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Income Tax Appellate Tribunal, BENCH – “SMC”, AHMEDABAD
Before: SHRI RAJPAL YADAV
आदेश/O R D E R
Assessee is in appeal before the Tribunal against order of ld.CIT(A)-9, Ahmedabad dated 5.2.2015 passed for the Asstt.Year 2008-09.
Assessee has taken two grounds of appeal, wherein it has pleaded that the ld.Commissioner has erred in not granting exemption under sections 11 and 12 of the Income Tax Act, 1961.
Brief facts of the case are that the assessee is a religious trust which came into existence on 20.3.2007. It has applied for registration under section 12A of the Act which was granted vide registration no.12A/642A/2009-10 on 9.3.2011 effective from 1.4.2009. Sole dispute before us is that whether the
ITA No.2494/Ahd/2015 2 assessee is entitled for benefit of this registration while determining of its taxable income or not.
In the present assessment year, the assessee has gross receipts of Rs.19,53,460/-. In computation of total income it has shown NIL income by claiming receipt of Rs.18,71,960/- which has been applied for charitable and religious purposes. This return was processed under section 143(1) of the Act and accepted it. Thereafter, the AO had issued notice under section 148 of the Act on 1.3.2013. In response to the notice, the assessee has filed letter and submitted that original return filed by it declared an income of Rs.81,495/- be treated as filed in response to the notice issued under section 148 of the Income Tax Act, 1961. I find this statement is contradictory because in para 5 and 6 of the CIT(A)’s order, the assessee has alleged declaring NIL income, whereas in the assessment order, it has been alleged that income of Rs.81,495/- was declared by the assessee in the return filed on 15.10.2010. Nevertheless this aspect would not influence decision making process, because, it is not a very material fact. The sole issue before me is whether the assessee is entitled for the benefit of registration granted to it under section 12A while determining its taxable income. The ld.AO has not granted benefit to the assessee on the ground that registration has been granted to the assessee on 9.3.2011 and it is effective from 1.4.2009. Thus, according to the AO, it is to be assumed that no registration is available to the assessee and it has wrongly claimed exemption under section 11 of the Act at Rs.18,71,960/-. The ld.CIT(A) has also concurred with the AO.
Before me, the ld.counsel for the assessee submitted that this issue was considered by the ITAT, Ahmedabad Bench in the case of Shri Bhanushali Mitra Mandal Vs. ITO in ITA No.2515/Ahd/2015. The Tribunal has considered that amendment effected in section 12AA by Finance Act, 2014
ITA No.2494/Ahd/2015 3 w.e.f. 1.10.2014 would be considered as applicable with retrospective effect and the assessee had availed registration under section 12A in subsequent year, and if its objects are genuine then benefit for preceding year would be available to the assessee. He placed on record copy of the Tribunal’s order. The ld.DR, on the other hand, relied upon the orders of the revenue authorities below.
I have duly considered rival contentions and gone through the record carefully. Find that the Tribunal has discussed position of law after introduction of amendment in section 12AA by Finance Act, 2014. The discussion made by the Tribunal is worth to note. It reads as under:
“7. I have heard the rival submissions and perused the material on record. The issue that arise for my consideration are of two folds, namely, Asst. Year 2011-12 (i) Whether the assessee trust is entitled to registration u/s.12AA of the Act for the relevant assessment year, (ii) if the assessee trust is not entitled for registration u/s.12AA of the Act whether surplus according to assessee trust which is corpus donation is liable to be taxed. 7.1 To examine the first issue, necessarily I have to analyze the relevant provision, namely, the amendment to Section 12A by Finance Act, 2014 w.e.f. 01.10.2014 by way of insertion of provisos to Section 12A(2) of the Act which is reproduced below for ready reference: "[(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:] [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
ITA No.2494/Ahd/2015 4 and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year:
Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]" 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: Asst. Year 2011-12 "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. 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. 7.3 In the instant case, it is not in dispute that registration was granted w.e.f. 17.12.2013 by the order of CIT(A) dated 08.05.2014. It is also
ITA No.2494/Ahd/2015 5 not in dispute that objects and activities of the assessee trust are charitable in nature during the relevant financial year. When Section 12A of the Act was amended by introducing new provisos to sub-section (2) of Section 12A byFinance Act, 2014 with effect from 01.10.2014, the assessment orders Asst. Year 2011-12 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 17.12.2013 w.e.f. the assessment year 2013-14. The appeal is 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 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 11 of the Act. 7.4 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. Asst. Year 2011-12 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 my 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
ITA No.2494/Ahd/2015 6 decided at the assessment stage. Being procedural in nature, in my 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. 7.5 I am 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 funding 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 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." 7.6 Further, the Kolkata Tribunal observed as under: Asst. Year 2011-12 "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 magis valeat 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. In the light of the above, if an analysis is being made in the present case, then it would reveal that the assessee has applied for grant of registration
ITA No.2494/Ahd/2015 7 under section 12A before filing of the return, but such registration was allowed to the assessee on 9.3.2011 w.e.f. 1.4.2009. The AO has passed assessment order on 20.1.2014. Registration was available to the assessee after filing of the return, but before passing of the assessment order. The ld.AO ought to have granted benefit of section 11 and 12 to the assessee. Respectfully following the order of the Co-ordinate Bench, I allow this appeal of the assessee and direct the AO to re-compute income of the assessee after extending benefit of registration granted to the assessee under section 12AA of the Act. The assessee will be entitled to consequential benefit under sections 11 and 12 of the Income Tax Act, 1961.
In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the Court on 11th October, 2017 at Ahmedabad.
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