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2016 (3) TMI 1110 - AT - Income TaxRegistration u/s 12A - assessee contended before the CIT (A) that once the registration u/s 12A of the Act was granted to an assessee even at a later date the same was applicable for the pending assessment proceedings for the earlier assessment years - Held that - AO was not justified in taking a stand that registration u/s 12A was not applicable to the assessee for the AYs under dispute and the condonation petition for delay in filing the application for registration u/s 12A for the AYs under dispute has not yet been decided by the CBDT and therefore the total incomes of the assessee were to be assessed as per commercial principles. The CIT (A) was also not justified in taking a similar stand that of the AO without taking cognizance and intention of the amendment to s. 12A of the Act. If no judicious or a liberal view is not taken either by the assessing authority or the appellate authority as in the case under consideration the very purpose for which such an amendment to s. 12A of the Act enacted, in our view would be defeated. - Decided in favour of assessee.
Issues Involved:
1. Justification of CIT (A) in confirming AO's assessment of the assessee's incomes as per commercial principles. 2. Justification of CIT (A) in confirming AO's action in not allowing exemption under section 10(23C)(iiiad) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Justification of CIT (A) in confirming AO's assessment of the assessee's incomes as per commercial principles: The assessee, a branch of SNDP Yogam, engaged in running educational institutions and temple activities, was assessed by the AO who concluded that the assessee's incomes should be taxed at the maximum marginal rate under section 167B of the Income Tax Act due to the lack of independent registration under the relevant Kerala State Act or the Income-tax Act. The AO issued notices under section 148, and the assessee filed returns admitting 'Nil' income. However, the AO assessed the incomes on commercial lines, which was confirmed by the CIT (A). The CIT (A) reasoned that the registration granted under section 12A on 29.07.2013 was not applicable retrospectively, and the assessee's accounts were not consolidated with the parent company, necessitating separate returns. The CIT (A) also noted that the assessee had filed a petition before the CBDT for condonation of delay in filing the application for registration under section 12A, which had not yet been decided. Upon appeal, the Tribunal considered the amendment to section 12A(2) of the Act, which allows the benefits of sections 11 and 12 for any income derived from property held under trust for any assessment year preceding the year of registration, provided the assessment proceedings were pending before the AO on the date of registration. The Tribunal noted that the amendment aimed to provide relief to genuine charitable organizations and should be interpreted liberally to avoid hardship. Consequently, the Tribunal held that the AO and CIT (A) were not justified in their stand, and the assessee was entitled to the benefits of sections 11 and 12 for the assessment years under dispute. 2. Justification of CIT (A) in confirming AO's action in not allowing exemption under section 10(23C)(iiiad) of the Income Tax Act:The CIT (A) confirmed the AO's finding that the assessee was not eligible for exemption under section 10(23C)(iiiad) as the total receipts exceeded the threshold of one crore rupees and the institution was not existing solely for educational purposes. The assessee contended that the exemption should be granted as the individual educational institutions had receipts below the threshold, citing the Tribunal's decision in Dr. CT. Eapen Trust Lake View v. ITO. The Tribunal considered the assessee's argument and the amendment to section 12A, which provides that once registration is granted, the benefits of sections 11 and 12 apply retrospectively to pending assessments. The Tribunal also referred to the explanatory memorandum to the Finance (No.2) Act, 2014, which aimed to provide relief to genuine charitable trusts. The Tribunal concluded that the AO and CIT (A) were not justified in denying the exemption under section 10(23C)(iiiad) and directed the AO to grant the exemption based on the amendment and the Tribunal's previous decisions. Conclusion:The Tribunal allowed the appeals filed by the assessee, directing the AO to grant the benefits of sections 11 and 12 and the exemption under section 10(23C)(iiiad) for the assessment years under dispute, based on the amendment to section 12A and previous Tribunal decisions. Order pronounced in the open Court on this 1st day of March 2016.
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