TMI Blog2017 (11) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... 10-11 and 2011-12. Accordingly appeal of the assessee is allowed. - I.T.A. No. 128/Vizag/2014, I.T.A. No. 129/Vizag/2014 - - - Dated:- 30-6-2017 - Shri V. Durga Rao, Judicial Member And Shri D. S. Sunder Singh, Accountant Member Appellant by : Shri C Subrahmanyam, AR Respondent by : Shri R. S. Aravindakshan, DR ORDER Per D. S. Sunder Singh, Accountant Member Both these appeals are filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) [CIT(A)], Visakhapatnam in ITA No. 0442/2012-13/ACIT C-5(1), Vsp/2013-14, ITA No.0443/2012- 13/ACIT C-5(1), Vsp/2013-14 dated 14.02.2014 for the A.Y.2010-11 and 2011-12. Issues in both the appeals are identical, hence they are clubbed, heard together and disposed off in a common order for the sake of convenience. All the grounds of appeal including the additional ground filed by the assessee are related to the registration u/s 12A of Income Tax Act. 2. The assessee is engaged in the activity of running the educational institutions and registered as a society with the Registrar of Societies on 23.08.2007. The assessee s gross receipts were exceeded ₹ 1 crore, therefore, the assessee sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessments were completed after granting the registration vide order dated 19.02.2013 and 25.02.2013 and according to the Ld.AR sub section(2) of section 12A would apply to the assesses s case and income should be exempt. The Ld.A.R relied on the Hon ble Supreme Court judgement in 224 ITR 677 and 367 ITR 466 and the decision of Hon ble Kolkata ITAT- C Bench in the case of Sree Sree Ramakrishna Samity reported in (2016) 156 I.T.D 0646. According to the Ld. AR, though the proviso was inserted w.e.f. 1.10.2014, following the decision of Hon ble ITAT Kolkata and the ratios of Hon ble Supreme Court s decisions cited (supra) the amendment should be made applicable retrospectively and the benefit of section 11 and 12 should be extended to the assessee. 4. On the other hand, the Ld.DR argued that the legislature has curtailed the powers of CIT, to accord approval from the retrospective dates to keep tab on the societies to implement the provisions of I.T. Act meticulously and to prevent the misuse of exemptions without payment of taxes. The proviso was inserted to sub section 2 of Section 12A w.e.f. 01.10.2014, and is not clarificatory in nature. Therefore, it cannot be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Officer followed the decision of ITAT Kolkata and held that the benefit u/s 11 and 12 would be available to the assessee for the pending assessments. The Ld.AR further brought to our notice, the observation of Hon ble Supreme Court in the case of Allied Motors P. Ltd. Vs CIT in 224 ITR 677 which reads as under : 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. 4.1 We extract the relevant paragraphs of Hon ble Kolkata ITAT decision in the case of Sree Sree Rama Krishna Samity which reads as under : 6.2 We find that the objects of the assessee society are charitable in nature within the meaning of section 2(15) of the Act on which fact there is absolutely no dispute. It is pertinent to note that the registration u/s 12AA of the Act was granted to the assessee on 29.10.2010 with effect from 1.4.2010. Admittedly, the notice u/s 148 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities of the trust had remained the same in preceding assessment years also i.e Asst Years 2003-04 to 2008-09. Though this first proviso to section 12A(2) talks about pendency of assessment proceedings, it is relevant to get into the definition of the term 'assessment' in section 2(8) of the Act, wherein it is defined as assessment includes reassessment . Hence even reassessment proceedings that were pending would also come under the ambit of the first proviso to section 12A(2) of the Act. 6.5 The second proviso to section 12A(2) also provides that no action u/s 147 of the Act shall be taken merely for non-registration of trust or institution. Reading this proviso with the first proviso to section 12A(2) and applying the Rule of Harmonious Construction, it could safely be concluded that the legislature in its wisdom had only brought this proviso to prevent genuine hardship that could be caused on the assessee due to non-registration u/s 12AA of the Act and accordingly in our opinion, the provisos to section 12A(2) of the Act is to be construed as retrospective in operation. 6.6 The third proviso to section 12A(2) of the Act also provides that the first and seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention 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 Learned AO, unless the registration granted earlier is cancelled or refused for specific reasons. The statute also goes on to provide that no action u/s 147 could be taken by the AO merely for non-registration of trust for earlier years. 6.9 With regard to the arguments of the Learned DR that donations received by assessee falls under the definition of income u/s 2(24)(iia) of the Act, we would like to state that income definition is an inclusive definition. An inclusive definition extends the specific meaning given in the stated items by the general meaning as commonly understood by the said expression which is defined in a statute. The word income as is commonly understood does not include any donation specifically meant for utilization for acquiring, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y three judges of the Supreme Court The departmental understanding also appears to be that section 43B, the proviso and Explanation 2 have to be read together as expressing the true intention of section 43B. Explanation 2 has been expressly made retrospective. The first proviso, however, cannot be isolated from Explanation 2 and the main body of section 43B. Without the first proviso, Explanation 2 would not obviate the hardship or the unintended consequences of section 43B. The proviso supplies an obvious omission. But for this proviso the ambit of section 43B become unduly wide bringing within its scope those payments, which were not intended to be prohibited from the category of permissible deductions. In the case of Goodyear India Ltd. v. State of Haryana (1991) 188 ITR 402, Supreme Court said that 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. As observed by G.P. Singh in his Principles of Statutory Interpretation, 4th Edn., Page 291, It is well settled that if a statute is curative or merely declaratory of the previous law, retr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors. CIT v. J.H. Gotla [1985] 156 ITR 323/23 Taxman 14j (SC) If the purpose of a particular provision is easily discernible from the whole of the scheme of the Act which in this case, is to counteract the effect of transfer of assets so far as computation of income of the assessee is concerned, then bearing that purpose in mind, we should find out the intention from the language used by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the society, in which event, the donations received thereon would take the character of revenue receipts requiring to be credited in the income and expenditure account for utilization towards charitable objects thereon. Hence we hold that in any case, the donations received by the assessee society cannot be brought to tax in the assessment. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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