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TMI Blog2016 (6) TMI 1237X X X X Extracts X X X X X X X X Extracts X X X X ..... ent made in sec. 11(2) by Finance Act, 2014 are not applicable in the applicant's case as the assessment proceedings are not pending before the AO. 2. The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in directing to tax the net surplus of Rs. 3,64,199/- at MMR as against the normal rate applicable to AOP. ITA No. 781/JP/2015 : 1. The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in not giving the benefit of sec. 11 and 12 of the IT Act, 1961 for the reason that the appellant trust is not registered u/s 12AA of the IT Act, 1961 in as much as the registration u/s 12AA was granted w.e.f. 01.04.2011. He has further erred in holding that amendment made in sec. 11(2) by Finance Act, 2014 are not applicable in the applicant's case as the assessment proceedings are not pending before the AO. 2. The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in holding that income of the appellant is to be taxed at MMR as against the normal rate applicable to AOP. Ground No. 1 & 2 are inter connected, therefore, both these grounds in both the appeals are being disposed off together. 2. Briefly stated the facts are that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as supported the order ld. CIT (A) on this issue. 3.3. We have heard rival contentions, perused the material on record and gone through the orders of the authorities below. The submissions of the assessee are as under :- "There is no dispute as to the fact that assessee trust is granted registration u/s 12AA on 28.12.2011 by CIT, Alwar w.e.f. 01.04.2011. As on the date of granting of registration, the assessment proceedings were pending in as much as the assessment was completed on 25.03.2013. The amendment made by the FA, 2014 by insertion of proviso to sub section 2 of section 12A effective from 01.10.2014 is to remove the 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. The Explanatory Notes to the provisions of the Finance (No. 2), 2014 as given in CBDT Circular No. 01/2015 dated 21.1.2015 explained the purpose of this amendment as under:- "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 li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coterminous with that of the AO. He can do what the AO could do and can also direct him to do what he has failed to do. The Ahmedabad Bench in case of Shree Bhanushali Mitra Mandal Trust Vs. ITO (2016) 47 CCH 197 at para 7.3 and 7.4 held as under:- "7.3 When section 12A of the Act was amended by introducing new provisos to sub-section (2) of Section 12A by Finance Act, 2014 with effect from 01.10.2014, 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 AO 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 of that term as envisaged under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the public generally and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. Allied Motors Pvt. Ltd. Vs. CIT 224 ITR 677 (SC) This case relates to section 43B, which was inserted in the statute book from 01.04.84. The proviso was added w.e.f. 01.04.88. It was held that proviso is inserted to remove unintended consequences and therefore has a retrospective effect. The Apex Court at page 686 held as under:- "The rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. 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 section as a whole." CIT Vs. Alom Extrusions Ltd. 319 ITR 306 (SC) Relax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the department as well as the facts of the case are same and therefore submission given above applies to this AY also." The contention of the assessee was not accepted by the ld. CIT (A) by observing as under :- "4.10. The appellant was not registered u/s 12AA of the IT Act and the amendments made by the Finance Act, 2014 are applicable to the pending assessments, which is therefore not applicable to the present case. In view of the above discussion, I do not find any justification in the action of the AO in treating the total receipts of the trust as income of the appellant. Accordingly, I hold that it would be just and fair to allow the expenses incurred for earning of such income. The claim of the appellant with regard to the taxation of surplus u/s 28 of the IT Act is not correct and is contrary to the facts on record. The trust in the absence of a registration under the relevant provisions of the IT Act has to be assessed as an AOP and can not be assessed as a business entity. Thus, I hold that AO was justified in treating and taxing the income of the trust in the capacity of an AOP, which is to be taxed at the maximum marginal rate of taxation." The issue, which require o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 coterminous with that of the assessing officer 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 of that term as envisaged under the proviso. It follows there-from that the assessee which obtained registration u/s 12AA of the Act during the pendency of appeal was entitled for exemption claimed u/s 11 of the Act. 7.4. The 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 tru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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