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2016 (3) TMI 1110 - ITAT COCHIN

2016 (3) TMI 1110 - ITAT COCHIN - TMI - Registration u/s 12A - assessee contended before the CIT (A) that once the registration u/s 12A of the Act was granted to an assessee even at a later date, the same was applicable for the pending assessment proceedings for the earlier assessment years - Held that:- 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 .....

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ose for which such an amendment to s. 12A of the Act enacted,in our view, would be defeated. - Decided in favour of assessee. - 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. .....

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(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. Briefly, the facts of the issues are as under: The assessee - a Poothotta Branch No.1103 of the Sree Narayana Dharma Paripalana Yogam [SNDP] - is running educational institutions and also engaged in temple activities by renti .....

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furnished its returns of income, admitting Nil income. After due consideration of the assessee s contentions and for the reasons recorded in the respective assessment orders, the AO came to the conclusion that since the assessee was only affiliated to SNDP Yogam and was not independently registered either under the relevant Kerala State Act or the Income-tax Act, the provisions of s.167B of the I.T. Act were applicable and, thus, the whole incomes of the assessee from all the institutions were t .....

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g into account the submissions of the assessee as enumerated in his findings, the CIT (A) had confirmed the stand of the AO on the issues. The relevant portions of the reasoning of the CIT (A) are reproduced as under: 4.3………It is seen that the assessee was not filing its income-tax returns giving an impression that as if its accounts were consolidated with the accounts of the parent company. However, during the course of assessment proceedings, the assessing officer observed .....

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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 registr .....

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therein that there is a chance that registration would be granted to the assessee with retrospective effect by the CBDT. Since the assessee does not have registration under section 12A in all these assessment years, exemption under section 11 cannot be given to the assessee. 4.3.1. The assessee has also contended in the additional grounds that since it is running individual education institution the assessee is also eligible for exemption u/s 10(23C) (iiiad). However, it is seen that the total r .....

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ection 10(23C)(iiiad), it has to be a university or educational institution existing solely for educational purposes, whereas this branch of SNDP Yogum has diversified activities in line with the main SNDP Yogum s objects, and it is involved in empowering the weak and needy through education and is also involved in temple activities and renting of auditorium etc., Therefore, the activities cannot be treated as solely for educational purposes and AO is correct in not allowing exemption under sect .....

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ples and, hence, the assessment of income of the assessee at ₹ 72,00,091/-, ₹ 77,75,0215/-, ₹ 89,63,810/- and ₹ 1,30,45,664/- for AYs 2006-07, 2007-078, 2008-09 & 2009-10 respectively is confirmed. 6. Aggrieved, the assessee has come up before us 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: ( .....

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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 assessing officer as on the date of such regis .....

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rust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA (iii) That the assessee filed 12A application before the CIT vide letter dt.30.1.2013 and the registration was granted vide order dt.29.7.2013; (iv) That the assessments u/s 143 (3) r.w.s. 147 of the Act were concluded for the AY 2006-07 on 23.03.2013, AYs 2007-08, 2008-09 and 2009-10 on 19.03.2013 and for the AY 2011-12 on 12.3.2014 respectively. That the returns of .....

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As regards the second condition, there was no dispute that the objectives and activities of the trust or institutions remained the same for all the preceding AYs. As such, the amendment in s. 12AA is directly applicable in the assessee s case; 6.1 The learned AR had, further, submitted that the earlier Bench of this Tribunal, in the case of Dr. CT. Eapen Trust Lake View v. ITO, Ward 1, Kollam reported in 2014 (8) TMI 278 / (2014) 34 ITR (Trib)318 (ITAT [COC]) by following the decisions in (i) J .....

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t 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 am .....

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der consideration require to be dismissed. 7. We have carefully considered the rival submissions, perused the relevant materials on record and the case law on which the learned AR had placed strong reliance. The primary issue for our consideration is whether the CIT (A) is justified in confirming the AO s action, for all the assessment years under consideration, in assessing the entire incomes of the assessee from all the institutions at the maximum marginal rate. In this context, it is appropri .....

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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 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 sha .....

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duce the explanatory note to the provisions of the Finance (No.,2) Act 2014 as given in CBDT No.1/15 dated 21.1.2015 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 availabl .....

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, 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 .....

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ontinuation 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 authority should be deemed to be assessment proceedings pending before the assessing officer within the meaning .....

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istration 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, .....

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AA 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, .....

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g 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 authority as in the case under consideration, the very purpose for which such an amendment to s. 12A of the Act enacted,in our view, would be defeated. We are also supported by the order of Kolkata Bench of ITAT in case of Sree Sree Ramkrishna Samity vs. DCIT (ITA No. 1680/2012, order dated 09.10.2015) where it was held that amendment .....

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e treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in operation with effect from the date when the condition of 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. Further, the Ko .....

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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). 7.5 In light of the aforesaid reasoning and order of the Tribunal in case of Sree Sree Ramkrishna Samity (supra), we direct the Director of Income-tax ( .....

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