TMI Blog2016 (3) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. - ITA Nos. 503 to 506 & 569/Coch/2014 - - - Dated:- 1-3-2016 - B. P. Jain (Accountant Member) And George George K. (Judicial Member) For the Assessee : R. Krishna Iyer For the Revenue : K. P. Gopakumar, SR DR ORDER George George K. (Judicial Member) These five appeals, at the instance of the assessee, are directed against two orders of the CIT (A)-II, Kochi, both dated 30.09.2014. The relevant assessment years are 2006-07, 2007-08, 2008-09, 2009-10 and 2011-12. 2. The assessee, in its grounds of appeals for all the assessment years under dispute, raised identical issues in an illustrative and narrative manner. In essence, the grievance of the assessee is confined to two issues, namely: (i) that the CIT (A) was not justified in confirming the AO s stand in assessing the assessee s incomes as per commercial principles for all the assessment years under dispute; (ii) that the CIT (A) was also not justified in confirming the AO s action in not allowing exemption u/s 10(23C)(iiiad) of the Act. 3. As the issues raised in these appeals pertain to the same assessee, they were heard together and disposed of by this consolidated order. 4. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is not registered u/s 12A and the registration that has now been granted to the assessee u/s 12A is dated 29.07.2013. Since the assessee is registered only from the asst. year 2013- 14 and as per the letter of registration u/s 12A granted by the CIT vide No.CIT/CHN/Tech/12A-81/2012-13 dated 29.07.2013, it is specifically mentioned that this registration u/s 12A does not automatically exempt the income of the institution and it is further mentioned that the certificate is not the finding regarding the charitable/religious nature of the institution and is only to the effect that applicant s name has been entered in the register maintained in this office, it can be treated as applicable only for the AY 2013-14. The appellant has tried to contend in the additional grounds raised that once registration u/s 12A has been granted to the assessee, the same is applicable for the earlier years also as the various activities of the assessee are same since those earlier years. However in the submissions and the additional grounds, the assessee has accepted that CIT s power to grant registration is not with retrospective effect and, therefore, the assessee has filed petition before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with the present appeals. During the course of hearing, the learned AR reiterated what had been submitted before the first appellate authority. In furtherance, the submissions made by the learned AR are summarized as under: (i) That as per the recent amendment in 2014, once a registration u/s 12AA is granted to a charitable organization in a financial year, then such registration in a financial year would also entitle the entity for the benefit of sections 11 and 12 and in cases where the assessment proceedings were pending before the AO on the date of registration. As per the amendment, no action shall be taken u/s 147. Following the said amendment, the entire income of the trust is eligible for exemption u/s 11; (ii) That sub-section (2) to s 12A of the Act, the following proviso inserted w.e.f. 1st day of October, 2014, namely: 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 assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the trust examining the fulfillment of condition of receipt of less than the prescribed limit of the annual gross receipt if the annual gross receipt of the educational institution is considered separately - the same is below 1 crore in each year, therefore, it is entitled for exemption u/s 10(23)(iiiad) of the Act . 6.2 It was, further, submitted that though the CIT (A) s attention was drawn to the above facts during the course of appellate proceedings, he had not considered the same. In conclusion, it was prayed that necessary directions require to be given to the AO to grant exemption u/s 12A for all the AYs under dispute based on the amendment in the Finance Act, 2014. 6.3. On the other hand, the learned DR submitted that the AO as well as the CIT (A) have, after careful consideration of the assessee s contentions and the perusal of the relevant records, taken a stand that the whole income of the assessee from all the institutions was to be taxed at the maximum marginal rate. As there were no infirmities in the stand of the authorities below, it was pleaded by the learned DR, that the appeals of the assessee for all the AYs under consideration require to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her substantive conditions. However, the power of condonation of delay in seeking registration was not available. 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 societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in section 11 to 13 have been duly fulfilled by the said trust. The benefit of retrospective application alone could be the intention 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 specific reasons. The statute also goes on to provide that no action u/s147 could be taken by the AO merely for nonregistration of trust for earlier years. 7.2 When section 12A of the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 present assessee under consideration. 7.4. Taking into account the above facts and circumstances of the issue, we are of the view that the 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 authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for all the assessment years 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, without prejudice to the fact of granting merely in principle registration by DIT(E). ii) With effect from the Assessment Year 2009-10, the advancement of any object of general public utility other than relief of the poor, education and medical relief as defined 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 ..... 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