Modern English School Education Society, Koraput V. ACIT (CPC), Bangalore

ITA 76/CTK/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4907 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 06-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUVENDU DATTA
• Keywords: Charitable institution; Application of stay; Retrospective amendment; Condonation of delay
• Section: 12A; 12AA; 147; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER S.P. NO.13/CTK/2018 ITA NO. 76 /CTK/201 8 ASSESSMENT YEAR : 201 4 - 2015 MODERN ENGLISH SCHOOL EDUCATION SOCIETY, PARABEDA, JEYPORE, DIST: KORAPUT VS. CPC, BANGALORE/CIT(EXEMPTION), HYDERABAD. PAN/GIR NO. (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI K A ILASH PANIGRAHI, AR REVENUE BY : SHRI SUVENDU DATTA, DR DATE OF HEARING : 0 9 /0 8 / 2018 DATE OF PRONOUNCEMENT : 10 /0 8 / 2018 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 1, BHUBANESWAR DATED 6.12.2017 FOR THE ASSESSMENT YEAR 2014 - 15. 2. T HE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) ERRED IN TAXING THE ENTIRE RECEIPTS OF THE ASSESSEE TRUST IN PLACE OF NET RECEIPTS OF THE ASSESSEE AFTER DEDUCTING AMOUNTS SPENT IN CARRYING OUT THE ACTIVITIES OF THE TRUST. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED E - RETURN OF INCOME ON 27.11.2014 FOR THE ASSESSMENT YEAR 2014 - 15 SHOWING NIL 2 S.P. NO.13/CTK/2018 ITA NO.76/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 INCOME, WHICH WAS PROCESS ED BY THE ASSESSING OFFICER, CPC, BANGALORE U/S.143(1) ON 14.3.2016 DETERMINING THE TOTAL INCOME OF RS.1,30,17,995/ - . 4. BEING AGGRIEVED BY THE SAID ORDER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). 5. THE CIT(A) OBSERVED THAT THE ASSESSEE HAS FILED APPEAL AGAINST INTIMATION U/S.143(1) AND NOT AGAINST A SCRUTINY ASSESSMENT. THE ASSESSEE IS NOT HAVI NG REGISTRATION U/S.12AA OF THE ACT AND IT DOES NOT HAVE APPROVAL UNDER SECTION 10(23C). THAT IS THE REASON WHY IN THE INTIMATION THE ENTIRE RECEIPT HAS BEEN TAKEN AS THE INCOME OF THE ASSESSEE. THEREFORE, HE DID NOT FIND ANY INFIRMITY IN THE INTIMATION AND DISMISS ED THE APPEAL OF THE ASSESSEE. 6. BEFORE US, LD A.R. RELIED ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BHAGBAT EDUCATIONAL TRUST IN ITA NO.487/CTK/2012 FOR THE ASSESSMENT YEAR 2008 - 2009 ORDER DATED 4.10.2013 AND POINTE D THEREFROM THAT THE TRIBUNAL IN THAT CASE HAS HELD THAT EVEN IF THE ASSESSEE TRUST IS NOT ENTITLED FOR EXEMPTION U/S. 11 & 13 OF THE ACT, IT IS ONLY THE NET INCOME, WHICH CAN BE BROUGHT TO TAX. FOR THIS, THE TRIBUNAL HAS RELIED ON THE DECISION OF HYDERAB AD BENCH OF THE TRIBUNAL IN THE CASE OF NORMAL AGRICULTURAL SOCIETY VS ITO, 71 ITD 152 (HYD). 3 S.P. NO.13/CTK/2018 ITA NO.76/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 7. ON THE OTHER HAND, THE LD D.R. SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 8. W E HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE FILED E - RETURN OF INCOME ON 27.11.2014 FOR THE ASSESSMENT YEAR 2014 - 15 SHOWING NIL INCOME. THE ASSESSING OFFICER (CPC) BANGALORE PROCESSED THE SAM E AND IN THE INTIMATION U/S.143(1) DATED 14.3.2016 ARRIVED AT THE INCOME OF RS.1,30,17,995/ - BY TAXING THE ENTIRE RECEIPTS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 9. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND CONTENDED T HAT THE ENTIRE RECEIPTS CANNOT BE TAXED EVEN WHERE THE ASSESSEE IS NOT HAVING REGISTRATION U/S.12AA OF THE ACT AND PLACED RELIANCE ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF BHAGBAT EDUCATIONAL TRUST (SUPRA) ORDER DATED 4.10.2013, WHEREI N, FOLLOWING THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF NORMAL AGRICULTURAL SOCIETY VS ITO, 71 ITD 152 (HYD) CONFIRMED THE ORDER OF THE CIT(A). 10. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS NOT HAVING REGISTRATION EITHER UNDER SECTION 12AA OF THE ACT OR APPROVAL U/S.10(23C)(VI) OF THE ACT AND, THEREFORE, THE ENTIRE RECEIPTS HAS TO BE TAKEN AS INCOME OF THE ASSESSEE. 4 S.P. NO.13/CTK/2018 ITA NO.76/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 11. BEFORE US, LD A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A). 12. ON THE OTHER HAND, LD D.R. RELIED ON ORDERS OF LOWER AUTHORITIES. 13. WE FIND THAT THE FIRST PROVISO TO SUB - SECTION (2) OF SECTION 12 READS AS UNDER: PROVIDED THAT WHERE REGISTRATION HAS BEEN GRANTED TO THE TRUST OR INSTITUTION UNDER SECTION 12AA, THEN, THE PROVISIONS OF SECTIONS 11 & 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. 14. WE FIND THAT THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF SHRI BHABUSHALI MITRA MANDAL VS ITO IN ITA NO.2515/AHD/2015 FOR THE ASSESSMENT YEAR 2011 - 12 ORDER DATED 22.2.2016 HAS HELD AS UNDER: 7.1 TO EXAMINE THE FIRST ISSUE, NECESSARILY I HAVE TO ANALYZE THE RELEVANT PROVISION, NAMELY, THE AMENDMENT TO SECTION 12A BY FINANCE A CT, 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 SHA LL 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 SECTI ON 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 ASSESSIN G 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: 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 5 S.P. NO.13/CTK/2018 ITA NO.76/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 YEAR PRECEDING THE AFORESAID ASSESSMENT YEAR ONLY FOR NON - REGISTRATION OF SUCH TRUST OR INSTITUTION FOR THE SA ID 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: 'PARA 8.2 NON - APPLICATION OF REGI STRATION 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 GENU INE 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 TH E 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 REGIS TRATION 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 ID. A.O., UNLESS THE REGISTRATION GRANTED EARLIER IS CANCELLED OR REFUSED FOR SPECIFI C REASONS. THE STATUTE ALSO GOES ON TO PROVIDE THAT NO ACTION U/S 147 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 O RDER OF CIT(A) DATED 08.05.2014. IT IS ALSO 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 BY FINANCE 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 6 S.P. NO.13/CTK/2018 ITA NO.76/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 APPELLATE AUTHORITY SHOULD BE DEEMED TO BE 'AS SESSM ENT PROCEEDINGS PEN DING BEFORE THE A SSESSING OFFI C ER' 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 ORD ER 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 OFF ICER' 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 . 15. IN THE I NSTANT CASE, IT IS NOT IN DISPUTE THAT THE OBJECTS AND ACTIVITIES OF THE TRUST OR THE YEAR UNDER CONSIDERATION ARE SAME AS WERE ON 30.3.2015 WHEN REGISTRATION U/S.12AA WAS GRANTED TO THE ASSESSEE BY THE CIT(EXEMPTION) VIDE HIS ORDER DATED 26.3.2015. FURTHER, AS HELD BY AHMEDABAD BENCH IN THE CASE OF SHRI BHANUSHALI MITRA MANDAL (SUP RA) THAT THE APPEAL IS THE CONTINUATION OF THE ASSESSMENT PROCEEDINGS 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 T HE MEANING OF THAT TERM AS ENVISAGED UNDER THE FIRST PROVISO TO SUB - SECTION (2) OF SECTION 12A . IT FOLLOWS THEREFROM THAT THE ASSESSEE WHICH OBTAINED REGISTRATION U/S. 12AA OF THE ACT DURING THE PENDENCY OF APPEAL WAS ENTITLED FOR EXEMPTION U/S 11 OF THE ACT. 7 S.P. NO.13/CTK/2018 ITA NO.76/CTK/2018 ASSESSMENT YEAR : 2014 - 2015 16. FOR THE REASONS QUOTED ABOVE, WE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND REMAND MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO COMPUTE THE INCOME OF THE ASSESSEE AFRESH AFTER ALLOWING EXEMPTION U/S.11 & 12 OF THE ACT TO THE ASSESSEE. HENCE, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 17. THE ASSESSEE HA D FILED STAY PETITION FOR STAY OF DEMAND. AS WE HAVE HEARD AND DECIDED THE APPEAL OF THE ASSESSEE, THE STAY PETITION OF THE ASSESSEE HA S BECOME INFRUCTUOUS AND, ACCORDINGLY, SAME IS DISMISSED 1 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND THE STAY PETITION IS DISMISSED. ORDER PRONOUNCED ON 10 /0 8 /2018. S D/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 10 /0 8 /2018 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : MODERN ENGLISH SCHOOL EDUCATION SOCIETY, PARABEDA, JEYPORE, DIST: KORAPUT 2. THE RESPONDENT. CPC, BANGALORE/CIT(EXEMPTION), HYDERABAD 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//