AADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN, Alwar V. DCIT, Alwar

ITA 780/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5250 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUVIR SINGH DUGAR CIT DHK
• Keywords: Charitable institution; Maximum Marginal Rate; Retrospective amendment; Benefit of exemption; Condonation of delay; Revenue expenditure; Capital expenditure
• Section: 43B; 12A; 12AA; 12; 28; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH VH-VKJ-EHUK ] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 780 & 781/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 & 2010-11. AADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN BHAJEDA DUBBI ROAD, VIA KANDOLI RAJGARH, ALWAR. CUKE VS. THE DCIT CIRCLE-1, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABAA 4995 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 834 & 835/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 & 2010-11. THE INCOME TAX OFFICER (EXEMPTIONS) WARD, ALWAR. CUKE VS. AADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN BHAJEDA DUBBI ROAD, VIA KANDOLI RAJGARH, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABAA 4995 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAGHUVIR SINGH DUGAR (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 31.05.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 7/06/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE ARE FOUR CROSS APPEALS BY THE ASSESSEE AND RE VENUE PERTAINING TO ASSESSMENT YEARS 2009-10 AND 2010-11 CHALLENGING TH E ORDERS OF LD. CIT (A), ALWAR DATED 16.09.2015. FIRST WE TAKE UP ASSESSEES APPEA LS IN ITA NOS. 780 & 781/JP/2015. ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL :- 2 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN ITA NO. 780/JP/2015 : 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN NOT GIVING THE BENEFIT OF SEC. 11 AND 12 OF THE IT ACT, 1961 FOR THE REASON THAT THE APPELLANT TRUST IS NOT REGISTERED U/S 12AA OF THE IT ACT, 1961 IN AS MUCH AS THE REGISTRA TION U/S 12AA WAS GRANTED W.E.F. 01.04.2011. HE HAS FURTHER ERRED IN HOLDING THAT AMENDMENT MADE IN SEC. 11(2) BY FINANCE ACT, 2014 A RE NOT APPLICABLE IN THE APPLICANTS CASE AS THE ASSESSMEN T PROCEEDINGS ARE NOT PENDING BEFORE THE AO. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN DIRECTING TO TAX THE NET SURPLUS OF R S. 3,64,199/- AT MMR AS AGAINST THE NORMAL RATE APPLICABLE TO AOP. ITA NO. 781/JP/2015 : 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN NOT GIVING THE BENEFIT OF SEC. 11 AND 12 OF THE IT ACT, 1961 FOR THE REASON THAT THE APPELLANT TRUST IS NOT REGISTERED U/S 12AA OF THE IT ACT, 1961 IN AS MUCH AS THE REGISTRA TION U/S 12AA WAS GRANTED W.E.F. 01.04.2011. HE HAS FURTHER ERRED IN HOLDING THAT AMENDMENT MADE IN SEC. 11(2) BY FINANCE ACT, 2014 A RE NOT APPLICABLE IN THE APPLICANTS CASE AS THE ASSESSMEN T PROCEEDINGS ARE NOT PENDING BEFORE THE AO. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED ON FACTS AND IN LAW IN HOLDING THAT INCOME OF THE APPELLANT IS TO BE TAXED AT MMR AS AGAINST THE NORMAL RATE APPLICABLE TO AOP. GROUND NO. 1 & 2 ARE INTER CONNECTED, THEREFORE, BO TH THESE GROUNDS IN BOTH THE APPEALS ARE BEING DISPOSED OFF TOGETHER. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE S OCIETY WAS CREATED ON 03.06.2008 AND REGISTERED WITH REGISTRAR OF SOCIETI ES, ALWAR VIDE ORDER NO.37/ALWAR/2008-09 WITH VARIOUS OBJECT OF GENERAL PUBLIC UTILITY. THE AO NOTED THAT ASSESSEE RECEIVED DONATION OF RS.21,14,507/- AND MI SCELLANEOUS RECEIPT OF RS.18,143/- TOTALLING TO RS.21,32,650/- DURING THE YEAR. THE AO HELD THAT THE TRUST IS 3 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN NOT REGISTERED U/S 12AA OF THE IT ACT, THEREFORE, I T IS NOT ENTITLE FOR EXEMPTION U/S 11 & 13 OF THE IT ACT. HE THEREFORE, TAXED THE ENTIRE AMOUNT OF RS.21,32,650/- AS INCOME OF THE ASSESSEE. 2.1. ON APPEAL BEFORE THE CIT(A), IT WAS EXPLAINED THAT ASSESSEE HAS INCURRED EXPENDITURE OF RS.17,64,451/- FOR THE OBJECTS OF TH E TRUST. THE ASSESSEE IS GRANTED REGISTRATION U/S 12AA BY THE CIT, ALWAR ON 28.12.20 11 W.E.F. 01.04.2011. SECTION 12A(2) IS AMENDED BY FINANCE ACT, 2014 W.E.F. 01.10 .2014 WHEREBY A PROVISO IS INSERTED TO PROVIDE THAT WHERE REGISTRATION HAS BEE N 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 W HICH ASSESSMENT PROCEEDINGS ARE PENDING BEFORE THE AO AS ON THE DATE OF SUCH RE GISTRATION IF THE OBJECTS AND ACTIVITIES OF SUCH TRUST OR INSTITUTION REMAIN THE SAME FOR SUCH PRECEDING ASSESSMENT YEAR. THE REGISTRATION WAS GRANTED BY CIT W.E.F. 01 .04.2011 WHEREAS THE ASSESSMENT ORDER WAS PASSED ON 25.03.2013, THEREFOR E, ASSESSMENT WAS PENDING AT THE TIME OF GRANT OF REGISTRATION U/S 12A. HENCE, T HE INCOME OF THE ASSESSEE OUGHT TO BE ASSESSED BY APPLYING THE PROVISIONS OF SECTIO N 11 & 12. THE LD. CIT (A) HELD THAT THE APPELLANT WAS NOT REGISTERED U/S 12AA OF T HE IT ACT AND THE AMENDMENTS MADE BY THE FINANCE ACT, 2014 ARE APPLICABLE TO THE PENDING ASSESSMENTS. HENCE, IT IS NOT APPLICABLE TO THE PRESENT CASE. HOWEVER, HE HELD THAT AGAINST THE RECEIPTS OF RS.21,32,650/-, EXPENSES OF RS.17,68,451/- IS INCUR RED AND THEREFORE THE NET SURPLUS OF RS.3,64,199/- HAS TO BE ASSESSED AS INCOME OF TH E AOP TO BE TAXED AT THE MAXIMUM MARGINAL RATE. 4 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN 3. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 3.1. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS AS ARE MADE IN THE WRITTEN SUBMISSIONS. THE LD. COUNSEL SUBMITTED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN REJECTING THE CLAIM. 3.2. ON THE CONTRARY, THE LD. SENIOR D/R HAS SUPPOR TED THE ORDER LD. CIT (A) ON THIS ISSUE. 3.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE SU BMISSIONS OF THE ASSESSEE ARE AS UNDER :- THERE IS NO DISPUTE AS TO THE FACT THAT ASSESSEE T RUST IS GRANTED REGISTRATION U/S 12AA ON 28.12.2011 BY CIT, ALWAR W .E.F. 01.04.2011. AS ON THE DATE OF GRANTING OF REGISTRATION, THE ASSESSMEN T PROCEEDINGS WERE PENDING IN AS MUCH AS THE ASSESSMENT WAS COMPLETED ON 25.03.2013. THE AMENDMENT MADE BY THE FA, 2014 BY INSERTION OF PROV ISO TO SUB SECTION 2 OF SECTION 12A EFFECTIVE FROM 01.10.2014 IS TO REMOVE THE UNINTENDED AND UNDUE HARDSHIP CAUSED TO THE GENUINE CHARITABLE TRUSTS AN D SOCIETIES CARRYING ON GENUINE CHARITABLE OBJECTS IN THE EARLIER YEARS AND THEREFORE THIS AMENDMENT SHOULD BE GIVEN RETROSPECTIVE EFFECT. THE EXPLANATO RY NOTES TO THE PROVISIONS OF THE FINANCE (NO. 2), 2014 AS GIVEN IN CBDT CIRCU LAR NO. 01/2015 DATED 21.1.2015 EXPLAINED THE PURPOSE OF THIS AMENDMENT A S UNDER:- 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 FULFIL OTHE R SUBSTANTIVE CONDITIONS. HOWEVER, THE POWER OF CONDONATION OF DELAY IN SEEKI NG REGISTRATION WAS NOT AVAILABLE. 5 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN 8.3 IN ORDER TO PROVIDE RELIEF TO SUCH TRUSTS AND R EMOVE HARDSHIP IN GENUINE CASES, SECTION 12A OF THE INCOME-TAX ACT HA S BEEN AMENDED TO PROVIDE THAT IN A CASE WHERE A TRUST OR INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX A CT, THE BENEFIT OF SECTIONS 11 AND 12 OF THE SAID ACT SHALL BE AVAILAB LE IN RESPECT OF ANY INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN AN Y ASSESSMENT PROCEEDING FOR AN EARLIER ASSESSMENT YEAR WHICH IS PENDING BEFORE THE ASSESSING OFFICER AS ON THE DATE OF SUCH REGISTRATI ON, IF THE OBJECTS AND ACTIVITIES OF SUCH TRUST OR INSTITUTION IN THE RELE VANT EARLIER ASSESSMENT YEAR ARE THE SAME AS THOSE ON THE BASIS OF WHICH SUCH RE GISTRATION HAS BEEN GRANTED. FROM THE ABOVE IT CAN BE NOTED THAT THE AMENDMENT W AS BROUGHT IN THE STATUE TO REMOVE UNINTENDED AND UNDUE HARDSHIP CAUS ED TO THE GENUINE CHARITABLE TRUSTS AND SOCIETIES CARRYING ON GENUINE CHARITABLE OBJECTS IN THE EARLIER YEARS AND THEREFORE THIS AMENDMENT SHOULD B E GIVEN RETROSPECTIVE EFFECT. FOR THIS RELIANCE IS PACED ON THE FOLLOWING CASES:- SREE SREE RAMKRISHNA SAMITY VS. DCIT (2015) 44 ITR (TRIB.) 678 (KOLKATA) THE TRIBUNAL AT PARA 6.10 HELD AS UNDER:- WE HOLD THAT IT IS AN ESTABLISHED POSITION IN LAW THAT A PROVISO WHICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO M AKE THE PROVISION WORKABLE, A PROVISO WHICH SUPPLIES AN OBVIOUS OMISS ION IN THE SECTION AND IS REQUIRED TO BE READ INTO THE SECTION TO GIVE THE SE CTION A REASONABLE INTERPRETATION, REQUIRES TO BE TREATED AS RETROSPEC TIVE IN OPERATION, SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO THE SECTI ON 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 RETROSPECTI VE 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 REGIS TRATION U/S 12AA AS A PRE- CONDITION FOR APPLICABILITY OF SECTION 12A. WE MAY ALSO SUBMIT THAT THE CIT(A) ENJOYS WIDE POWE RS UNDER THE STATUTE. THOUGH HE SITS IN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE AO, HIS POWERS ARE PLEN ARY AND COTERMINOUS WITH THAT OF THE AO. HE CAN DO WHAT THE AO COULD DO AND CAN ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. THE AHMEDABAD BENCH IN CASE OF SHREE 6 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN BHANUSHALI MITRA MANDAL TRUST VS. ITO (2016) 47 CCH 197 AT PARA 7.3 AND 7.4 HELD AS UNDER:- 7.3 WHEN SECTION 12A OF THE ACT WAS AMENDED BY INT RODUCING NEW PROVISOS TO SUB-SECTION (2) OF SECTION 12A BY FINAN CE ACT, 2014 WITH EFFECT FROM 01.10.2014, THE ASSESSMENT ORDERS PASSED BY TH E 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 ORIG INAL PROCEEDINGS AND THAT THE POWER OF THE COMMISSIONER OF INCOME-TAX WA S CO-TERMINUS WITH THAT OF THE AO WERE TWO WELL ESTABLISHED PRINCIPLES OF LAW. IN VIEW OF THE ABOVE AND GOING BY THE PRINCIPLE OF PURPOSIVE INTER PRETATION OF STATUES, AN ASSESSMENT PROCEEDING WHICH IS PENDING IN APPEAL BE FORE THE APPELLATE AUTHORITY SHOULD BE DEEMED TO BE 'ASSESSMENT PROCEE DINGS PENDING BEFORE THE ASSESSING OFFICER' WITHIN THE MEANING OF THAT T ERM AS ENVISAGED UNDER THE PROVISO. IT FOLLOWS THERE-FROM THAT THE ASSESSE E WHICH OBTAINED REGISTRATION U/S 12AA OF THE ACT DURING THE PENDENC Y 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 CLEAR THA T 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 TH OUGH OTHERWISE THEY WERE ELIGIBLE FOR EXEMPTION BY FULFILLING OTHER SUBSTANT IVE CONDITIONS THAT THE AMENDMENT WAS BROUGHT IN. THAT BEING SO, DENYING SU CH 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 AUT HORITY, WILL BE DOING VIOLENCE TO THE PROVISIONS OF THE STATUTE AND, AS S UCH, LIABLE TO BE INTERFERED WITH. IN THE PRESENT CASE ALSO, WHEN THE AMENDMENT WAS MA DE IN SECTION 12A OF THE ACT BY THE FA, 2014, THE APPEAL WAS PENDING BEF ORE THE FIRST APPELLATE AUTHORITY. DURING SUCH PENDENCY, THE ASSESSEE WAS G RANTED REGISTRATION U/S 12AA OF THE ACT ON 28.12.2011 W.E.F. 01.04.2011. TH US, IN VIEW OF THE ABOVE CASE LAW, CIT(A) HAS POWER TO GRANT REGISTRATION TO ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS APPEAL WAS PENDING BEFORE HI M AND AN ASSESSMENT PROCEEDING WHICH IS PENDING IN APPEAL BEFORE THE AP PELLATE AUTHORITY SHOULD 7 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN BE DEEMED TO BE ASSESSMENT PROCEEDINGS PENDING BEFO RE THE AO WITHIN THE MEANING OF THE TERM AS ENVISAGED UNDER THE PROVISO. RELIANCE IS FURTHER PLACED ON THE FOLLOWING CASES W HERE IT IS HELD THAT ANY AMENDMENT MADE IN THE ACT WHICH IS INTENDED TO REMO VE UNINTENDED AND UNDUE HARDSHIP SHOULD BE GIVEN RETROSPECTIVE EFFECT :- CIT VS. VATIKA TOWNSHIP PVT. LTD. 367 ITR 466/ 109 DTR 33 (SC) THE SUPREME COURT AT PARA 32 & 33 HELD THAT LEGISLA TIONS WHICH MODIFY ACCRUED RIGHTS OR WHICH IMPOSE OBLIGATIONS OR IMPOS E NEW DUTIES OR ATTACH A NEW DISABILITY HAVE TO BE TREATED AS PROSPECTIVE UNLESS THE LEGISLATIVE INTENT IS CLEARLY TO GIVE THE ENACTMENT A RETROSPEC TIVE EFFECT. HOWEVER, IF LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT W ITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GENERALLY AND WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BE EN THE LEGISLATORS OBJECT, THEN THE PRESUMPTION WOULD BE THAT SUCH LEG ISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WOULD WARRANT IT TO BE GIVE N A RETROSPECTIVE EFFECT . ALLIED MOTORS PVT. LTD. VS. CIT 224 ITR 677 (SC) THIS CASE RELATES TO SECTION 43B, WHICH WAS INSERTE D IN THE STATUTE BOOK FROM 01.04.84. THE PROVISO WAS ADDED W.E.F. 01.04.8 8. IT WAS HELD THAT PROVISO IS INSERTED TO REMOVE UNINTENDED CONSEQUENC ES AND THEREFORE HAS A RETROSPECTIVE EFFECT. THE APEX COURT AT PAGE 686 HELD AS UNDER:- THE RULE OF REASONABLE CONSTRUCTION MUST BE APPLIE D WHILE CONSTRUING A STATUTE. LITERAL CONSTRUCTION SHOULD BE AVOIDED I F IT DEFEATS THE MANIFEST OBJECT AND PURPOSE OF THE ACT. A PROVISO W HICH IS INSERTED TO REMEDY UNINTENDED CONSEQUENCES AND TO MAKE THE PROV ISION WORKABLE, A PROVISO WHICH SUPPLIES AN OBVIOUS OMISSION IN THE SECTION AND IS REQUIRED TO BE READ INTO THE SECTION, TO GIVE THE S ECTION A REASONABLE INTERPRETATION, REQUIRES TO BE TREATED AS RETROSPEC TIVE IN OPERATION, SO THAT A REASONABLE INTERPRETATION CAN BE GIVEN TO TH E SECTION AS A WHOLE. 8 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 (SC) RELAXATION ALLOWED BY FIRST PROVISO TO S. 43B WAS R ESTRICTED ONLY TO TAX, DUTY, CESS AND FEE, AND DID NOT APPLY TO CONTRIBUTI ONS TO LABOUR WELFARE FUNDS. SINCE THE SECOND PROVISO RESULTED IN IMPLEME NTATION PROBLEMS, IT WAS DELETED BY FINANCE ACT, 2003, THEREBY EQUATI NG TAX, DUTY, CESS AND FEE WITH CONTRIBUTIONS TO WELFARE FUNDS. THUS, OMISSION OF SECOND PROVISO AND THE CORRESPONDING AMENDMENT OF FIRST PR OVISO BY FINANCE ACT, 2003, ARE CURATIVE IN NATURE AND ARE EFFECTIVE RETROSPECTIVELY W.E.F. 1ST APRIL, 1988, I.E., THE DATE OF INSERTION OF FIR ST PROVISO. IF THE CONTENTION OF THE DEPARTMENT THAT THE AMENDMENTS AR E EFFECTIVE PROSPECTIVELY IS ACCEPTED, IT WOULD CAUSE HARDSHIP AND INDIVIOUS DISCRIMINATION AMONG THE ASSESSEES. IN VIEW OF ABOVE, THE LD. CIT(A) HAS ERRED IN NOT A LLOWING THE BENEFIT OF SECTION 11 & 12 TO THE ASSESSEE AND THEREFORE THE A O BE DIRECTED TO COMPUTE THE INCOME OF THE ASSESSEE U/S 11 & 12 OF T HE ACT. SO FAR AS GROUND OF THE DEPARTMENT AND GROUND NO.2 OF THE ASSESSEE IS CONCERNED, ANY EXPENDITURE INCURRED BY A TRUST, BE IT A CAPITAL OR REVENUE EXPENDITURE HAS TO BE ALLOWED AS A DEDUCTION AGAINS T THE RECEIPT IN AS MUCH AS THE CONSTRUCTION EXPENSES INCURRED BY THE A SSESSEE HAS NOT RESULTED INTO CREATION OF ANY ASSET IN THE HANDS OF THE TRUST AS IS EVIDENT FROM THE INCOME & EXPENDITURE A/C AND THE BALANCE S HEET ENCLOSED HEREWITH. THE LD. CIT(A) HAS THEREFORE RIGHTLY HELD THAT THE TRUST IS TO BE ASSESSED AS AN AOP AND NOT AS A BUSINESS ENTITY. HO WEVER, THE LD. CIT(A) HAS INCORRECTLY HELD THAT THE SURPLUS IS TO BE TAXE D AT MMR. IN HOLDING SO HE IGNORED THE PROVISIONS OF SECTION 164(2) WHICH P ROVIDES THAT IN CASE THE RELEVANT INCOME WHICH IS DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE, OR WHICH IS OF THE NATURE REFERRED TO IN SECTION 2(24)(II) OR U/S 11(4A), TAX SHALL BE CHARG ED ON MUCH OF THE RELEVANT INCOME AS IS NOT EXEMPT U/S 11 OR SECTION 12 AS IF THE RELEVANT INCOME NOT SO EXEMPT WERE THE INCOME OF AN AOP. TH EREFORE, IN VIEW OF SECTION 164(2), THE SURPLUS OF THE TRUST, IF LIABLE FOR TAX, CAN BE TAXED AS AN AOP AND NOT AT THE MMR UNLESS AND UNTIL THERE IS A VIOLATION OF SECTION 13(1)(C) OR 13(1)(D). IN THE ASSESSEES CASE THERE IS NO VIOLATION OF SECTION 9 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN 13 AND THEREFORE THE SURPLUS CAN BE TAXED ONLY AS I NCOME OF AN AOP AND NOT AT MMR. SO FAR AS AY 2010-11 IS CONCERNED, THE GROUNDS OF T HE ASSESSEE AND THE DEPARTMENT AS WELL AS THE FACTS OF THE CASE ARE SAME AND THEREFORE SUBMISSION GIVEN ABOVE APPLIES TO THIS AY ALSO. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE LD. CIT (A) BY OBSERVING AS UNDER :- 4.10. THE APPELLANT WAS NOT REGISTERED U/S 12AA OF THE IT ACT AND THE AMENDMENTS MADE BY THE FINANCE ACT, 2014 ARE APPLIC ABLE TO THE PENDING ASSESSMENTS, WHICH IS THEREFORE NOT APPLICA BLE TO THE PRESENT CASE. IN VIEW OF THE ABOVE DISCUSSION, I DO NOT FI ND ANY JUSTIFICATION IN THE ACTION OF THE AO IN TREATING THE TOTAL RECEIPTS OF THE TRUST AS INCOME OF THE APPELLANT. ACCORDINGLY, I HOLD THAT IT WOULD BE JUST AND FAIR TO ALLOW THE EXPENSES INCURRED FOR EARNING OF SUCH INC OME. THE CLAIM OF THE APPELLANT WITH REGARD TO THE TAXATION OF SURPLU S U/S 28 OF THE IT ACT IS NOT CORRECT AND IS CONTRARY TO THE FACTS ON RECO RD. THE TRUST IN THE ABSENCE OF A REGISTRATION UNDER THE RELEVANT PROVIS IONS OF THE IT ACT HAS TO BE ASSESSED AS AN AOP AND CAN NOT BE ASSESSE D AS A BUSINESS ENTITY. THUS, I HOLD THAT AO WAS JUSTIFIED IN TREAT ING AND TAXING THE INCOME OF THE TRUST IN THE CAPACITY OF AN AOP, WHIC H IS TO BE TAXED AT THE MAXIMUM MARGINAL RATE OF TAXATION. THE ISSUE, WHICH REQUIRE OUR CONSIDERATION IS WHETH ER THE BENEFIT OF EXEMPTION WAS AVAILABLE TO THE ASSESSEE IN VIEW OF THE FACT THAT THE ASSESSEE TRUST WAS REGISTERED IN SUBSEQUENT YEAR AND APPEAL WAS PENDING BEFORE THE L D. CIT (A) IN RESPECT OF THE EARLIER ASSESSMENT. THE LD. COUNSEL HAS PLACED REL IANCE ON THE DECISION OF THE 10 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN COORDINATE BENCH IN THE CASE OF SREE SREE RAMKRISHN A SAMITY VS. DCIT (2015) 44 ITR (TRIB.) 678 (KOLKATA) WHEREIN THE COORDINATE BE NCH HAS HELD AS UNDER :- 6.13. WE HOLD THAT SINCE THE ONLY REASON FOR DENIA L OF EXEMPTION U/S 11 WAS ABSENCE OF REGISTRATION U/S 12AA (WHICH WAS GRANTED TO ASSESSEE SOCIETY ON 29.10.2010 WITH EFFECT FROM 1.4 .2010) FOR THE RELEVANT ASSESSMENT YEARS AND ON NO OTHER GROUND, T HE BENEFIT OF CHANGE IN LAW AS ABOVE BY FINANCE ACT 2014 SHOULD B E AVAILABLE AND FOR ALL THE YEARS, THE BENEFIT OF EXEMPTION SHOULD BE AVAILABLE ON THE DATE OF REGISTRATION AS ALL THE ASSESSMENTS WERE PE NDING AS SHOWN ABOVE. IN THIS CONNECTION, IT REQUIRES MENTION SPEC IFICALLY THAT ALL THE RECEIPTS OF THE DONATION WERE PROVED ON ENQUIRY TO HAVE BEEN RECEIVED FROM THE CLAIMED DONORS AND UTILIZED FOR THE SPECIF IC PURPOSE (CONSTRUCTION OF OLD AGE HOME) FOR WHICH THEY WERE RECEIVED. IN CONCLUSION, WE HOLD THAT THE INSERTION OF THE PROVI SO TO SECTION 12A(2) OF THE ACT HAS TO BE CONSTRUED AS RETROSPECTIVE IN OPERATION. 3.4. IN THE PRESENT CASE ALSO THE ASSESSEE WAS GRAN TED REGISTRATION UNDER SECTION 12AA OF THE ACT AND ASSESSMENT WAS NOT PENDING BEFO RE THE AO BUT APPEAL AGAINST THE ORDER OF AO WAS PENDING BEFORE LD. CIT (A). IT IS A SETTLED POSITION OF LAW THAT LD. CIT (A) HAS COTERMINOUS POWER WITH THE AO. THE BENEFIT OF EXEMPTION HAS BEEN DENIED SOLELY ON THE GROUND THAT ASSESSEE WAS NOT R EGISTERED U/S 12AA OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER RELIED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF SHREE BHANUSHALI MITRA MANDAL TRUST VS. ITO, (2016) 47 CCH 197 (AHD.TRIB.) WHICH HAS HELD AS UNDER :- 7.3. IN THE INSTANT CASE, IT IS NOT IN DISPUTE TH AT REGISTRATION WAS GRANTED W.E.F. 17.12.2013 BY THE ORDER OF CIT (A) D ATED 08.05.2014. IT IS ALSO NOT IN DISPUTE THAT OBJECTS AND ACTIVITIES OF THE ASSESSEE TRUST 11 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN ARE CHARITABLE IN NATURE DURING THE RELEVANT FINANC IAL YEAR. WHEN SECTION 12A OF THE ACT WAS AMENDED BY INTRODUCING N EW PROVISOS TO SUB-SECTION (2) OF SECTION 12A BY FINANCE ACT, 2014 WITH EFFECT FROM 01.10.2014, THE ASSESSMENT ORDERS PASSED BY THE ASS ESSING 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 COTERMINOUS 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, A N ASSESSMENT PROCEEDING WHICH IS PENDING IN APPEAL BEFORE THE AP PELLATE AUTHORITY SHOULD BE DEEMED TO BE ASSESSMENT PROCEEDINGS PENDI NG BEFORE THE ASSESSING OFFICER WITHIN THE MEANING OF THAT TERM A S ENVISAGED UNDER THE PROVISO. IT FOLLOWS THERE-FROM THAT THE ASSESSE E WHICH OBTAINED REGISTRATION U/S 12AA OF THE ACT DURING THE PENDENC Y 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 OBJE CTS AND REASONS FOR MAKING SUCH AMENDMENTS. THE EXPLANATION MAKES I T CLEAR THAT IT WAS IN ORDER TO PROVIDE RELIEF TO SUCH TRUSTS IN RE SPECT OF WHICH, DUE TO ABSENCE OF REGISTRATION U/S 12AA TAX LIABILITY GOT ATTACHED THROUGH OTHERWISE THEY WERE ELIGIBLE FOR EXEMPTION BY FULFI LLING OTHER SUBSTANTIVE CONDITIONS THAT THE AMENDMENT WAS BROUG HT IN. THAT BEING SO, DENYING SUCH BENEFIT TO A TRUST LIKE THE ASSESS EE WHO HAD OBTAINED REGISTRATION U/S 12AA DURING THE PENDENCY OF THE AP PEALS 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 DO ING VIOLENCE TO THE PROVISIONS OF THE STATUTE AND, AS SUCH, LIABLE TO B E INTERFERED WITH. 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 EXE MPTIONS 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 NO T 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 DECIDED AT THE ASSESSMENT STAGE. BEING PROCEDURAL IN NATURE, IN MY VIEW, LIBE RAL INTERPRETATION WILL GIVE EFFECT TO THE INTENTION OF THE AMENDMENT, THER EBY REMOVING THE HARDSHIP IN GENUINE CASES LIKE THE PRESENT ASSESSEE UNDER CONSIDERATION. 12 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN AFTER CONSIDERING THE FACTS OF THE PRESENT CASE AND IN VIEW OF THE BINDING PRECEDENTS, WE SET ASIDE THE ORDER OF LD. CIT (A) A ND DIRECT THE AO TO GRANT THE BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT. T HIS GROUND OF THE ASSESSEE IS ALLOWED. 4. APROPOS GROUND NO. 2, SINCE WE HAVE ALLOWED GROU ND NO. 1 ABOVE HOLDING THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION, WE DIR ECT THE AO TO DELETE THE ADDITION AND GRANT EXEMPTION TO THE ASSESSEE AS PER LAW. 5. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. NOW WE TAKE UP THE APPEALS OF THE REVENUE IN ITA NO S. 834 & 835/JP/2015. 6. THE GROUND RAISED BY THE REVENUE IN BOTH THE APP EALS IS COMMON WHICH IS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS), ALWAR HAS ERRED IN ALLOWING CAPITAL EXPENDITURE OUT OF THE INCOME OF THE ASSESSEE BY TREATING THE ASSESSEE AS AN AOP IN ABSENCE OF REGISTRATION U/S 12AA. 7. THE FACTS INVOLVED IN THE REVENUES APPEAL ARE E XACTLY IDENTICAL AS ARE IN ITA NOS. 780 AND 781/JP/2015 OF THE ASSESSEE. BOTH THE PARTIES HAVE ADOPTED THE SAME SUBMISSIONS AS ARE MADE IN THE CASE OF THE ASSESSEE ABOVE. SINCE WE HAVE HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTIO N 11 OF THE ACT, THEREFORE, THE GROUND RAISED IN THESE APPEALS IS DISMISSED. 13 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN 8. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOW ED WHEREAS APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7/06/2016. SD/- SD/- VH-VKJ-EHUK] ( DQY HKKJR ) ( T.R. MEENA) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 7/06/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- AADIWASI MEEN BHAGWAN JAN SEWA S ANSTHAN, ALWAR. 2. THE RESPONDENT- THE DCIT CIRCLE-1/ITO EXEMPTION, ALWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 780(4)/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 14 ITA NO. 780(4)/JP/2015 ADIWASI MEEN BHAGWAN JAN SEWA SANSTHAN