SOMANI CHARITABLE TRUST,GWALIOR vs. INCOME TAX OFFICER, EXEMPTION WARD, GWALIOR

ORDER

Per Annapurna Gupta, Accountant Member:

“6. BECAUSE, the 'appellant' was granted registration under section 12AA of the Act vide Certificate dated 15.10.2018 by the Ld. CIT(Exemption) Bhopal in view thereof the Ld. 'CIT(A)' ought to have allowed exemption under section 11 as claimed for A.Y 2006-07 in appellate proceedings in view of revised proviso to sub-section (2) of section 12A w.e.f. 01.04.2013 providing that provisions of section 11 and 12 shall apply to preceding years too where proceedings are pending before the Assessing officer.

CIT(Appeals) order denying assessee’s claim of exemption u/s. 11 of the 2 | P a g e Act was not sustainable since he has not properly interpreted the provisions of section 12A of the Act. His contention was that in terms of second proviso to section 12A(2) of the Act, where registration has been granted to a trust or institution u/s. 12AA, the provisions of section 11 & 12 would apply to the preceding assessment years also for which the assessment proceedings were pending before the Assessing Officer as on the date of grant of registration and the objects and activities of the trust remain the same for such preceding years. Our attention was drawn to the second proviso to section 12A(2) of the Act as under: “12A. (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:— (aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA; (2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made: Second proviso omitted by the Finance Act, 2023, w.e.f. 1.4.2023. Prior to its omission, second proviso, as amended by the Finance Act, 2020 w.e.f. 1.6.2020 and Taxation and Other laws (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1.6.2020 and w.e.f. 1.4.2021, read as under – “Provided further that where registration has been granted to the trust or institution under section 12AA or section 12AB, 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.”

3 | P a g e His contention was that the ld. CIT(Appeals) had ignored this provision of law and had not applied the same to the facts of the case wherein the assessee had been granted registration vide order dated 15.10.2018 w.e.f.

01.04.2013 u/s. 12AA of the Act by the ld. CIT(Exemption), Bhopal and on the date of grant of registration, the appeals of the assessee were pending before the ld. CIT(Appeals), who had passed the first appellate order in all the cases on the same date, i.e., 12.04.2024. It was the contention of the ld. Counsel that the proceedings before the ld. CIT(Appeals) was an extension of assessment proceedings and claim raised before the CIT(Appeals) which accrued on 15.10.2018 after passing of the assessment order dated 28.02.2013 ought to have been allowed by the ld.

CIT(Appeals). For the proposition that the proceedings before the ld.

CIT(Appeals) was an extension of assessment proceedings and if the proceedings before the ld. CIT(Appeals) were pending on the date of grant of registration u/s. 12AA for any preceding year, the provisions of section proviso to section 12A(2) would apply. The assessee referred several case laws including that of Hon’ble High Court. Brief synopsis in this regard was filed before us, the contents of which are reproduced hereunder :

5.7. From the above it is clear that the appellant has not satisfied the conditions laiddown under the Act for claiming deduction u/s. 11 & 12 of the Act as mentioned inabove paras & therefore the action of AO of disallowing expenditure u/s. 11 & 12 ofthe Act is upheld particularly because of the fact that as per section 119(2)(b) of theAct the CIT(A) is not authorized to admit application or claim of exemption which saysthat “ the Board may, if it considers it desirable or expedient so to do for avoidinggenuine hardship in any case or class of cases, by general or special order,authorise any income-tax authority, not being 30[a Joint Commissioner(Appeals) or] a Commissioner (Appeals) to admit an application or claim forany exemption, deduction, refund or any other relief under this Act after theexpiry of the period specified by or under this Act for making such applicationor claim and deal with the same on merits in accordance with law.” 5.8. Further, several case laws relied upon by the appellant are also distinguishableon facts and hence not applicable. Accordingly, grounds of appeal are liable to bedismissed.” Cases relied upon (a) CIT Vs M/s Shree Shyam Mandir [2018] 400 ITR 466 (Raj) Exemption u/s 11 - trust or institution has been granted registration under section 12AA - Applicability ofthe registration granted to a trust or institution to earlier years - Non-application of registration for theperiod prior to the year of registration caused genuine hardship to charitable organisations - ITAT applyingthe Proviso of Section 12A(2), inserted w.e.f. 01.10.2014, with 5 | P a g e retrospective effect in spite of the facts thatthe proviso has no indication of being applied for the earlier years retrospectively - HELD THAT:- At thetime of registration, the authority is required to look whether it is registered under the state Act or underany other Act. There is no distinction between private trust and public trust. The contention which hasbeen raised by counsel for the appellant regarding the expenses, diversion or control by the private peoplewill come only when the assessment has taken place. For the purpose of trust registered and the incomeused is for the charitable purpose or not and whether income from public trust if it is going for any privateuse will negative the very object of the Trust Act which is the main intention of the legislation, is not to beconsidered at this stage. As long as the objects were charitable in nature in the earlier years and in the year in which registrationu/s 12AA was granted, the existence of trust for charitable purposes in the earlier years cannot be doubtedwith. Even otherwise, no adverse findings were given by the revenue with regard to the existence of theassessee society for charitable purposes in the assessment years under appeal. A receipt which is by birth, capital in nature, cannot change its character merely for want of registration ofsociety u/s 12AA of the Act. It is not the case of the revenue that the donations received are meant forgeneral functioning of the charitable objects of the society, in which event, the donations received thereonwould take the character of revenue receipts requiring to be credited in the income and expenditureaccount for utilization towards charitable objects thereon. Hence, we hold that in any case, the donationsreceived by the assessee society cannot be brought to tax in the assessment. 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 relevantassessment years and on no other ground, the benefit of change in law as above by Finance Act 2014should be available and for all the years, the benefit of exemption should be available on the date ofregistration as all the assessments were pending as shown above. In this connection, it requires mentionspecifically that all the receipts of the donation were proved on enquiry to have been received from theclaimed donors and utilized for the specific purpose (construction of old age home) for which they werereceived. In conclusion, we hold that the insertion of the proviso to section 12A(2) of the Act has to be construed asretrospective in operation - This issue stands answered in favour of the assessee by Shree BhanushaliMitra Mandal Trust [2016 (4) TMI 578 - ITAT Ahmedabad] , wherein, it was held that appeal is acontinuation of the original proceedings and assessment proceedings pending before an appellate authority should be deemed to be "assessment proceedings pending before the Assessing Officer" withinthe meaning of Section 12A. - Decided in favour of assessee.

(b) Shri Krishnabai Ghat Trust Vs ITO (Exemptions) 2019 (5) TMI 618 - ITAT Pune 6 | P a g e

Exemption u/s.11 - deemed registration u/s 12AA - applicability of Proviso to Section 12A sub-section (2)during appeal proceedings or restricted to assessment proceedings - registration granted to the assesseeu/s.12AA during the pendency of proceedings before the ld. CIT(A) - HELD THAT:- What AO can do, canbe done by CIT(A) in an appeal before him. Even what the AO could have done but failed to do, can alsobe done by him. It shows that the powers of a CIT(A) in an appeal against an assessment order arealmost similar to those of an AO. If extend this analogy to the provisions of section 12A(2), an irresistibleconclusion which follows is that the benefit of the proviso is available not only when the assessmentproceedings are pending before the AO but also when an appeal against the assessment order is pendingbefore the ld. CIT(A). It is so for the reason that the appeal proceedings are nothing but continuation of theassessment proceedings. As at the time of granting registration by the ld. CIT (Exemptions) to the assessee, the appeal of theassessee was pending before the ld. CIT(A), in my considered opinion, the benefit of first proviso tosection 12A(2) ought to have been granted. My view is fortified by the judgment of Hon’ble Rajasthan High Court in CIT (Exemptions) Vs. Shree Shyam Mandir Committee [2017 (10) TMI 1450 - Rajasthan High Court] in which it has been held that “An assessment proceedings which is pending in appeal before the appellate authority should bedeemed to be “assessment proceedings pending before the AO.” within the meaning of the term asenvisaged under the proviso. It follows there from that the assessee which obtained registration u/s.12AAof the Act during the pending of appeal was entitled for exemption claimed u/s.11.

The additional ground thus raised is allowed by holding that the assessee would be entitled to exemptionu/ss. 11 and 12 of the Act for the year under consideration on the reason that the registration was, in fact,granted to the assessee u/s.12AA during the pendency of proceedings before the ld. CIT(A). In the light of my above conclusion on the additional ground, the impugned order is set-aside and thematter is restored to the file of AO for framing a de novo assessment as per law after allowing areasonable opportunity of hearing to the assessee. Needless to say, the assessee in such assessmentproceedings would be considered to have been granted registration and the provisions of sections 11 and12 shall apply pro tanto. Appeal is allowed for statistical purposes.

(c)ITO(E) Vs M/s.Centre For Cellular AndMolecularPlatforms 2019 (8) TMI 1717 - ITAT Bangalore Exemption u/s 11 - Applicability of the registration granted to a trust or institution to earlier years -Non-application of registration for the period prior to the year of registration caused genuinehardship to charitable organisations - claim of the assessee that since the registration of the 7 | P a g e assesseeconcern has been granted w.e.f. 21.09.2016, it comes into effect during the course of pendency of firstappeal proceedings and the proviso to sub-section 2 of section 12A should be construed liberally and theassessee should be granted exemption u/s. 12A - HELD THAT:- As relying on M/S Shree Shyam Mandir [2017 (10) TMI 1450 - Rajasthan High Court] registration was granted to the assesseeu/s. 12AA of the IT Act on 29.07.2013. Under these facts, it was held by Hon’ble Rajasthan High Court thatappeal is continuation of original assessment proceedings and proceedings before appellate authorities iscovered by the proviso to subsection 2 of section 12A of the IT Act. In the present case also, the facts aresimilar and hence, respectfully following this judgment of Hon’ble Rajasthan High Court, we decline tointerfere in the order of ld. CIT(A). Appeal filed by the revenue is dismissed.

(d) Lady KikabaiPremchandIyambail Trust Vs ITO 2020 (2) TMI 448 - ITAT Pune Exemption u/s 11 and 12 denied - deemed registration u/s 12AA - registration granted to theassessee u/s.12AA during the pendency of proceedings before the ld. CIT(A) - In the interim, theassessee had applied for fresh registration before the CIT(E) and CIT(E) has granted registration - HELDTHAT:- As decided In Shri Krishnabai Ghat Trust Versus ITO (EXEMPTIONS) , WARD-1, Pune [2019 (5) TMI 618 - ITAT Pune] what AO can do, can be done by CIT(A) in an appeal before him. Evenwhat the AO could have done but failed to do, can also be done by him. It shows that the powers of aCIT(A) in an appeal against an assessment order are almost similar to those of an AO. If extend thisanalogy to the provisions of section 12A(2), an irresistible conclusion which follows is that the benefit ofthe proviso is available not only when the assessment proceedings are pending before the AO but alsowhen an appeal against the assessment order is pending before the ld. CIT(A). It is so for the reason thatthe appeal proceedings are nothing but continuation of the assessment proceedings. As at the time of granting registration by the ld. CIT (Exemptions) to the assessee, the appeal of theassessee was pending before the ld. CIT(A), in my considered opinion, the benefit of first proviso tosection 12A(2) ought to have been granted. Ground thus raised is allowed by holding that the assessee would be entitled to exemption u/ss. 11 and 12of the Act for the year under consideration on the reason that the registration was, in fact, granted to theassessee u/s.12AA during the pendency of proceedings before the ld. CIT(A). - Decided in favour ofassessee. (e) Sree Sree Ramkrishna Samity Vs DCIT [2015] 44 ITR (Trib) 678 (ITAT [Kolk]) Reopening of assessment - eligibility for exemption under section 11 & 12 denied - existence of theassessee society for charitable purposes in the assessment years under appeal - Held that:- It is anestablished position in law that a proviso which is inserted to remedy unintended consequences 8 | P a g e and tomake the provision workable, a proviso which supplies an obvious omission in the section and is requiredto be read into the section to give the section a reasonable interpretation, requires to be treated asretrospective in operation, so that a reasonable interpretation can be given to the section as a whole andaccordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 shouldbe read as retrospective in operation with effect from the date when the condition of eligibility forexemption under section 11 & 12 as mentioned in section 12A provided for registration u/s 12AA as a pre-condition for applicability of section 12A. A receipt which is by birth, capital in nature, cannot change its character merely for want of registration ofsociety u/s 12AA of the Act. It is not the case of the revenue that the donations received are meant forgeneral functioning of the charitable objects of the society, in which event, the donations received thereonwould take the character of revenue receipts requiring to be credited in the income and expenditureaccount for utilization towards charitable objects thereon. Hence, we hold that in any case, the donationsreceived by the assessee society cannot be brought to tax in the assessment. 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 relevantassessment years and on no other ground, the benefit of change in law as above by Finance Act 2014should be available and for all the years, the benefit of exemption should be available on the date ofregistration as all the assessments were pending as shown above. In this connection, it requires mentionspecifically that all the receipts of the donation were proved on enquiry to have been received from theclaimed donors and utilized for the specific purpose (construction of old age home) for which they werereceived.In conclusion, we hold that the insertion of the proviso to section 12A(2) of the Act has to beconstrued as retrospective in operation. - Decided in favour of assessee. (f) Navsari Malesar Behdin Anjuman Vs ITO 2020 (4) TMI 576 - ITAT Surat Exemption u/s.11 denied - assessee trust was not registered u/s.12AA at the time of assessment -HELD THAT:- The benefit of change in Law as above by Finance Act, 2014 should be available and for theyear under consideration, the benefit of exemption should be available on the date of registration as theassessment of the year was pending because as per chronology of events the assessee had alreadyapplied for registration u/s.12A on 03.03.2016 and the assessment order was passed on 15.03.2016 – theregistration u/s.12AA was granted on 28.03.2016 and the same was also produced during the FirstAppellate Authority. Referring to observations of the Co-ordinate Bench of Tribunal in SNDP YogamVERSUS Asst Director Of Income Tax (Exemption), Range 4, Kochi [2016 (3) TMI 1110 -ITAT Cochin] we are in agreement with the view taken therein by the Co-ordinate Benches. First proviso of section 12A(2) as had been made available to the statute vide the Finance Act, no.2[2014], being a beneficial provision intended to 9 | P a g e mitigate the hardship in case of charitable institutions, thusfind ourselves to be in agreement with the view taken by the Tribunal in the aforesaid appeals. Firstproviso of section 12A(2) would be applicable to the case of the present assessee. Therefore, we set-aside the order of the Ld.CIT(A), consequently delete the additions. Therefore, this ground raised by theassessee is allowed. (g)Prajapati Samaj Maroli Bazar, C/o Ganpatbhai Mistri Vs DCIT 2023 (1) TMI 414 - ITAT Surat Exemption u/s 11 - Denial of exemption as assessee was not having registration u/s 12AA for theyear under consideration - AO held that the assessee was granted registration u/s 12AA on 25/10/2018effective from 24/04/2018 i.e. A.Y. 2019-20, hence, the assessee is not eligible for deduction u/s 11 and 12for the year under consideration - HELD THAT:- Assessee while making submission vehemently reliedupon the decision of Navsari Malesar Behdin Anjuman, Agiary Street, Malesar, Navsar 2020 (4) TMI 576 -ITAT SURAT wherein the Coordinate Bench of Tribunal while relying upon the decision of PunjabEducational Society 2017 (12) TMI 989 - ITAT AMRITSAR held that benefit of first proviso to Section12A(2) of the Act would be applicable to the facts of the said case. Benefit of Section 11 is to be given ifthe registration is obtained even during the pendency of appeal before the ld. CIT(A). Again, coming to the fact of the case,we find that the assessment in the present case was completed on23/02/2021, before that date, the registration was granted vide order dated 25/10/2018. As in SNDP Yogum case 2016 (3) TMI 1110 - ITAT Cochin held that proviso to section 12A(2) inserted from .01.10.2014 has retrospective effect thus, and there should be no denial of relief under section 11 toa trust if it had obtained registration during the pendency of appeal. Similar view was also taken in Shree Bahnushali Mitra Mandal Trust 2016 (4) TMI 578 - ITAT AHMEDABAD Thus, respectfully following the decisions of coordinate benches, find that the assessee is also eligible for first proviso to Section 12A(2) of the Act. Grounds of appeal raised by the assessee is allowed. (h) St. Jude's Convent School and Others VsACIT 2016 (9) TMI 1382 - ITAT Amritsar Benefit of Section 11 and 12 - amendment to sec 12A(2) - Retrospectivity - whether payment of Education Extension Services to the Diocese of Jalandhar, notified U/s 10(23C)(vi), as well as registered U/s. 12A of the Act and persuing the object of prompting education through running various schools, can be regarded as application of income? - Held that:- The first proviso to section 12A(2) of the Act is applicable retrospectively. Likewise, for the same reasoning, it is also held, regarding the second batch of appeals, that even the second proviso to Section 12A(2) is retrospective in nature and the completed assessments in these cases ought not to have been reopened only for non-registration for the relevant assessment years. Whether the assessment proceeding "pending before the Assessing Officer", as stated in the first proviso to Section 12A(2) can be taken as 10 | P a g e

"pending in appeal"? - Held that:- This issue also stands answered in favour of the assessee by Shree Bhanushali Mitra Mandal Trust [2016 (4) TMI 578 - ITAT AHMEDABAD]wherein, it was held that appeal is a continuation of the original proceedings and assessment proceedings pending before an appellate authority should be deemed to be "assessment proceedings pending before the Assessing Officer" within the meaning of Section 12A. Accordingly, it is held that the appellate proceedings before the appellate authorities are deemed to be assessment proceedings pending before the Assessing Officer Whether payment of Education Extension Services to the Diocese of Jalandhar, notified U/s 10(23C)(vi),as well as registered U/s. 12A of the Act and persuing the object of prompting education through running various schools, can be regarded as application of income - Held that:- ere, it is not in dispute that the Diocese of Jalandhar is not only registered U/s 12A of the Act, it is also notified U/s. 10(23C)(vi) of the Act. Besides, for A.Ys. 2007-08 to-2013-14, vide orders passed U/s 143(3) of the Act (copies on record), its stands taken note of that the Diocese of Jalandhar is running various schools and that exemption U/ss. 11and 12 of the Act has been allowed with regard to its income. Therefore, it has wrongly been held in the impugned order that the payment of education extension services made by the assessee to the Diocese of Jalandhar out of the current year income, as is also available from the income and expenditure account of the relevant financial years, is not allowable as application of income. The restriction/embargo in donation by one charitable Trust to another is only restricted to accumulations made in excess of 15% of income of the Trust, as referred to in Section 11(2) of the Act; and that the said prohibition does not apply, to current year income, or even to accumulations up to 15% U/s. 11(l)(a) of the Act. It may be reiterated that the Diocese of Jalandhar stands notified U/s. 10(23C)(vi) of the Act. This provision, it may be noted, is applicable to universities and educational institutions, which exist solely for educational purposes and not for purposes of profit. Neither the assessment order/s of the assessee/s, nor the assessment order/s of the Diocese of Jalandhar, carry any finding of the Diocese of Jalandhar pursuing religious objects. Merely having religious objects does not amount to pursuing religious objects, Itis the actual objects perused and the actual activities undertaken, which are of consequence so far as regards our present purposes. Therefore, it cannot be denied that the Diocese of Jalandhar is engaged solely in pursuing the object of education. It runs various schools. Hence, it is but a charitable institution pursuing objects which are similar to those of the assessee. That being so, the amount paid to the Diocese of Jalandhar being out of the current year income and not out of accumulated income, such payment of education extension services to the Diocese of Jalandhar is to be allowed as application of the income. It is so ordered. In view of the above discussion, we hold that (1) the subsequent grant of registration in all the cases respectively operates retrospectively for all the years under consideration; and (2) payment of education extension services to the Diocese of Jalandhar is application of income, duly satisfying the 11 | P a g e provisions of Sections 11(l)(a) and 11(3)(d) of the Act. - Decided in favour of assessee. (i) St. Joseph’s Convent School Vs ACIT 2017 (2) TMI 1511 - ITAT Amritsar Exemption u/s 11 - Registration u/s 12AA - amendment to sec 12A(2) - Retrospectivity - scope ofamendment made in section 12A vide Finance (No.2) Act, 2014 the Income Tax Act - HELD THAT:- Asdecided in ST. JUDE'S CONVENT SCHOOL AND OTHERS [2016 (9) TMI 1382 - ITAT AMRITSAR] Thefirst proviso to section 12A(2) of the Act is applicable retrospectively. Likewise, for the same reasoning, it isalso held, regarding the second batch of appeals, that even the second proviso to Section 12A(2) isretrospective in nature and the completed assessments in these cases ought not to have been reopenedonly for non-registration for the relevant assessment years. - Decided in favour of assessee. (j) M/S Punjab Educational Society Vs ITO 2017 (12) TMI 989 - ITAT Amritsar Grant of registration under Sec. 12AA - first proviso of Sec.12A(2) applicability - retrospective effect – Held that:- The first proviso of Sec. 12A(2) as had been made available on the statute vide the Finance (No. 2) Act. 2014, with effect from 01.10.2014, being a beneficial provision intended to mitigate thehardships in case of genuine charitable institutions, thus, find ourselves to be in agreement with the viewtaken by the Tribunal in the aforesaid appeals. We thus, are of the considered view that the first proviso ofSec. 12A(2) would be applicable to the case of the present assessee. We therefore set aside the order ofthe CIT(A) and consequently delete the addition - Decided in favour of assessee. In the light of above it is submitted that appeals may kindly be allowed.”

Counsel for the assessee either on law or on facts nor was he able to point out any distinction on facts or law in the judicial decisions cited by the ld.

Counsel for the assessee before us in support of the proposition that the assessee was entitled to the benefit of second proviso to section 12A(2) of the Act on account of which since the appeal proceedings in the present cases were pending on the date of grant of registration u/s. 12A of the Act for subsequent assessment years, the benefit of section 11 & 12 of the Act 12 | P a g e would apply to the assessment years pending on the date of granting registration also. The ld. DR could also not bring to our notice any contrary decision of High Court and Supreme Court in this regard. In the light of the same, we have no hesitation in holding that in the facts and circumstances of the present cases, which clearly demonstrate that on the date of grant of registration u/s. 12A of the Act to the assessee w.e.f. 01.04.2013 vide order of CIT(Exemption) dated 15.12.2018, the appeal proceedings for all the impugned years before us were pending before the CIT(Appeals) who in turn had passed order in 2024 ,the assessee was entitled to claim exemption of its income u/s. 11 of the Act in view of second proviso to section 12A(2) of the Act as per the various judicial decisions cited by the ld. Counsel for the assessee before us.

Ground No. 6, 7 & 8, raising above arguments by the ld. Counsel, stand allowed. Remaining grounds were not argued before us and therefore are not being adjudicated by us.

Order pronounced in the open court on 16.04.2025.

Sd/- Sd/- (SUNIL KUMAR SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 16.04.2025 *aks/-

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