M/s. Shiv Kumar Singh Sumitra Devi, Ghaziabad V. ITO (Exemptions), Ghaziabad

ITA 1755/DEL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1716 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Benefit of exemption
• Section: 12AA; 12; 11

Judgement Text

ITA NO. 1755/DEL/2016 ASSESSMENT YEAR 2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 1755/DEL/2016 ASSESSMENT YEAR: 2011-12 SHIV KUMAR SINGH SUMITRA DEVI, VS ITO(EX EMPTIONS), SMARAK SHIKSHAN SANSTHAN, CGO C OMPLEX-1, SGF-12, SHASTRI NAGAR, PURANI HAPUR CH UNGI, GHAZIABAD-201002 GHAZIABAD. (PAN: AACAT0372M) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI ANCHIT JAIN, CA SHRI ALOK KUMAR JAIN, AD V. DEPARTMENT BY: SHRI GAURAV SHARMA SR. DR DATE OF HEARING: 28.08.2018 DATE OF PRONOUNCEMENT: 26.11.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 29.01.2016 PASSED BY THE LD. COMMISSIONER OF INCOME TAX(A), GHAZIABAD FOR ASSESSMENT YEAR 2011-12 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A TRUST FORMED WITH THE OBJECT OF PROVIDING EDUCATION IN TH E STATUS OF ASSOCIATION OF PERSONS (AOP). THE RETURN OF INCOME WAS FILED DECLARING INCOME AT NIL. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE D ID NOT HAVE ITA NO. 1755/DEL/2016 ASSESSMENT YEAR 2011-12 2 REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961 ( HEREINAFTER CALLED 'THE ACT') AND THE REGISTRATION U/S 12AA WAS APPLIED ONLY ON 15.12.2014. THE ASSESSING OFFICER DENIED EXEMPT ION TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DID NOT HA VE THE REQUIRED REGISTRATION U/S 12AA OF THE ACT. ADDITIO N WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CORPUS FUND/DON ATIONS AMOUNTING TO RS.52,50,9501/-, ADDITION ON ACCOUNT O F CREDITORS AMOUNTING TO RS. 29,63,131/- AND ADDITION ON ACCOUN T OF DISALLOWANCE OF DEPRECIATION. THE ASSESSMENT WAS C OMPLETED AT AN INCOME OF RS. 83,47,800/-. THE ASSESSING OFFICE R ALSO NOTED THAT THE ASSESSEE HAD NOT CLAIMED EXEMPTION U/S 10( 23C) IN ITS RETURN OF INCOME AND THAT FOR CLAIMING EXEMPTION U/ S 11 OF THE ACT, REGISTRATION U/S 12AA OF THE ACT WAS REQUIRED. AGGRIEVED, THE ASSESSEE APPROACHED THE LD. COMMISSIONER OF INC OME TAX (A) CHALLENGING THE DENIAL OF EXEMPTION. HOWEVER, THE APPEAL OF THE ASSESSEE WAS ONLY PARTLY ALLOWED BY DELETING THE AD DITION ON ACCOUNT OF DEPRECIATION. THE LD. COMMISSIONER OF I NCOME TAX (A) UPHELD THE ACTION OF THE ASSESSING OFFICER IN DENYI NG EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT AS WELL AS HOLDING TH AT THE ASSESSEE WAS NOT ENTITLED TO BENEFIT U/S 11 OF THE ACT. NOW, THE ASSESSEE IS ITA NO. 1755/DEL/2016 ASSESSMENT YEAR 2011-12 3 BEFORE THE ITAT AND HAS CHALLENGED THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A). 3.0 THE LD. AR SUBMITTED THAT IT WAS AN ADMITTED FA CT THAT THE ASSESSEE WAS RUNNING AN EDUCATIONAL INSTITUTION WIT H THE MAIN PURPOSE OF PROVIDING EDUCATION TO ALL SECTIONS OF T HE SOCIETY. IT WAS ALSO SUBMITTED THAT ADMITTEDLY, THE ASSESSEE HA D MADE THE CLAIM OF EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT ON LY DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT HAD NOT CLAIME D THE SAME IN ITS RETURN OF INCOME AND THE ASSESSING OFFICER H AD REJECTED THE ASSESSEES CLAIM ON THIS GROUND WITHOUT GOING INTO THE MERITS OF THE CLAIM MADE BY THE ASSESSEE. IT WAS FURTHER SUB MITTED THAT THE LD. COMMISSIONER OF INCOME TAX (A), IN HIS ORDE R, HAD OBSERVED THAT THE TRUST HAD NOT CARRIED OUT ANY EDU CATIONAL ACTIVITY AND HAD FAILED TO PROVE THAT IT EXISTED SO LELY FOR THE PURPOSE OF EDUCATION. IT WAS ALSO SUBMITTED THAT T HE ASSESSEE HAS SINCE BEEN GRANTED REGISTRATION U/S 12AA AND TH IS GRANT OF REGISTRATION ESSENTIALLY REQUIRED THE INCOME TAX AU THORITIES TO CHECK AND ASSESS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST AND, THEREFORE, THE GRANT OF REGISTRATION U/S 12AA WAS PROOF ENOUGH THAT THE ASSESSEES ACTIVITIES WERE GENUINE IN NATURE. IT WAS ALSO SUBMITTED THAT THE REGISTRATION U/S 12AA W AS GRANTED ITA NO. 1755/DEL/2016 ASSESSMENT YEAR 2011-12 4 VIDE ORDER DATED 8.6.2015 AND REGISTRATION WAS TO B E EFFECTIVE FROM 1.4.2014. IT WAS ALSO SUBMITTED THAT IT WAS D URING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. COMM ISSIONER OF INCOME TAX (A) THAT THE REGISTRATION U/S 12AA WAS G RANTED. HE DREW OUR ATTENTION TO PROVISO TO SECTION 12A(2) OF THE ACT WHICH PROVIDES THAT WHERE REGISTRATION HAS BEEN GRANTED T O THE TRUST OR INSTITUTION U/S 12AA, THEN THE PROVISO TO SECTION 1 1 AND 12 WOULD APPLY IN RESPECT OF ANY INCOME FROM PROPERTY HELD UNDER THE TRUST AND IN ASSESSMENT YEAR PRECEDING THE AFOR ESAID ASSESSMENT YEAR IN WHICH ASSESSMENT PROCEEDINGS WER E PENDING BEFORE THE ASSESSING OFFICER AS ON THE DATE OF SUCH REGISTRATION. IT WAS SUBMITTED THAT THE LD. COMMISSIONER OF INCOM E TAX (A) TOOK A VERY NARROW VIEW OF THE PROVISO AGAINST THE INTENTION OF THE LEGISLATURE WHICH WAS TO PROVIDE RELIEF TO GENUINE CASES WHO WOULD BE FACING HARDSHIP FOR WANT OF REGISTRATION. HE ALSO DREW OUR ATTENTION TO PARA 8 OF THE EXPLANATORY NOTES TO THE FINANCE ACT, 2014 WHEREIN IT HAS BEEN STATED THAT NON-APPLI CATION OF REGISTRATION FOR A PERIOD PRIOR TO THE YEAR OF REGI STRATION CAUSES GENUINE HARDSHIP TO CHARITABLE ORGANISATIONS AND DU E TO ABSENCE OF SUCH REGISTRATION, TAX LIABILITY IS FASTENED EVE N THOUGH THEY MAY OTHERWISE BE ELIGIBLE FOR EXEMPTION AND FULFIL OTHER ITA NO. 1755/DEL/2016 ASSESSMENT YEAR 2011-12 5 SUBSTANTIVE CONDITIONS. IT WAS SUBMITTED THAT AS P ER THE EXPLANATORY NOTES, THIS PROVISO WAS INTRODUCED IN O RDER TO PROVIDE RELIEF TO SUCH TRUSTS AND REMOVE HARDSHIP I N GENUINE CASES. IT WAS SUBMITTED THAT THE ONLY FAULT ON THE PART OF THE ASSESSEE WAS THAT IT HAD CLAIMED EXEMPTION U/S 11 A LTHOUGH REGISTRATION U/S 12AA WAS NOT GRANTED TO THE ASSESS EE. IT WAS PRAYED THAT THE BENEFIT OF THE PROVISO BE DIRECTED TO BE APPLIED IN THE CASE OF THE ASSESSEE. 4.0 IN RESPONSE, THE LD SR. DR PLACED RELIANCE ON T HE ORDERS OF THE AUTHORITIES BELOW AND VEHEMENTLY ARGUED THAT TH E ASSESSEE HAD FAILED TO FOLLOW THE DUE PROCEDURE AS LAID DOWN BY THE ACT AND, THEREFORE, THE BENEFIT OF EXEMPTION HAD BEEN R IGHTLY DENIED. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSES SEE DID NOT HOLD REGISTRATION U/S 12AA AT THE TIME WHEN THE RET URN OF INCOME WAS FILED ALTHOUGH IT CLAIMED THE BENEFIT OF EXEMPT ION U/S 11 OF THE ACT. HOWEVER, WE NOTE THAT WITH THE INSERTION O F PROVISO TO SECTION 12A(2), THE ASSESSEE IS ELIGIBLE FOR BENEFI T OF EXEMPTION U/S 11 OF THE ACT. THE SAID PROVISO READS AS UNDER: - ITA NO. 1755/DEL/2016 ASSESSMENT YEAR 2011-12 6 PROVIDED THAT WHERE REGISTRATION HAS BEEN GRANTED T O THE TRUST OR INSTITUTION UNDER SECTION 12AA, THEN, THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN RES PECT OF ANY INCOME DERIVED FROM PROPERTY HELD UNDER TRUS T 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 . 5.1 IT IS AN ADMITTED FACT THAT THE REGISTRATION WA S GRANTED VIDE ORDER DATED 8.6.2015 WHICH WAS TO HAVE EFFECT FROM 1 ST APRIL, 2014. ALTHOUGH THE ASSESSMENT ORDER WAS PASSED ON 2 7.2.2014, THE ASSESSEE WAS ALREADY REGISTERED U/S 12AA ON 29. 01.2016 WHEN THE ASSESSEES APPEAL WAS DECIDED BY THE LD. C OMMISSIONER OF INCOME TAX (A). AS THE POWERS OF THE LD. COMMIS SIONER OF INCOME TAX (A) ARE COTERMINOUS WITH THAT OF THE ASS ESSING OFFICER AND FURTHER AS THE APPELLATE PROCEEDINGS ARE AN EXT ENSION OF THE ASSESSMENT PROCEEDINGS ITSELF, WE ARE OF THE CONSID ERED OPINION THAT THE BENEFIT OF THIS PROVISO IS TO BE EXTENDED TO PENDING FIRST APPELLATE PROCEEDINGS ALSO. ACCORDINGLY, WE HOLD THAT THE ASSESSEE SHOULD BE ALLOWED THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT AND SINCE THE ASSESSING OFFICER HAS NOT EXAMINE D AND VERIFIED THE ELIGIBILITY OF ASSESSEES CLAIM OF EXEMPTION U/ S 11 BUT HAS DENIED EXEMPTION AT THE THRESHOLD ITSELF, IT WOULD BE IN THE FITNESS ITA NO. 1755/DEL/2016 ASSESSMENT YEAR 2011-12 7 OF THINGS THAT THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE ASSESSEES CLAIM U/S 11 OF T HE ACT AFTER AFFORDING PROPER OPPORTUNITY TO THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 6.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER, 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANS HU SRIVASTAVA) VICE PRESIDENT JUDICIAL M EMBER DATED: 26 TH NOVEMBER, 2018 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR ITA NO. 1755/DEL/2016 ASSESSMENT YEAR 2011-12 8