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2016 (4) TMI 578

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..... lves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. iii) Amendments to the Deed/Memorandum, Rules and Regulations, if any, of the Trust / Institution shall be made only with the prior approval of the Commissioner of Income Tax(Exemptions) or any other prescribed authority under the Income Tax Act,1961. iv) The registration may be withdrawn on violation of any of the stipulations laid down in the Income Tax Act, 1961, v) The SOCIETY/TRUST shall regularly file its Income Tax Return.” - Decided in favour of assessee - ITA No. 2515/Ahd/2015 - - - Dated:- 22-2-2016 - Shri George George K, Judicial Member For The Appellant : Shri Rajesh M. Upadhyay, AR For The Respondent : Shri Kamlesh Makwana, Sr.DR ORDER PER George George K, Judicial Member. This appeal at the instance of assessee is directed against CIT(A), Valsad, order dated 15.06.2015. The relevant assessment year is 2011-12. 2. The .....

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..... ell, since there is no dispute that the objects and the activities of assessee trust is charitable in nature for the relevant assessment year also. Secondly, it was contended that the entire surplus is corpus donation and same cannot be taxed as revenue receipt. 5. The CIT(A), however, rejected the contentions raised by the assessee trust and dismissed the appeal. The relevant finding of the CIT(A) reads as follows: (At page 13) I have considered the rival submissions. I find that the assessing officer has correctly disallowed the exemption claimed u/s 11 of the Act as the appellant trust was not registered u/s12AA of the Act. So far as the submission of the appellant that the amendment brought by Finance Act, 2014 should be made effective from the retrospective date, it is not acceptable as the legislature has clearly deciphered the date of its application. From the facts as gathered from the submissions of the appellant that he appellant has incurred expenditure and has shown the gross receipt as income. In the situation where the charitable trust is not registered then the income to be assessed in the status of A.O.P. by the applying the maximum margined rate of tax. Her .....

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..... 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: 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 non-registration of such trust or institution for the said 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 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 exem .....

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..... 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 order 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 officer' 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 with. Moreover, under the Scheme of the Act, sections 11 and 12 are substantive .....

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..... edundant. Applying this legal maxim, it would be just and fair to hold that the amendment in section 12A is brought in the statute to confer benefit of exemption u/s 11 of the Act on the genuine trusts which 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). 7.7 In view of the aforesaid reasoning and the order of Kolkata Bench of the Tribunal in case of Sree Sree Ramkrishna Samity vs. DCIT (supra), I direct the Director of Income-tax (Exemption) to grant registration to the assessee trust for the assessment year under dispute, subject to the following conditions, namely; i) The registration U/S.12AA (1)(b)(i) of the Income Tax Act, 1961 does not automatically exempt the income of the Trust/Institution. The question of taxability of the income of the Trust/Institution shall be examined and decided upon by the Assessing Officer at the time of assessment based on the conduct of the activities, compliance with various statutory and other requirements, etc., as referred to in Sections 2(15), 11, 12 13 of the Income Tax Act, 1961, w .....

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