCIT (supra) read as follows: “6.10. We hold that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to to 2105/Kol/2016 M/s St.Xavier’s School, Burdwan A.Yrs.2008-09 to 2012-13 give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under section 11 & 12 as mentioned in section 12A provided for registration u/s.12AA as a pre- condition for applicability of section 12A.” Further, the Kolkata Tribunal observed as under: “6.11. We also hold that though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It is only elementary that a statutory provision is to be interpreted ut res magisvaleat quam pereat, i.e to make it workable rather than redundant. Applying this legal maxim, it would be just and fair to hold that the amendment in section 12A is brought in the statute to confer benefit of exemption u/s 11 of the Act on the genuine trusts which had not changed its objectives and had carried on the same charitable objects in the past as well as in the current year based on which the registration u/s.12AA is granted by the DIT (Exemptions).” 7.5 In light of the aforesaid reasoning and order of the Tribunal in case of Sree Sree Ramkrishna Samity(supra), we direct the Director of Income-tax(Exemption) to grant registration to the assessee trust for all the assessment years under dispute, subject to the following conditions, namely: “i) The registration U/S.12AA (1)(b)(i) of the Income Tax Act, 1961 does not automatically exempt the income of the rust/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, to 2105/Kol/2016 M/s St.Xavier’s School, Burdwan A.Yrs.2008-09 to 2012-13 education and medical relief as defined in section 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. iii) Amendments to the Deed/Memorandum, Rules and Regulations, if any, of the Trust / Institution shall be made only with the prior approval of the Commissioner of Income Tax(Exemptions) or any other prescribed authority under the Income Tax Act,1961. iv) The registration may be withdrawn on violation of any of the stipulations laid down in the Income Tax Act, 1961, v)The SOCIETY/TRUST shall regularly file its Income Tax Return.”
In the aforementioned decision, we find the Coordinate Bench of Cochin Tribunal placed reliance in the case of Sree Sree Samity in of Kolkata Tribunal wherein it was held that amendment to Section 12A w.e.f. 01.10.2014 is retrospective and observed that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under section 11 & 12 as mentioned in section 12A provided for registration u/s.12AA as a pre- condition for applicability of section 12A.
That it is also established principle that a legal claim can always be entertained in first appellate proceedings which is part and parcel of assessment proceedings in determining the correct income. The CIT-A found satisfied the appeals pending before to 2105/Kol/2016 M/s St.Xavier’s School, Burdwan A.Yrs.2008-09 to 2012-13 him 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.
In view of above, we are of the view that the CIT-A was justified in holding the assessee is entitled to claim benefit u/s. 11of the Act for the A.Y’s under consideration. Grounds raised by the revenue are dismissed.
In the result the appeals of the revenue are dismissed.
Order pronounced in the open Court on 11.05.2018.
Sd/- Sd/- [P.M.Jagtap] [ S.S.Viswanethra Ravi ] Accountant Member Judicial Member Dated : 11.05.2018. [RG Sr.PS] Copy of the order forwarded to: 1.M/s St. Xavier’s School, Burdwan, Kanainatshal, P.O.Sripalli, Burdwan-713103.
2. I.T.O. (Exemptions), Ward-2(1), Durgapur.
3. C.I.T.(A)-25, Kolkata 4. C.I.T.-(Exemptions), Kolkata.