Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (11) TMI 119 - ITAT KOLKATA

2015 (11) TMI 119 - ITAT KOLKATA - [2015] 44 ITR (Trib) 678 (ITAT [Kolk]), [2016] 156 ITD 646 - Reopening of assessment - eligibility for exemption under section 11 & 12 denied - existence of the assessee society for charitable purposes in the assessment years under appeal - Held that:- It is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is requi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

registration u/s 12AA as a pre-condition for applicability of section 12A. - A receipt which is by birth, capital in nature, cannot change its character merely for want of registration of society u/s 12AA of the Act. It is not the case of the revenue that the donations received are meant for general functioning of the charitable objects of the society, in which event, the donations received thereon would take the character of revenue receipts requiring to be credited in the income and expend .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be available and for all the years, the benefit of exemption should be available on the date of registration as all the assessments were pending as shown above. In this connection, it requires mention specifically that all the receipts of the donation were proved on enquiry to have been received from the claimed donors and utilized for the specific purpose (construction of old age home) for which they were received.In conclusion, we hold that the insertion of the proviso to section 12A(2) of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t of the order of the Learned CITA in the following manner:- Appeal No. 26/CIT(A)/Slg/10-11 dated 25.7.2012 for Asst Year 2003-04 Appeal No. 27/CIT(A)/Slg/10-11 dated 25.7.2012 for Asst Year 2004-05 Appeal No. 28/CIT(A)/Slg/10-11 dated 25.7.2012 for Asst Year 2005-06 Appeal No. 29/CIT(A)/Slg/10-11 dated 25.7.2012 for Asst Year 2006-07 Appeal No. 30/CIT(A)/Slg/10-11 dated 25.7.2012 for Asst Year 2007-08 Appeal No. 31/CIT(A)/Slg/10-11 dated 25.7.2012 for Asst Year 2008-09 2. As the issues involved .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ansa Dev irrespective of caste and creed of the humanity at large. The objects further include promotion of physical and mental development of youths, to make them worthy citizen for the service of the mother land, co-ordination of social, cultural and religious activities of allied organizations, organization of sevadal for rendering services to the suffering humanity, acquiring, establishment, starting, aiding, maintaining and management of schools, colleges, libraries, hospitals for the benef .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cipal Corporation for which contributions from the public were forthcoming and the same were duly accounted for in the audited accounts recording receipts and expenditures of the society. The said old age home was subsequently inaugurated by His Excellency the Governor of West Bengal. 3.2. The assessee society was in receipt of the following donations from various parties for the purpose of construction of old age home:- Asst Year Donation recd Invt in old age home construction 2003-04 9,38,000 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee society is not registered u/s 12AA of the Act and accordingly not eligible for exemption u/s 11 of the Act. Accordingly, the Learned AO brought to tax the rental income derived by the assessee society as income from house property, interest income and donations received from various donors under the head income from other sources. This action was upheld by the Learned CITA for the same reason. Aggrieved, the assessee is in appeal for the Asst Years 2003-04 to 2008-09 before us. 4. The L .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

No.2) Act, 2014 with effect from 1.10.2014 clearly provides for deemed registration u/s 12AA of the Act for the earlier years and hence the same has to be construed as retrospective in operation. He further argued that on the date of granting registration u/s 12AA of the Act on 29.10.2010 with effect from 1.4.2010, admittedly, the reassessment proceedings were pending before the Learned AO and admittedly, the assessee had carried on the same charitable objects in the earlier assessment years. 4. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ex Court in the case of CIT vs Indira Balkrishna reported in 39 ITR 546 (SC). He further argued that, even assuming without conceding, that assessee society has to be taxed as an AOP by assessee not given exemption u/s 11 of the Act, it is required on the part of the Learned AO to consider the income of the society in its hands as on AOP and decide the surplus as non-taxable in view of its non - revenue nature, in as much as the donations were meant for utilization for creation of an asset which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dition for claiming exemption u/s 11 of the Act. He also argued that in order to claim exemption u/s 11(1)(d) of the Act for donations received, the registration u/s 12AA of the Act is mandatory. He also argued that donations received by assessee falls under the definition of income u/s 2(24)(iia) of the Act and accordingly prayed for non-interference in the orders of the lower authorities. 6. We have heard the rival submissions and perused the materials available on record. We find that the fir .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

various philanthropists including Siliguri Municipal Corporation and these donations were admittedly utilized by the assessee trust towards construction of old age home under the name and style of "Shesh Basanta". On these facts, there is absolutely no dispute. All the donors had filed confirmations before the Learned AO and the genuinity of these donations are proved beyond doubt by the assessee. The Learned AO has accepted the same in the remand proceedings. 6.2. We find that the obj .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

le objects as per the trust deed on which fact also there is absolutely no dispute. The receipts were brought to tax only on the pretext that the assessee society is not having registration u/s 12AA of the Act in the Asst Years 2003-04 to 2008-09. 6.3. It is relevant at this juncture to get into the amendment brought in section 12A by Finance Act 2014 with effect from 1.10.2014 by way of insertion of first proviso to section 12A(2) of the Act which is reproduced below for the sake of convenience .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ld under trust of any assessement year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on 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 year preceding the aforesaid assessment year only for no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

0 with effect from 1.4.2010 as reassessment proceedings got commenced pursuant to issuance of notice u/s 148 on 30.3.2010 as stated supra. Admittedly, the objects and activities of the trust had remained the same in preceding assessment years also i.e Asst Years 2003-04 to 2008-09. Though this first proviso to section 12A(2) talks about pendency of assessment proceedings, it is relevant to get into the definition of the term 'assessment' in section 2(8) of the Act, wherein it is defined .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ature in its wisdom had only brought this proviso to prevent genuine hardship that could be caused on the assessee due to non-registration u/s 12AA of the Act and accordingly in our opinion, the provisos to section 12A(2) of the Act is to be construed as retrospective in operation. 6.6. The third proviso to section 12A(2) of the Act also provides that the first and second proviso shall not be applicable if the trust or institution had been refused registration earlier or the registration granted .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n'ble Apex Court rendered in the case of ACIT vs Surat City Gymkhana reported in (2008) 300 ITR 214 (SC). Drawing analogy from this judgement, the logical inference could be that as long as the objects were charitable in nature in the earlier years and in the year in which registration u/s 12AA was granted, the existence of trust for charitable purposes in the earlier years cannot be doubted with. Even otherwise, no adverse findings were given by the revenue with regard to the existence of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e 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 genuine charitable trusts and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 Learned AO, unless the registration granted earlier is cancelled or refused for specific 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. 6.9. With regard to the arguments of the Learned DR that donations received by assessee falls under the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

undergone amendment by way of insertion of clause (iia) by Finance Act, 1972 with effect from 1.4.1973. In this connection, it will be relevant to get into the Memorandum explaining the provisions in Finance Act 1972 reported in 83 ITR (St.) 173, wherein Paragraphs 24 and 25 clearly define the scope of the amendment wherein in paragraph 25(i), the concluding sentence is as under:- "contributions received with a specific direction that they will form part of the corpus of the trust or distri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Act. We find that the order of the Learned CITA failed to distinguish between a case where a receipt is not an income at the stage of its receipt and a case where it is not so but is claimed to be exempt because of any exemption provision granting exemption from taxation to receipts which are liable to taxation but for the provision granting exemption. 6.10. We hold that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f eligibility for exemption under section 11 & 12 as mentioned in section 12A provided for registration u/s 12AA as a pre-condition for applicability of section 12A. Reliance in this regard is placed on the following decisions :- Allied Motors P ltd vs CIT reported in (1997) 224 ITR 677 (SC) - Judgement by three judges of the Supreme Court The departmental understanding also appears to be that section 43B, the proviso and Explanation 2 have to be read together as expressing the true intentio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

permissible deductions. In the case of Goodyear India Ltd vs State of Haryana (1991) 188 ITR 402, this court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. As observed by G.P.Singh in his Principles of Statutory Interpretation, 4th Edn., Page 291, "It is well settled that if a statute is curative or merely declaratory of the previous law, retrospective .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

P ltd and also in the case of Alom Extrusions Ltd has already decided that the aforesaid provision has retrospective application. Again, in the case reported in 82 ITR 570, the Supreme Court held that the provision, which has inserted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well". CIT vs Vatika Township P Ltd reported in (2014) 367 ITR 466 (SC) - Five Judges decision of the Su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

struction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India vs Indian Tobacco Association reported in (2005) 7 SCC 396, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

case, the proviso added to section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act or arise .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

intention from the language used by the legislature and if strict literal construction leads to an absurd result, i.e., result not intended to be subserved by the object of the legislation found in the manner indicated before, then another construction is possible apart from strict literal construction then that construction should be preferred to the strict literal construction. 6.11. We also hold that though equity and taxation are often strangers , attempts should be made that these do not r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h had not changed its objectives and had carried on the same 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(Exemptions). 6.12. We hold that the arguments of the Learned AR that, even assuming without conceding, in the worst scenario, the assessee society could only be taxed in the status of an AOP does not require any adjudication as we hold that the assessee society to be construed as a public charitable trust and eli .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ely no dispute. The Learned AO also had duly accepted the nature of donations, genuinity of the donors and its utilization in the remand proceedings. Hence in any case, a receipt which is by birth, capital in nature, cannot change its character merely for want of registration of society u/s 12AA of the Act. It is not the case of the revenue that the donations received are meant for general functioning of the charitable objects of the society, in which event, the donations received thereon would .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version