TMI Blog2016 (6) TMI 1237X X X X Extracts X X X X X X X X Extracts X X X X ..... roved on enquiry to have been received from the claimed donors and utilized for the specific purpose (construction of old age home) for which they were received. In conclusion, we hold that the insertion of the proviso to section 12A(2) of the Act has to be construed as retrospective in operation.” In the present case also the assessee was granted registration under section 12AA of the Act and assessment was not pending before the AO but appeal against the order of AO was pending before ld. CIT (A). It is a settled position of law that ld. CIT (A) has coterminous power with the AO. The benefit of exemption has been denied solely on the ground that assessee was not registered u/s 12AA of the Act. Thus we set aside the order of ld. CIT (A) and direct the AO to grant the benefit of exemption under section 11 of the Act. This ground of the assessee is allowed. - ITA No. 780 & 781/JP/2015, ITA No. 834 & 835/JP/2015 - - - Dated:- 7-6-2016 - T. R. Meena (Accountant Member) And Kul Bharat (Judicial Member) For the Assessee : P. C. Parwal, (C.A.) For the Revenue : Raghuvir Singh Dugar (Addl.CIT) ORDER Kul Bharat (Judicial Member) These are four cross ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the assessee. 2.1. On appeal before the CIT(A), it was explained that assessee has incurred expenditure of ₹ 17,64,451/- for the objects of the trust. The assessee is granted registration u/s 12AA by the CIT, Alwar on 28.12.2011 w.e.f. 01.04.2011. Section 12A(2) is amended by Finance Act, 2014 w.e.f. 01.10.2014 whereby a proviso is inserted to provide 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 AO as on the date of such registration if the objects and activities of such trust or institution remain the same for such preceding assessment year. The registration was granted by CIT w.e.f. 01.04.2011 whereas the assessment order was passed on 25.03.2013, therefore, assessment was pending at the time of grant of registration u/s 12A. Hence, the income of the assessee ought to be assessed by applying the provisions of section 11 12. The Ld. CIT (A) held that the appellant was not registered u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 12 of the said Act shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. From the above it can be noted that the amendment was brought in the statue to remove unintended and undue hardship caused to the genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and therefore this amendment should be given retrospective effect. For this reliance is paced on the following cases:- Sree Sree Ramkrishna Samity Vs. DCIT (2015) 44 ITR (Trib.) 678 (Kolkata) The Tribunal at Para 6.10 held as under:- 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AA 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. In the present case also, when the amendment was made in section 12A of the Act by the FA, 2014, the appeal was pending before the first appellate authority. During such pendency, the assessee was granted registration u/s 12AA of the Act on 28.12.2011 w.e.f. 01.04.2011. Thus, in view of the above case law, CIT(A) has power to grant registration to assessee for the year under consideration as appeal was pending before him and an assessment proceeding which is pending in appeal before the appellate authority should be deemed to be assessment proceedings pending before the AO within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e retrospectively w.e.f. 1st April, 1988, i.e., the date of insertion of first proviso. If the contention of the Department that the amendments are effective prospectively is accepted, it would cause hardship and indivious discrimination among the assessees. In view of above, the Ld. CIT(A) has erred in not allowing the benefit of section 11 12 to the assessee and therefore the AO be directed to compute the income of the assessee u/s 11 12 of the Act. So far as Ground of the department and Ground No.2 of the assessee is concerned, any expenditure incurred by a trust, be it a capital or revenue expenditure has to be allowed as a deduction against the receipt in as much as the construction expenses incurred by the assessee has not resulted into creation of any asset in the hands of the trust as is evident from the Income Expenditure A/c and the Balance Sheet enclosed herewith. The Ld. CIT(A) has therefore rightly held that the trust is to be assessed as an AOP and not as a business entity. However, the Ld. CIT(A) has incorrectly held that the surplus is to be taxed at MMR. In holding so he ignored the provisions of section 164(2) which provides that in case the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.13. We hold that since the only reason for denial of exemption u/s 11 was absence of registration u/s 12AA (which was granted to assessee society on 29.10.2010 with effect from 1.4.2010) for the relevant assessment years and on no other ground, the benefit of change in law as above by Finance Act 2014 should be available and for all the years, the benefit of exemption should be available on the date of registration as all the assessments were pending as shown above. In this connection, it requires mention specifically that all the receipts of the donation were proved on enquiry to have been received from the claimed donors and utilized for the specific purpose (construction of old age home) for which they were received. In conclusion, we hold that the insertion of the proviso to section 12A(2) of the Act has to be construed as retrospective in operation. 3.4. In the present case also the assessee was granted registration under section 12AA of the Act and assessment was not pending before the AO but appeal against the order of AO was pending before ld. CIT (A). It is a settled position of law that ld. CIT (A) has coterminous power with the AO. The benefit of exemption h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provisions which provide for exemptions 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 stage. Being procedural in nature, in my 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. After considering the facts of the present case and in view of the binding precedents, we set aside the order of ld. CIT (A) and direct the AO to grant the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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