Shree Halar Deshodhharak P.Pu, Bhavnagar V. Income Tax Officer,(Exempton), Bhavnagar

ITA 2494/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8346 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 24-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Charitable institution; Retrospective amendment; Benefit of exemption; Condonation of delay
• Section: 12A; 12AA; 147; 148; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH SMC, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA.NO.2494/AHD/2015 / ASSTT.YEAR : 2008-09 SHREE HALAR DESHODHHARAK P.PU. VIJAMMRUSURJI SMARAK TRUST YOGI NAGAR HADDAD, BOTAD DIST. BHAVNAGAR 364 710. VS ITO (EXEMPTION) BHAVNAGAR. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI AJIT SHAH, AR REVENUE BY : MS.SONIA KUMAR, SR.DR / DATE OF HEARING : 10/10/2017 / DATE OF PRONOUNCEMENT: 11/10/2017 !'/ 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. 2. ASSESSEE HAS TAKEN TWO GROUNDS OF APPEAL, WHEREI N IT HAS PLEADED THAT THE LD.COMMISSIONER HAS ERRED IN NOT GRANTING EXEMP TION UNDER SECTIONS 11 AND 12 OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A RELIGIOUS TRUST WHICH CAME INTO EXISTENCE ON 20.3.2007. IT HAS APPLIED F OR 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 BEF ORE US IS THAT WHETHER THE ITA NO.2494/AHD/2015 2 ASSESSEE IS ENTITLED FOR BENEFIT OF THIS REGISTRATI ON WHILE DETERMINING OF ITS TAXABLE INCOME OR NOT. 4. 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 A PPLIED FOR CHARITABLE AND RELIGIOUS PURPOSES. THIS RETURN WAS PROCESSED UNDE R SECTION 143(1) OF THE ACT AND ACCEPTED IT. THEREAFTER, THE AO HAD ISSUED NOT ICE UNDER SECTION 148 OF THE ACT ON 1.3.2013. IN RESPONSE TO THE NOTICE, THE AS SESSEE 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 U NDER SECTION 148 OF THE INCOME TAX ACT, 1961. I FIND THIS STATEMENT IS CON TRADICTORY BECAUSE IN PARA 5 AND 6 OF THE CIT(A)S ORDER, THE ASSESSEE HAS ALLEG ED DECLARING NIL INCOME, WHEREAS IN THE ASSESSMENT ORDER, IT HAS BEEN ALLEGE D THAT INCOME OF RS.81,495/- WAS DECLARED BY THE ASSESSEE IN THE RET URN FILED ON 15.10.2010. NEVERTHELESS THIS ASPECT WOULD NOT INFLUENCE DECISI ON 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 REGISTRATIO N GRANTED TO IT UNDER SECTION 12A WHILE DETERMINING ITS TAXABLE INCOME. THE LD.A O 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. THU S, 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 A CT AT RS.18,71,960/-. THE LD.CIT(A) HAS ALSO CONCURRED WITH THE AO. 5. BEFORE ME, THE LD.COUNSEL FOR THE ASSESSEE SUBMI TTED 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 T RIBUNAL 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 SEC TION 12A IN SUBSEQUENT YEAR, AND IF ITS OBJECTS ARE GENUINE THEN BENEFIT F OR PRECEDING YEAR WOULD BE AVAILABLE TO THE ASSESSEE. HE PLACED ON RECORD COP Y OF THE TRIBUNALS ORDER. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE ORDER S OF THE REVENUE AUTHORITIES BELOW. 6. I HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. FIND THAT THE TRIBUNAL HAS DISCUSSED POSITION OF LA W AFTER INTRODUCTION OF AMENDMENT IN SECTION 12AA BY FINANC E 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 A RE OF TWO FOLDS, NAMELY, ASST. YEAR 2011-12 (I) WHETHER THE ASSESSEE TRUST IS ENTITLED TO REGIS TRATION U/S.12AA OF THE ACT FOR THE RELEVANT ASSESSMENT YEAR, (II) IF THE ASSESSEE TRUST IS NOT ENTITLED FOR REGI STRATION U/S.12AA OF THE ACT WHETHER SURPLUS ACCORDING TO ASSESSEE TRUST WHI CH 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 T O SECTION 12A(2) OF THE ACT WHICH IS REPRODUCED BELOW FOR READY REFEREN CE: '[(2) WHERE AN APPLICATION HAS BEEN MADE ON OR AFTE R THE 1ST DAY OF JUNE, 2007, THE PROVISIONS OF SECTIONS 11 AND 12 SH ALL APPLY IN RELATION TO THE INCOME OF SUCH TRUST OR INSTITUTION FROM THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THE FINANCIAL YEAR IN WHICH S UCH APPLICATION IS MADE:] [PROVIDED THAT WHERE REGISTRATION HAS BEEN G RANTED TO THE TRUST OR INSTITUTION UNDER SECTION 12AA, THEN, THE PROVIS IONS OF SECTIONS 11 AND 12 SHALL APPLY IN RESPECT OF ANY INCOME DERI VED FROM PROPERTY HELD UNDER TRUST OF ANY ASSESSMENT YEAR PRECEDING T HE AFORESAID ASSESSMENT YEAR, FOR WHICH ASSESSMENT PROCEEDINGS A RE PENDING BEFORE THE ASSESSING OFFICER AS ON THE DATE OF SUCH REGIST RATION 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 S HALL BE TAKEN BY THE ASSESSING OFFICER IN CASE OF SUCH TRUST OR INSTITUT ION FOR ANY ASSESSMENT YEAR PRECEDING THE AFORESAID ASSESSMENT YEAR ONLY F OR NON-REGISTRATION OF SUCH TRUST OR INSTITUTION FOR THE SAID ASSESSMEN T YEAR: PROVIDED ALSO THAT PROVISIONS CONTAINED IN THE FIRS T 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 EXPLANATOR Y 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 REG ISTRATION FOR THE PERIOD PRIOR TO THE YEAR OF REGISTRATION CAUSED GEN UINE HARDSHIP TO CHARITABLE ORGANIZATIONS. DUE TO ABSENCE OF REGISTR ATION, 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 T O SECTION 12A(2) WAS BROUGHT IN THE STATUTE ONLY AS A RETROSPECTIVE EFFE CT WITH A VIEW NOT TO AFFECT GENUINE CHARITABLE TRUSTS AND SOCIETIES CARR YING ON GENUINE CHARITABLE OBJECTS IN THE EARLIER YEARS AND SUBSTAN TIVE CONDITIONS STIPULATED IN SECTION 11 TO 13 HAVE BEEN DULY FULFI LLED BY THE SAID TRUST. THE BENEFIT OF RETROSPECTIVE APPLICATION ALONE COUL D BE THE INTENTION OF THE LEGISLATURE AND THIS POINT IS FURTHER STRENGTHE NED BY THE EXPLANATORY NOTES TO FINANCE (NO.2) ACT, 2014 ISSUED BY THE CEN TRAL 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 EA RLIER ASSESSMENT YEARS FOR WHICH ASSESSMENT PROCEEDINGS ARE PENDING BEFORE THE LD. A.O., UNLESS THE REGISTRATION GRANTED EARLIER IS CANCELLE D OR REFUSED FOR SPECIFIC REASONS. THE STATUTE ALSO GOES ON TO PROVI DE THAT NO ACTION U/S147 COULD BE TAKEN BY THE AO MERELY FOR NON-REGI STRATION 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 08.0 5.2014. IT IS ALSO ITA NO.2494/AHD/2015 5 NOT IN DISPUTE THAT OBJECTS AND ACTIVITIES OF THE A SSESSEE TRUST ARE CHARITABLE IN NATURE DURING THE RELEVANT FINANCIAL YEAR. WHEN SECTION 12A OF THE ACT WAS AMENDED BY INTRODUCING NEW PROVI SOS 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 APP EAL BEFORE THE FIRST APPELLATE AUTHORITY. DURING SUCH PENDENCY, THE ASSE SSEE 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 B Y THE PRINCIPLE OF PURPOSIVE INTERPRETATION OF STATUES, AN ASSESSMENT PROCEEDING WHICH IS PENDING IN APPEAL BEFORE THE APPELLATE AUTHORITY SH OULD BE DEEMED TO BE 'ASSESSMENT PROCEEDINGS PENDING BEFORE THE ASSES SING OFFICER' WITHIN THE MEANING OF THAT TERM AS ENVISAGED UNDER THE PRO VISO. IT FOLLOWS THERE-FROM THAT THE ASSESSEE WHICH OBTAINED REGISTR ATION 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) BI LL, 2014, WHICH SOUGHT TO AMEND SECTION 12A EXPLAINS THE OBJECTS AN D REASONS FOR MAKING SUCH AMENDMENTS. THE EXPLANATION MAKES IT CL EAR THAT IT WAS IN ORDER TO PROVIDE RELIEF TO SUCH TRUSTS IN RESPECT O F WHICH, DUE TO ABSENCE OF REGISTRATION U/S 12AA TAX LIABILITY GOT ATTACHED THOUGH OTHERWISE THEY WERE ELIGIBLE FOR EXEMPTION BY FULFILLING OTHER SUB STANTIVE CONDITIONS THAT THE AMENDMENT WAS BROUGHT IN. THAT BEING SO, D ENYING SUCH BENEFIT TO A TRUST LIKE THE ASSESSEE WHO HAD OBTAINED REGIS TRATION U/S 12AA DURING THE PENDENCY OF THE APPEALS FILED AGAINST TH E ORDERS OF THE ASSESSING AUTHORITY, BY NARROWLY INTERPRETING THE T ERM, 'PENDING BEFORE THE ASSESSING OFFICER' SO AS TO EXCLUDE ITS PENDENC Y 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 TH E ACT, SECTIONS 11 AND 12 ARE SUBSTANTIVE PROVISIONS WHICH PROVIDE FOR EXEMPTIONS TO A RELIGIOUS OR CHARITABLE TRUST. SECTIONS 12A AND 12A A DETAIL THE PROCEDURAL REQUIREMENTS FOR MAKING AN APPLICATION T O 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 CAPITA L IN NATURE IS TO BE ITA NO.2494/AHD/2015 6 DECIDED AT THE ASSESSMENT STAGE. BEING PROCEDURAL I N NATURE, IN MY VIEW, LIBERAL INTERPRETATION WILL GIVE EFFECT TO TH E 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 BEN CH OF ITAT IN CASE OF SREE SREE RAMKRISHNA SAMITY VS. DCIT (ITA NO. 16 80/2012, ORDER DATED 09.10.2015) WHERE IT WAS HELD THAT AMENDMENT TO SECTION 12A W.E.F. 01.10.2014 IS RETROSPECTIVE. THE RELEVAN T FUNDING OF THE HON'BLE KOLKATA BENCH IN CASE OF SREE SREE RAMKRISH NA SAMITY VS. DCIT (SUPRA) READ AS FOLLOWS: '6.10. WE HOLD THAT IT IS AN ESTABLISHED POSITION I N LAW THAT A PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROVISION WORKABLE, A PROVISO WHICH SUPPLIES AN OBV IOUS OMISSION IN THE SECTION AND IS REQUIRED TO BE READ INTO THE SEC TION TO GIVE THE SECTION A REASONABLE INTERPRETATION, REQUIRES TO BE TREATED AS RETROSPECTIVE IN OPERATION, SO THAT A REASONABLE IN TERPRETATION 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 EFF ECT FROM 1.10.2014 SHOULD BE READ AS RETROSPECTIVE IN OPERATION WITH E FFECT FROM THE DATE WHEN THE CONDITION OF ELIGIBILITY FOR EXEMPTION UND ER SECTION 11 & 12 AS MENTIONED IN SECTION 12A PROVIDED FOR RE GISTRATION U/S.12AA AS A PRE-CONDITION FOR APPLICABILITY OF SE CTION 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 T HESE DO NOT REMAIN ALWAYS SO AND IF A CONSTRUCTION RESULTS IN EQUITY R ATHER THAN IN INJUSTICE, THEN SUCH CONSTRUCTION SHOULD BE PREFERRED TO THE L ITERAL 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 R ATHER THAN REDUNDANT. APPLYING THIS LEGAL MAXIM, IT WOULD BE J UST 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 GENUI NE TRUSTS WHICH HAD NOT CHANGED ITS OBJECTIVES AND HAD CARRIED ON THE S AME 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 (EXEMPT IONS).' 7. IN THE LIGHT OF THE ABOVE, IF AN ANALYSIS IS BEI NG MADE IN THE PRESENT CASE, THEN IT WOULD REVEAL THAT THE ASSESSEE HAS AP PLIED 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 AV AILABLE TO THE ASSESSEE AFTER FILING OF THE RETURN, BUT BEFORE PASSING OF T HE ASSESSMENT ORDER. THE LD.AO OUGHT TO HAVE GRANTED BENEFIT OF SECTION 11 A ND 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 INC OME OF THE ASSESSEE AFTER EXTENDING BENEFIT OF REGISTRATION GRANTED TO THE AS SESSEE UNDER SECTION 12AA OF THE ACT. THE ASSESSEE WILL BE ENTITLED TO CONSE QUENTIAL BENEFIT UNDER SECTIONS 11 AND 12 OF THE INCOME TAX ACT, 1961. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 11 TH OCTOBER, 2017 AT AHMEDABAD. SD/-