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Shree Bhanushali Mitra Mandal Trust Versus Income Tax Officer, Vapi, Ward -3, Vapi

2016 (4) TMI 578 - ITAT AHMEDABAD

Registration u/s.12AA - entitled for exemption claimed u/s 11 - Held that:- We 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 .....

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ned in section 2(15) of the Income Tax Act shall not be a charitable purpose, if it involves 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 / .....

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llant : 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 grounds raised read as follows: 1] Lr. CIT(A), Valsad has erred in law and on facts to held that amendment made in Section 12A by Finance Act No.2 of 2014 is not restropective in nature and only effective from Dt. 1/10/2014 .....

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e charitable trust is not registered than the income to be assessed at maximum marginal rate of tax. 4] Lr. CIT(A), Valsad has erred in law and on facts to consider appellant s case on the principle of mutuality over looking the fact that the appellant trust has collected donation from bhanushali community and had spent the same for the benefit of bhanushali community. Therefore, surplus, if any, not taxable on the ground of mutuality. 3. Briefly stated facts of the case are that assessee is a t .....

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amounting to ₹ 7,63,226/-. The A.O. denied the benefit of Section 11 deduction, since according to the A.O., assessee trust was not registered u/s.12AA of the Act during the relevant assessment year. 4. Aggrieved, the assessee trust preferred an appeal before the First Appellate Authority. Before the First Appellate Authority, it was contended that the assessee trust was granted registration u/s.12AA of the Act w.e.f. 17.12.2013 and in view of introduction of proviso to Section 12A by the .....

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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 a .....

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dings and is presumed to have been verified by the Assessing Officer. As the trust is to be assessed an AOP so these expenses of ₹ 2,98,763/- needs to be allowed. So far as the donation of ₹ 1,11,111/- is concerned, the Assessing Officer is directed to verify the facts and consider the allowability of this amount as per law. Therefore the ground of appeal stands disposed off. 6. Aggrieved, the assessee is in appeal before the Tribunal. The A.R. reiterated the submissions made before .....

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for my consideration are of two folds, namely, (i) Whether the assessee trust is entitled to registration u/s.12AA of the Act for the relevant assessment year, (ii) if the assessee trust is not entitled for registration u/s.12AA of the Act whether surplus according to assessee trust which is corpus donation is liable to be taxed. 7.1 To examine the first issue, necessarily I have to analyze the relevant provision, namely, the amendment to Section 12A by Finance Act, 2014 w.e.f. 01.10.2014 by wa .....

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visions 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 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 tr .....

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ct, 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 exemption and fulfill other substantive conditions. However, the power of condonation of delay in seeking registration was not ava .....

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lanatory 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 registration 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 ld. A.O., unless the registration granted earlier is cancelled or refused for specific reasons. The statute also goes on to provide that no action u/s147 .....

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2014, the assessment orders 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 vi .....

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he 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 l .....

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s to a religious or charitable trust. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemptions 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 not 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 st .....

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h in case of Sree Sree Ramkrishna Samity vs. DCIT (supra) read as follows: 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 provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the sec .....

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trangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e to make it workable rather than redundant. 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 e .....

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