Rathi Ranchore Dharamshalla , Barmer V. ITO, Ward-Exemption, Jodhpur

ITA 350/JODH/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1817 (ITAT-JODHPUR)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-03-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 14-09-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Maximum Marginal Rate; Benefit of exemption
• Section: 147; 12; 154; 11; 12A; 12AA; 143(1); 250; 119; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. Nos. 349 & 350/Jodh/2023 Assessment Year: 2014-15 & 2015-16 Rathi Ranchore Dharamshalla 11, Station Road, Barmer. [PAN:AABTR2541L] (Appellant) Vs. ITO, Ward-Exemption, Jodhpur. (Respondent) Appellant by Sh. Rajendra Jain, Adv. & Smt. Raksha Birla, C.A. Respondent by Sh. A. S. Nehra, Sr. DR Date of Hearing 20.03.2024 Date of Pronouncement 04.06.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM Both the caption appeals are of the same assessee and involved for the two assessment years having common questions of facts and law and have been taken up and heard together. For the same reasons, these appeals are being disposed of by this common order. 2. First we take up the appeal of the assessee in ITA no. 349/Jodh/2023 which is arising out of the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi dated 04.08.2023 [here in after I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 2 “CIT(A)/NFAC”] for assessment years 2014-15 which in turn arise from the orders dated 12.01.2021 passed under section 154 of the Income Tax Act, by the Income Tax Officer, Exemption ward, Jodhpur. In this appeal the assessee has raised following grounds:- “ 1. That on the facts and in the circumstances of the case, the ld. CIT(a) erred in upholding the validity of order passed by the ld. AO u/s 154 of the Act. 2. That on the facts and in the circumstances of the case, the Cit(A) erred in not rectifying the legal & factual mistake committed by ld. AO. 3. That on the facts and in the circumstances of the case, the CIT(A) erred in upholding that the appellant is not eligible for exemption under Section 12A of the Income tax Act, 1961 without analyzing legal & factual position in right perspective and judicious manner. 4. That on the facts and in the circumstances of the case, the CIT(A) erred in denying the benefit of exemption u/s 11 of the act which was contrary to the legal principle and judicial decisions. 5. That on the facts and in the circumstances of the case, the CIT(A) ought to have allowed the benefit of exemption in the earlier years in light of explanatory notes to the provisions of the finance (No. 2), 2014 as given in CBDT Circular No. 01/2015 dated 21.01.2015. 6. That the petitioner may kindly be permitted to raise any addition or alternative grounds at or before the time of hearing. 7. The petitioner prays for justice & relief.” 3. Brief fact of the case is that the assessee vide application u/s. 154 of the Act moved before the ld. AO stated that while processing return u/s 143(1) the CPC has created a demand of Rs. 2,67,695/- on 18.03.2016 which need to be rectified. The ld. AR submitted that the assessee is charitable trust and eligible for exemption u/s 11 of the Act I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 3 and the trust is registered u/s 12A of the Act. However, on examination of records, it is noticed that the trust has been registered u/s 12AA only on 20.09.2018 and as per order dated 20.09.2018 for registration u/s 12AA of the Act the provisions of Section 11 & 12 shall apply in the case from the assessment year 2019-20. Therefore, the ld. AO noted that there is no mistake apparent from record rectifiable u/s 154 of the Act and the claim of Section 11 & 12 during the year cannot be granted u/s 154 of the Act at the level and accordingly the application was rejected. 4. Aggrieved from the order of the assessing officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds of the appeal so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below:- “5.1 The appeal is against the order u/s 154 of the Act, passed by the Assessing Officer. The appellant has raised 02 grounds of appeal both of them relating to the denial of exemption claimed u/s 11 of the Act. Order u/s 143(1) of the Act was passed by the CPC processing the return on 18-03-2016, against which application for rectification u/s 154 has been filed by the assessee before the jurisdictional Assessing Officer. The Assessing Officer rejected the request for rectification as he stated that there is no mistake apparent from record in the order passed by the CPC u/s 143(1) of the Act. The appellant has filed an application for additional evidence u/s 250 rws Rule 46A. The relevant portion of the above application of the assessee is reproduced as under:- “5) The appellant is small charitable trust working in remote area of Rajasthan. The appellant got the registration W's 12AA and 806 dated 20.09.2018. As the matter of fact, the trust is receiving very nominal donation and entire activities are carried out on real basis as the filing of ITR and claiming the exemption u/s 12AA r.w.s 11 is genuine while processing the online ITR, the system has created demand of Rs I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 4 2,67,700/. The system has disallowed the charitable expenses bearded whereas due to technical glitches the undoubtly the voluntary contribution is received for charitable purposes. Hence the tax liability is nil. 6) The appellant assessee is genuine and a law abiding citizen bearing PAN No AABTR2541L The voluntary contribution is entirely expended for charitable purpose in this connection our attention has been drawn to a number of decisions of various High Courts dealing with interpretation of section 12(2). In the case of Sri Dwarkadhish Charitable Trust v. ITO [1975] 98 ITR 557, the Allahabad High Court while interpreting section 12(2) observed that section 12 is confined to voluntary contributions which should be treated as income. The Allahabad High Court was concerned with a case where the donor specified that the contribution was towards the corpus of the receiving trust's funds. The Allahabad High Court held that since the voluntary contribution was made expressly towards the corpus of the trust, it could not be considered as income. Hence, it was not covered by section 12(2) which covers only income in the form of voluntary contributions. The same view has been taken by the Gujarat High Court in CIT v. Bal Utkarsh Society [1979] 119 ITR 137. The Gujarat High Court, following the Allahabad High Court's decision in Sri Dwarkadheesh Charitable Trust's case (supra), has also observed that section 12(1) covers voluntary contributions which are received as income. Sub-section (2) would apply if the voluntary contribution is from one public charitable trust to another. However, when the voluntary contribution is expressly towards the corpus of the receiving trust, it cannot be considered as income. A similar view has been taken by the Kerala High Court in CIT v. Vanchi Trust [1981] 127 ITR 227/5 Taxman 209, and by the Delhi High Court in CIT v. Etemal Science of Man's Society [1981] 128 ITR 456 (See also Sukhdeo Charity Estate v. CIT [1984] 149 ITR 470/19 Taxman 222 (Raj.)." 5.2 Since the appellant filed an application for admission of Additional evidence, an opportunity was afforded to the Assessing Officer in terms of Rule 46A of the IT Rules, 1962. The Assessing Officer in his Remand report submitted as under. "On perusal of the records available with this office, it is gathered that the assessee for the year under consideration filed Income-tax Return in form ITR Form 7 on 31.03.2015 whereas the due date of filing Income-tax Return for the year under consideration was 30.09.2014. The assessee in its ITR for the year under consideration has claimed to have received aggregate income of Rs.8.93,377/- referred to in section 11 and 12 derved from the property held under trust. The assessee has also claimed Rs 1,34,007/- being amount accumulated on set apart for application to chantable purpose to the extent it does not exceed 15percentol income derived from property held under trust and the rest of its income of Rs 5,18,728/- was offered for tax. Apart from that the assessee in ITR has also mentioned that it is not registered u/s 12A/12AA whereas I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 5 in Part B-TI the deductions/exemptions claimed by the assessee are applicable only to the trusts/ institutions etc. either registered u/s12A/12AAorapproved u/s10(23C)of the Income-tax Act, 1961. The CPC therefore during the processing of Income-tax Retum for the year under consideration treated the assessee as an AOP and the benefit of sectiontt and 12 was denied to the assessee and the tax was computed on the total income of Rs. 8,93,377/ The CPC treated the assessee as an AOP and the tax was charged at MMR in virtue of the section 164 of the Income-tax Act, 1961. In view of the facts mentioned above, it appears that the CPC has justified by making the addition on disallowing the benefit of section 11/12ofthe LT. Act 1961and assessed the income of the assessee treating as an AOP 5.3 The written submissions of the appellant and the Remand report of the Assessing Officer have been carefully examined. It is clear that the appellant did not have registration u/s 12A/12AA or approval u/s 10(23C) of the IT Act of 1961, for the assessment year under consideration. Exemption u/s 11 and 12 can be granted only if registration has been obtained by the trust u/s 12A or 12AA of the Act. It is a fact admitted by the appellant that the registration u/s 12A/12AA has not been granted for the AY under consideration. Such being the case, there is no mistake in the order of the CPC u/s 143(1) of the Act in denying the exemption claimed u/s 11. When there is no mistake apparent from record, the Assessing Officer is correct in rejecting the application of the assessee filed u/s 154 of the Act. 5.4 Further, though the assessee has claimed in the grounds of appeal that, the registration has been obtained subsequently on 20-09-2018, such order of registration u/s 12AA of the Act has not been filed before the undersigned. Thus it cannot be held that the exemption is available for any earlier assessment years including the year under consideration. 5.5 In the above circumstances, the grounds of appeal raised by the appellant are dismissed. 6. In the result, the appeal of the appellant is Dismissed.” 5. The ld. AR of the assessee submitted that the assessee is registered and doing the charitable activities since 1967. The assessee is registered in the earlier regime and in the new regime. Based on the CBDT circular no 01/2015 dated 21.01.2015 the benefit should be given I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 6 to the assessee for the prior year which the lower authority has not appreciated. The assessee in support of the grounds so raised relied upon the written submission made to the ld. AO while dealing the application u/s. 154 of the Act. The ld. AR of the assessee also filed a decision of the co-ordinate bench in the case of St John’s Educational Trust in ITA no. 358/Chny/2018. 6. Per contra, the ld. DR supported the order of the lower authorities. 7. We have heard the rival contentions, perused the material placed on record. The brief facts as emerges from the record is that the Assessee Trust is created for lawful objects under the prevailing laws and is duly registered U / s 12AA of the Income Tax Act, 1961 vide Order dated (20/9) / 2018 granted by the Ld. CIT (Exemption), Jaipur vide Registration No. CIT EXEMPTION,JAIPUR/12AA/2018-19/A/10053. The said Trust was constituted on 14/12/1967 vide the Trust Deed / Instrument indicating it's objects in detail. The Trust was established solely for charitable purpose with no profit motive behind carrying out the objectives of the Trust. It was granted registration u / s 12AA of the Income Tax Act, 1961 with salient activities as 'relief of the poor' and therefore, the provisions of Section 11 and 12 of the said Act shall apply in case of the said Trust. As the Assessee Trust is duly registered u/s I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 7 12AA of the Income Tax Act, 1961, it is eligible for benefits of exemption u/s 12AA, which is also extended to the earlier years as per the new amendment in Section 12A which becomes applicable w.e.f. 1st of October, 2014. The above contentions and submissions of the assessee derived from the new amendment in Section 12A which becomes applicable w.e.f. 1st of October, 2014 that the Assessee Trust is eligible for benefits of exemption u/s 12A, which is also extended to the earlier years. In order to resolve the controversy, reference is necessitated to understand the intention of Section 12A. The Assessee Trust also placed reliance Explanatory Notes to the provisions of the Finance (No. 2) Act, 2014 issued by CBDT vide Circular No. 01/2015 circulated vide F. No. (142/13) / 2014 - TPL For clarity, the relevant portions are reproduced as below: "8. Applicability of the registration granted to a trust or institution to earlier years 8.1. The provisions of section 12A of the Income-tax Act, before amendment by the Act, provided that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA of the said Act has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively. 8.2. Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organisations. Due to absence of registration tax liability is fastened even though they may otherwise be eligible for exemption and fulfil other substantive conditions. However, the power of condonation of delay in seeking registration was not available. I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 8 8.3. In order to provide relief to such trusts and remove hardship in genuine cases, section 12A of the Income-tax Act has been amended to provide that in a case where a trust or institution has been granted registration under section 12AA of the Income-tax Act, the benefit of sections 11 and 12 of the said Act shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. 8.4. Further, it has been provided that no action for reopening of an assessment under section 147 of the Income-tax Act shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. 8.5. However, the above benefits would not be available in the case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA of the Income-tax Act or a registration once granted was cancelled. 8.6 Applicability: - These amendments take effect from 1 st October, 2014." 7.1 According to the above-explained legal provisions, as the registration u/s 12AA of the Income Tax Act, 1961 has been granted in case of Assessee Trust vide the order dated 20/09/2018, therefore, the provisions of Sec. 11 and 12 of the Income Tax Act, 1961 shall also be applicable retrospectively in case of the Assessee Trust for the Assessment Proceedings of A.Y 2015-16 under consideration. Hence, as the aforesaid amendment made to Sec. 12A w.e.f 01/10/2014 is beneficial to the Assessee Trust, the provisions of Sec. 12A shall be I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 9 applicable to the said Trust since it’s inception as there has been no change in the objects and activities of the Trust since it’s inception till date. 8. Thus, considering the provision of the Act and clarification issued by the CBDT we are of the considered view that the trust is continue in carrying out the charitable activities and therefore, the registration u/s. 12AA though given on 20.09.2018 the same shall apply to the year under consideration. We get strength to our view from the decision of the co-ordinate bench in the case of Ramkrishan Samity Vs. DCIT in ITA no. 1680 to 1685/Kolkata/2012 and ITA no. 358/Chny/2018. Based on these observations the ld. AO is directed to treat this assessee trust as having the benefit of the registration u/s. 12AA of the Act for the year under reference. In the results the appeal of the assessee in ITA no. 349/Jodh/2023 stands allowed. 9. In light of the submissions so made by both the parties, our findings and directions contained in ITA No. 349/Jodh/2023 shall apply mutatis mutandis to the appeal of Rathi Ranchore Dharamshalla in ITA no. 350/Jodh/2023 and the appeal of the assessee is thus allowed. I.T.A. No.349 & 350/Jodh/2023 Rathi Banchore Dharamshalla 10 In the results the appeal of the assessee in ITA no. 350/Jodh/2023 stands allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- ((Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) Judicial Member Accountant Member Dated 04/06/2024 *Ganesh Kumar, Sr. Ps Copy of the order forwarded to: (1) The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order