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Income Tax Officer, Ward – 10 (1) , Pune Versus M/s. Shri Vishwakalyan Jivraksha Pratishthan and Vica-Versa

2016 (8) TMI 1000 - ITAT PUNE

Eligibility of benefits of exemption u/s. 11 and 12 - Held that:- The amendment to provisions of sub-section (2) to section 12A to be retrospective in nature, coupled with the fact that the assessee was subsequently granted registration u/s. 12AA of the Act, we are of the considered view that the Commissioner of Income Tax (Appeals) has rightly deleted the addition made by the Assessing Officer. Accordingly, the appeal of the Revenue is dismissed being devoid of any merit. - ITA No. 2013/PN/2014 .....

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rom records are: The assessee is a charitable trust. The assessee filed its return of income for the assessment year 2011-12 declaring loss of ₹ 5,42,718/-. The return of the assessee was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) on 18-07-2013. At the time of filing of return of income, the assessee was not registered u/s. 12A of the Act. The assessee had filed an application for registration u/s. 12AA of the Act in the prescribed form on 16-01 .....

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vide order dated 27-01-2014 passed order u/s. 143(3) r.w.s. 147 of the Act making addition of ₹ 40,92,239/- on account of disallowance of deduction u/s. 57 of the Act. Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) challenging the reassessment proceedings, as well as addition/disallowance made by the Assessing Officer. The First Appellate Authority vide impugned order rejected the contentions of the assessee with regard t .....

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the Department submitted that at the time of filing of return of income the assessee was not registered u/s. 12AA of the Act and hence, was not eligible to claim the benefit of section 11 of the Act. All the donations received by the assessee were liable to be taxed in the absence of registration u/s. 12A. The ld. DR vehemently supported the order of Assessing Officer in making the disallowance of deduction u/s. 57 of the Act. 4. On the other hand Shri S.N. Doshi appearing on behalf of the asse .....

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n of proviso to section 12A(2) w.e.f. 01-10-2014 is retrospective in operation. The benefit of section 11 cannot be denied to the trust if it had obtained registration during pendency of appeal before the Commissioner of Income Tax (Appeals). The ld. AR further referred to the decision of Kolkata Bench of the Tribunal in the case of Sree Sree Ramkrishna Samity Vs. Deputy Commissioner of Income Tax reported as 156 ITD 646 (Kolkata-Trib.). The Tribunal held that as long as objects of a society wer .....

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ncorrect. In the reasons recorded for issuing of notice u/s. 148 communicated to the assessee vide letter dated 18-06-2013, it is mentioned that during the year the assessee has received donations of ₹ 40,77,937/- and has claimed expenses of ₹ 39,21,244/-. Thus, there is a surplus of ₹ 1,56,693/-. In fact, the amount of ₹ 1,56,693/- is deficit and not surplus. The ld. AR referred to income and expenditure account for the year ending on 31-03-2011 at page 16 of the paper b .....

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ere is escapement of income to the extent of ₹ 6,99,411/-. However, in the reassessment proceedings, the Assessing Officer did not make any addition on account of such aforesaid escapement but made disallowance of deduction u/s. 57 to the tune of ₹ 40,92,937/-. The ld. AR asserted that if no addition was made in respect of amounts mentioned in the reasons recorded for re-opening, there cannot be any other addition. In support of his submissions reliance was placed on the judgment of .....

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SC). The ld. AR prayed for dismissing the appeal of the Revenue and reversing the findings of Commissioner of Income Tax (Appeals) with respect to reassessment proceedings. 5. The ld. DR controverting the submissions made on behalf of the assessee submitted that reassessment proceedings were validly initiated against the assessee. The original assessment was made in the case of assessee u/s. 143(1). The assessee had claimed benefit of section 11, whereas the assessee at the time of filing of ret .....

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low. We have also considered the decisions on which the ld. AR of the assessee has placed reliance and the documents that were referred during the course of making submissions. 7. It is an undisputed fact that at the time of filing of return of income and passing of order u/s. 143(1) the assessee was not registered u/s. 12A of the Act. The assessee made application for registration on 16-01-2013. The assessee was granted registration by the Commissioner of Income Tax on 25-03-2014 w.e.f. assessm .....

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elation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made. Provided that where registration has been 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 which assessment proceedings are pending before the Assessing O .....

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so 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. The aforesaid amendment was made w.e.f. 01-10-2014. 8. The Cochin Bench of the Tribunal in the case of SNDP Yogam Vs. Assistant Director of Income Tax (Exemption) (supra) while dealing with the issue relating to retrospective applicability of newly inserted proviso to section 12A(2) has held that the amendment is retrospective in na .....

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of the legislature and this point is further strengthened by the Explanatory 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 specifi .....

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gistration u/s 12AA of the Act on 29.07.2013 w.e.f. the assessment year 2013-14. Those appeals were 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 [ADIT (Exemption) in the present case] were two well established principles of law. In view of the above and going by the principle of purposive interpretation of statues, an assessment proceeding which is pending in appeal before the appellate author .....

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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 .....

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nd the grant or rejection of such application by the commissioner. Thus, in our 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 stage. Being procedural in nature, in our view, liberal interpretation will give effect to the intention of the amendment, thereby removing the hardship in genuine cases like the prese .....

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ccordingly, the amendment to section 12A(2) has to be construed as retrospective in operation. 10. The Commissioner of Income Tax (Appeals) has accepted the contentions of the assessee by placing reliance on the decision of Hon'ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Programme for Community Organisation reported as 248 ITR 1 (SC). The Commissioner of Income Tax (Appeals) held : 11. This leaves the matter of computation of income which has been complicated by .....

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come-tax Act, the income of the Trust is required to be computed not in accordance with the provisions of Act but in accordance with the provisions of Act but in accordance with the normal rule of accountancy, in a commercial sense without reference to the head of income specified in See. 14. This is a matter of settled law. The Hon'ble Supreme Court in CIT Vs. Programme for community organization, 248 ITR 1 (SC) had approved Kerala High Court s decision in the same case in 228 ITR 620 (Ker) .....

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-tax Act being not registered u/s. 12AA of Income-tax Act and the question of taxability of donation u/s. 57 and deduction u/s. 57(iii) of Income-tax Act does not arise. Accordingly, the Assessing Officer is directed to delete the addition of ₹ 40,92,237/-. 11. The ld. DR has not been able to controvert the well reasoned findings of the Commissioner of Income Tax (Appeals). Thus, in view of the facts of the case and the decisions of Tribunal holding the amendment to provisions of sub-secti .....

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ding the reassessment proceedings. The ld. AR of the assessee has pointed that the additions made by the Assessing Officer in reassessment proceedings are for different reasons viz-a-viz reasons mentioned in the reasons for reopening . The reasons for reopening were communicated to the assessee vide letter dated 18-06-2013. The same are reproduced as under : The assessee trust has filed Return of Income for A.Y. 2011-12 declaring total loss of ₹ 5,42,718/-. During the year the assessee tru .....

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able to the tax for A.Y. 2011-12 has escaped assessment within the meaning of section 147 of the IT Act, 1961 to the extent of ₹ 6,99,411/-. 13. The ld. AR has further pointed that in the reasons recorded it has been wrongly mentioned that there is surplus of ₹ 1,56,693/-, whereas, it is a deficit. In support of his submissions the ld. AR has drawn our attention to the income and expenditure account for the year ended on 31-03-2011 at page 16 of the paper book. We find merit in the s .....

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