Income Tax Appellate Tribunal - Amritsar
Income Tax Officer (Exemptions), vs Guru Harkrishan Public School, ... on 18 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
(CAMP AT JALANDHAR)
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND
SH. T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A No. 422 (Asr)/2016
Assessment Year:2011-12
ITO (Exemption) Vs. Guru Harkrishan Public School,
Ward, Jalandhar Opp. Rail Coach Factory,
Kapurthala.
PAN: AAITS-2981C
(Appellant) (Respondent)
Cross Objection No. 19 (Asr)/2016
Arising out of ITA No.422(Asr)/2016
Assessment Year: 2011-12
Guru Harkrishan Public Vs. ITO (Exemption)
School, Ward, Jalandhar
Opp. Rail Coach Factory,
Kapurthala.
PAN: AAITS-2981C
(Cross Objector) (Respondent)
I.T.A No. 423 (Asr)/2016
Assessment Year: 2011-12
ITO (Exemption) Vs. Guru Harkrishan Public School,
Ward, Jalandhar Sultanpur Lodhi, Kapurthala.
PAN: AABAS-2513A
(Appellant) (Respondent)
Cross Objection No. 20(Asr)/2016
Arising out of ITA No.423(Asr)/2016
Assessment Year: 2011-12
Guru Harkrishan Public Vs. ITO (Exemption)
School, Sultanpur Lodhi, Ward, Jalandhar
Kapurthal.
PAN: AABAS-2513A
(Cross Objector) (Respondent)
2 ITA Nos.422 & 423 (Asr)/2016
C.O.Nos.19 & 20 (Asr)/2016
Asst. Year: 2011-12
Appellant by: Sh. Surinder Mahajan(CA.)
Respondent by: Sh. Bhawani Shankar (DR)
Date of hearing: 16.01. 2017
Date of pronouncement: 18.01.2017
ORDER
PER T. S. KAPOOR (AM):
These are two appeals filed by Revenue against the separate orders of Ld. CIT(A), Jalandhar, both dated 08.04.2016, for Asst. Year: 2011-12.
The assesses have also preferred Cross Objections to the appeals filed by the Revenue.
2. The Revenue as well as assessee has taken following common grounds of appeals and cross objections.
Grounds of appeal in ITA No.422(Asr)/2016 "(i) That the assessee society u/s 12AA(I)(b)(i) by the Commissioner of Income Tax dated 25.09.2012 with effect from 01.04.20111 i.e. from assessment year 2012-13 and subsequent years. Thus assessee's claim for exemption of income u/s 11 & 12 of Income Tax Act, 1961 is not sustainable, there being no registration u/s 12AA of the I.T. Act 1961 for the year under consideration.
(ii) That the annual receipts of the assessee as per income & expenditure account, audit report in form No 10B and books of account are of Rs. 1,06,01,567/- and claim of exemption u/s 10(23c)(iiiad) is therefore also not allowable. It is the afterthought of the assessee society to evade tax.
(iii) That the assessee trust earning profits from running book shop, earning bank interest and canteen rent etc. That capital assets have been purchased of surplus which also amounts to utilization for charitable purposes, but the surplus has to be maintained as reasonable within the range of 6% to 15% as per the observations of Shri Sinha Hon'ble Judge of the Supreme Court (In the case of P A Andar and other V/s State of Maharashtra (2005)/6 SCC 537). To earn surpluses of the ranges of 39%, 37% and 29% clearly 3 ITA Nos.422 & 423 (Asr)/2016 C.O.Nos.19 & 20 (Asr)/2016 Asst. Year: 2011-12 manifests a high profit motive which not shows the charitable activities of the assessee trust.
Grounds of Cross Objections No.19(Asr)/2016
(i) That on the facts and circumstances of the case, Learned Commissioner of Income-Tax(Appeals)-2, Jalandhar, has rightly held that income of the assessee trust is exempt u/s 11/12 of the Act since at the time of registration u/s 12AA of the Act, assessment proceedings for the year under consideration were pending before the learned Assessing Officer.
(ii) That Learned CIT(A) in para 8 page 25 of the appellant order has held that since assessee trust is entitled for exemption u/s 11/12 of the Act, it is not considered necessary to adjudicate on grounds of appeal no.2,3,4,5 & 6. Grounds of appeal not adjudicate by the learned CIT(A) as detailed below be adjudicated.
3. The appeals where heard together, therefore, for the sake of convenience, a common and consolidated order is being passed.
4. The Ld. DR, at the outset, submitted that the CIT(A) has wrongly allowed relief to the assessee by allowing its claim for exemption u/s 11 /12 of the Income Tax Act, as registration granted to the assessee u/s 12AA was for Asst. Year 2012-13 and subsequent years and during this year i.e., Asst. Year 2011-12, the assessees were not having registration u/s 12AA of the Act. The Ld. DR further submitted that exemption u/s 10(23C) (iiiad) was also not allowable to the assessees.
5. The Ld. AR, on the other hand, submitted that assesses were no doubt granted exemption vide order dated 25.09.2012, however, the assesses were eligible for exemption for the present years also as the assessment for these years was pending before the Assessing Officer and in view of the amended provisions of Sec.12A of the Act w.e.f. 1.10.2014, 4 ITA Nos.422 & 423 (Asr)/2016 C.O.Nos.19 & 20 (Asr)/2016 Asst. Year: 2011-12 these were applicable in the case of assessees also. The ld. AR submitted that detailed submissions were made to Ld. CIT(A) and an additional ground was taken to consider as to whether the amendment brought in Sec.12A by Finance Act 2014 were applicable to the year under consideration or not and the Ld. CIT(A) relying on the case laws of Allied Motors (P.) Ltd. Vs. CIT 224 ITR 0677(SC) and further juridical pronouncements has held that the amendment brought by Finance Act, 2014 was not retrospective in nature and therefore, applicable to the assessee company.
6. As regards Cross Objections filed by the assessee, the Ld. AR submitted that the Ld. CIT(A) had not adjudicated on the grounds taken by assessee for allowing exemption u/s 10(23C)(iiiad) of the Act, therefore, the assessees has preferred these grounds as Cross Objections to the appeals filed by Revenue.
7. The Ld. DR, on the other hand, relied on the order of authorities below.
8. We have heard the rival parties and have gone through the material placed on record. We find that assesses were running schools in District Kapurthala and had filed returns of income declaring total nil income after claiming exemption u/s 11/12 of the Act. During he assessment proceedings, the Assessing Officer required the assessees to explain as to why exemption claimed by assessees should not be 5 ITA Nos.422 & 423 (Asr)/2016 C.O.Nos.19 & 20 (Asr)/2016 Asst. Year: 2011-12 disallowed as it was not registered u/s 12A/12AA of the Act. In response thereto the assessees submitted that exemption to the trust be allowed u/s 10(23C)(iiiad) of the Act, on the ground that assessee trusts were running as an educational institutions as such it was entitled for exemption of income under this section as the receipts of the assesees were less than Rs.1,00,000,00/. However, the Assessing Officer rejected the claim of assessee u/s 10(23C)(iiiad) of the Act on the ground that assessee had not made such claim while filing returns of income. The claim of such exemption was also rejected as the Assessing Officer held that application filed by assessee for subsequent years for claim of exemption u/s 10(23C)(iiiad) of the act was rejected by the Commissioner of Income Tax Act. The Assessing Officer further held that receipts of the assessee trusts during the year under consideration exceeded Rs.1,00,000,00/-. Therefore, in view of these facts and circumstances, the Assessing Officer held that the claim of the assessee u/s 11/12 and U/s 10(23C)(vii) of the Act was not tenable.
9. Aggrieved the assessee filed appeals before Ld. CIT(A) and submitted various submissions. The assessees also filed additional grounds of appeal, which is reproduced herein below.
"That on the facts and circumstances of the case, assessee has to exemption under section 11 of the Act because of amendment brought in section 12A by Finance Act 2014 w.e.f.01.10.2014 by way of insertion of first proviso to section 12A(2) of the Act which reads as under:
"Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 & 12 6 ITA Nos.422 & 423 (Asr)/2016 C.O.Nos.19 & 20 (Asr)/2016 Asst. Year: 2011-12 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:"
The Ld. CIT(A) adjudicated on the additional grounds of appeal and held that assesses were eligible for exemption u/s 11/12 of the Act. He however did not adjudicate on the other grounds of appeal which included the claim of assessee u/s 10(23C)(iiiad) of the Act. The Ld. CIT(A) in this respect held that since the assesses were held to be entitled for exemption u/s 11/12 of the Act, therefore, he did not consider necessary to adjudicate on the claim of the assessee u/s 10(23C) (iiad) of the Act.
10. Aggrieved both parties are in appeal before us.
11. The Revenue is in appeal against the action of Ld. CIT(A) by which he had allowed exemption u/s 11&12 of the Act, whereas assessee has filed Cross Objections against the order of CIT(A) on the ground that Ld. CIT(A) has not adjudicated on grounds relating to exemption u/s 10(23C)(iiiad) of the Act. We find that Ld. CIT(A) has passed similar orders in two appeals and whereby he has decided the additional grounds of appeal in favour of assessee and has held that assessees were entitled for exemption u/s 11/12 of the Act as amendment brought in by the Finance Act, 2014 was retrospective in nature because the assessments were pending before the Assessing Officer. It is an 7 ITA Nos.422 & 423 (Asr)/2016 C.O.Nos.19 & 20 (Asr)/2016 Asst. Year: 2011-12 undisputed fact that assessments in these cases were pending before the Assessing officer on the date of registration of trust i.e., 25.09.2012 as is apparent from the following charts.
Sr. No. Particulars Date
1. Application under section 12A(a) of the Act filed before 30.03.2012
C.I.T., Jalandhar-II, Jalandhar
2. Return for A.Y. 2011-12 filed with income tax Dept. 29.09.201
3. Case for A.Y. 2011-12 selected for scrutiny & notice 25.09.2012
under section 143(2) of the Act issued
4. Order under section 12AA(l)(b)(i) of the Act passed by 25.09.2012
C.I.T., Jalandhar-II, Jalandhar
5. Assessment for the A.Y. 2011-12 completed by Dy. 28.03.2014
C.I.T., Circle-IV, Jalandhar
We further find that CBDT vide Circular No.01/2015, dated 21.01.2015 has issued explanatory notes to provisions of Finance Act (No.2) Finance Act, 2014 which are reproduced below.
"8. Applicability of the registration granted to a trust or institution to earlier years 8.1 The provisions of section 12A of the Income-tax Act, before amendment by the Act, provided that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA of the said Act has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively.
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 available.
8.3. In order to provide relief to such trusts and remove hardship in genuine cases, section 12A of the Income-tax Act has been amended to provide that in a case where a \ trust or institution has been granted registration under section 1 2AA of the Income-tax Act, the benefit of sections 11 and 12 of the said Act shall be available in respect of any 8 ITA Nos.422 & 423 (Asr)/2016 C.O.Nos.19 & 20 (Asr)/2016 Asst. Year: 2011-12 income derived from property held under trust in any assessment proceeding for an 1 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 re earlier assessment year are the same as those on the basis of which such registration been granted.
8.4. Further, it has been provided that no action for reopening of an assessment section 147 of the Income-tax Act shall be taken by the Assessing Officer in the c. such trust or institution for any assessment year preceding the first assessment year which the registration applies, merely for the reason that such trust or institution has obtained the registration under section 12AA for the said assessment year.
8.5..However, the above benefits would not be available in the case of any trust institution which at any time had applied for registration and the same was refused under section 12AA of the Income-tax Act or a registration once granted was cancelled.
Applicability: - These amendments take effect from f' October, 2014. "
We further find that the amendment in Sec.12A(2) of the Act were brought in the statute with a view to grant tax benefit to genuine charitable trust and societies carrying on genuine charitable objects in the earlier years and which were fulfilling substantive conditions stipulated in Sec.11 to 13 of the Act. The Hon'ble ITAT Kolkata Bench in the case of Sree Sree Ramkrishna Samity vs. DCIT vide order dated 09.10.2015 has held that "c) insertion of provisions, the proviso to Sec.12A(2) of the Act has to be construed as retrospective in operation.
"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."
As the assessments were pending on the date of registration, the Ld. CIT(A) has rightly allowed exemption u/s 11 of the Act. For the sake of 9 ITA Nos.422 & 423 (Asr)/2016 C.O.Nos.19 & 20 (Asr)/2016 Asst. Year: 2011-12 completeness the operative part of the Ld. CIT(A) order is reproduced herein below.
"6.6 On careful consideration of the submissions of the assessee and on the basis of relevant judicial pronouncements relied upon by the assessee trust more particularly of the Honourable ITAT, C-Bench, Kolkata which is directly on the issue and as that I have not come across any judicial pronouncement which is contrary to that as of today, I am of the view that there is a lot of force in the arguments put forth by the learned AR of the assessee. I am, therefore, in complete agreement with the arguments of the learned AR of the assessee that the first proviso to section 12A(2) of the Act is applicable to trust/institutions which have been granted registration under section 12AA of the Act even prior to amendment provided assessments are pending in their cases at the relevant time. I am also of the opinion that the provisions of section 11/12 of the Act shall apply in respect of any income derived from any 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. I am also in agreement with the arguments of the learned AR of the assessee trust 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 interpretation, requires to be treated as retrospective, in operation so that a reasonable interpretation, can be given to the section as a whole. So, insertion of first proviso to section 12A(2) of the Act w.e.f. 01.10.2014 should be read as a retrospective in operation w.e.f. the date when the condition of eligibility for exemption under section 11/12 of the Act as mentioned in section 12A of the Act provided for registration under section 12A of the Act as per condition for applicability of section 12A of the Act. This argument of the learned AR of the assessee trust also gets strengthened from the judgment of the Honourable Supreme Court in the case of ALLIED MOTORS(P) LTD. ETC. vs. COMMISSIONER OF INCOME TAX (SC), COMMISSIONER OF INCOME TAX vs. SURESH N. GUPTA (SC), CIT VS VATIKA TOWNSHIP P LTD, COMMISSIONER OF INCOME TAX vs. J.H. GOTLA (SC) and CBDT circular No. 1/2015 dated 21.01.2015. Furthermore , the case of Sree Sree Ramkrishna Samity vs. DCIT (ITAT Kolkata) dated 09.10.2015 quoted by the learned Ld. A.R of the assessee trust as per which proviso to section 12A(2) of the Act has to be construed retrospective in operation is squarely applicable to the case of the assessee trust. I am, therefore of the considered opinion that the assessee is entitled to exemption under section 11 and 12 of the Act. Respectfully relying upon the judicial pronouncements of the Honourable Supreme Court and also that of the Plonourable Kolkata Bench as relied upon by the learned AR of the assessee trust, I am 10 ITA Nos.422 & 423 (Asr)/2016 C.O.Nos.19 & 20 (Asr)/2016 Asst. Year: 2011-12 of the considered opinion that the income of the assessee trust is exempt under section 11/12 of the Act since at the time of registration under section 12AA of the Act, the assessment proceedings for the year under consideration were pending before the Assessing Officer. The Assessing officer is, therefore, directed to allow exemption under section 11/12 of the Act to the assessee trust. In the result, additional ground of appeal taken by the assessee is allowed."
We find that Ld. CIT(A) has passed a reasoned and speaking order and we do not find any infirmity in the same. In view of the above appeals filed by Revenue are dismissed.
12. As regards the Cross Objections filed by the assessee, we find that Ld. CIT(A) has not adjudicated on the grounds raised by assessee with regard to exemption u/s 10(23C)(iiiad) of the Act and in the absence of non adjudication by Ld. CIT(A), we cannot adjudicate on the grounds taken by assessees. Therefore, Ld. CIT(A) is directed to adjudicate on the grounds taken by assessee in Ground Nos.2 to 6 of appeals filed before him. In view of the above, the Cross Objections filed by assessee are allowed for statistical purposes.
13. In nutshell, the appeals filed by Revenue are dismissed and Cross Objections filed by assesses are allowed for statistical purposes.
Order pronounced in the open Court on 18.01. 2017.
Sd/- Sd/-
(A.D. JAIN) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 18.01.2017.
/PK/ Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
11 ITA Nos.422 & 423 (Asr)/2016
C.O.Nos.19 & 20 (Asr)/2016
Asst. Year: 2011-12
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By Order