Income Tax Appellate Tribunal - Amritsar
Francis Convent School, Jalandhar vs Asstt. Commissioner Of Income-Tax, ... on 21 February, 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
M.A Nos.1,2 & 3(Asr)/2017
Arising Out of ITA Nos.746,747 & 748 (Asr)/2013
Assessment Years: 2005-06, 2006-07 & 2010-11
I.T.A Nos. 746, 747 & 748 (Asr.)/2013
Assessment Years: 2005-06,2006-07 & 2010-11
PAN: -AACTS-9035M
St. Joseph's Convent School, Vs. Asstt. Commissioner of Income
Phagwara C/O Bishop House, Tax Circle-III,
Civil Lines, Jalandhar.
Jalandhar.
(Appellant) (Respondent)
Appellant by: Sh. G.S. Syal (Adv.)
Respondent by: Sh. Smt. Balwinder Kaur (DR)
Date of hearing: 25.01.2017
Date of pronouncement: 21.02.2017
ORDER
PER T. S. KAPOOR (AM):
These three appeals alongwith three M.A.s have been filed by Assessee against separate orders of Learned CIT(A), Jalandhar, all dated 15.10.2013.
2. The appeals were earlier dismissed for being defective vide a consolidated order of the Hon'ble Tribunal dated 18.03.2014 as necessary defects pointed out to the assessee were not rectified within a reasonable period of time.
2M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011
3. The Ld. A.R. at the outset submitted that the assessee had deposited fee under wrong head and despite best efforts could not get the mistake rectified from the bankers and therefore the assessee has deposited fresh fee. The Ld. AR also submitted that the name mentioned in the order dismissing the appeals of assessee has been wrongly mentioned as St. Francis Convent School, Phagwara, instead of Joseph's Convent School, Phagwara and it was submitted that the name of the assessee be also rectified while disposing of the appeals. It was further submitted that while filing the appeals before Hon'ble Tribunal by oversight in form no. 36 the name was mentioned as St. Francis Convent School instead of St. Josheph's Convent School and therefore he filed another copy of form no. 36 with corrected name and it was requested that the same may be taken on record. The Ld. A.R. submitted that since the assessee has removed defects therefore, the order of the Tribunal dated 18.03.2014 be recalled and appeals be heard on merits.
4. The Ld. DR had no objection to recalling of the Tribunal order dated 18.03.2014, therefore, the said order was recalled and Ld. AR was directed to proceed with his arguments.
5. In view of the above the miscellaneous applications filed by Assessee are allowed and fresh corrected form no. 36 are taken on record.
3M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011
6. At the outset the Ld. AR submitted that the cases of the assessee are covered by the consolidated order of the Tribunal in case of various assessees vide order dated 26.09.2016 and filed a copy of the same. It was submitted that in the case decided by Hon'ble Tribunal, the different assessees had taken an additional ground of appeal and Hon'ble Tribunal had disposed off additional ground only in favour of Assessee. It was submitted that similar additional ground is being taken by the assessee and in this respect our attention was invited to copy of letter requesting for admission of additional ground of appeal. The Ld. DR had no objection for admission of additional ground and since it was a legal ground, therefore, it was admitted.
7. We have heard the rival parties and have gone through the material placed on record. We find that the assessee has raised the following additional ground of appeal:
"1. That on the facts and circumstances of the case and in law, the appellant having been granted registration under section 12A vide order dated 25.02.2013, therefore, the benefit of such exemption should be granted for year under consideration also in view of the amendment made in section 12A vide Finance (No.2) Act, 2014 the Income Tax Act ('the Act")' We find that similar ground was taken by different assessees in a bunch of cases decided by Tribunal on 26.09.2016 and the Hon'ble Tribunal vide this order had admitted the additional ground and had decided the issue in favour of assessee by holding as under:-4
M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011 "9. The Additional Ground is admitted, being based on the amendment made in Section 12A(2) of the Act, by virtue of Finance (No.2) Act, 2014, w.e.f. 01.10.2014, post passing of the impugned order.
10. Apropos the merits of the Additional Ground, the Ld. Counsel for the assessee has contended that as per the mandate of the amended Section 12A of the Act, the benefit of exemption should be granted to the assessee for the year under consideration, since the assessment proceedings for the said assessment year were pending as on 25.02.2013, the date on which the assessee was granted registration u/s 12A and since the objects and activities of the assessee remained the same as in the earlier years.
11. Per contra, the Ld. DR has submitted that the amendment introduced in Section 12A(2) of the Act, by virtue of Finance (No.2) Act, 2014, by way of the first proviso added to the section, specifically states that 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 assessment year immediately following the financial year in which an application for registration of the Trust or Institution is made by the person in receipt of the income, for which, assessment proceedings are pending before the Assessing Officer. According to the Ld. DR, since at the said relevant time, the assessment proceedings for the said assessment year were not pending before the Assessing Officer, the provisions of the first proviso to Section 12A(2) are not applicable to the case of the assessee.
Therefore, as per Ld. DR, the benefit of exemption cannot be granted to the assessee for the said assessment year.
12. In response to this, the Ld. Counsel for the assessee has contended that the assessment proceedings pending in appeal are deemed to be assessment proceedings pending before the Assessing Officer. For this proposition, the Ld. Counsel has placed reliance on the decisions in the cases of 'SNDP Yogam Vs. ADIT', (2016) 68 taxmann.com 152 (Cochin Trib) and 'Shree Bhanushali Mitra Mandal Trust', (2016) 68 taxmann.com 250 (Ahemedabad-Trib).
13. The Ld. DR has further submitted that in any case, the said first proviso has been inserted by Finance (No.2) Act, 2014 w.e.f. 01.04.2014 and as such, it is not applicable respectively.
14. For this, the Ld. Counsel for the assessee has, again, cited the decision in the case of 'SNDP Yogam', (supra).
15. We have heard the rival contentions of both the parties with reference to the merits of the additional ground. The relevant portion of Section 12A of the Act is as follows:-
"Section 12A-CONDITIONS as to registration of trusts, etc. (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely :--5
M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011 (aa) the person in receipt of the income has made an application for registration of the trust or institution on of after the 1st day of June, 2007 in the prescribed from and manner to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;
...... ......... .....
(2) Where an application has been made on or after the 1st day
of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:
Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of section 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 of institution remain the same for such preceding assessment year.
Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year".
16. Thus, as per the provisions of Section 12A, if a Trust or Institution has applied for registration on or after 01.06.2007 and such registration has been granted to it, the provisions of Sections 11 and shall not apply to its income. If the application for registration has been made on or after 01.06.2007, the provisions of Sections 11 and 12 shall apply for any assessment year preceding the assessment year immediately following the financial year in which the application for registration was made, for which year, the assessment proceedings are pending before the Assessing Officer as on the date of the registration and the objects and activities of the Trust or Institution remained the same as those on the basis of which the registration was granted. According to the second proviso to Section 12A(2), where for the assessment year immediately following the financial year in which the application for registration was made, the Trust or Institution is not registered, no action U/s 147 shall be taken for any assessment year.
17. The first issue before us is as to whether the two provisos to Section 12A(2) are applicable to all the appeals before us, respectively, as contended by the Ld. Counsel for the assessee, or whether, since the provisos have been brought in w.e.f. 01.10.2014 and they have not been made applicable retrospectively, the same are not applicable for earlier periods, as submitted by the department.
6M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011
18. Now, a bare reading of the first proviso to Section 12A (2) shows that it has not been made applicable retrospectively. It has been inserted in the Act w.e.f. 01.10.2014, by virtue of the Finance (No. 2) Act, 2014. Thus, ordinarily, it ought to be taken as applicable only prospectively, and not retrospectively. However, the law is well settled to the effect that if the proviso brought in as a procedural or beneficial one, intending to remove hardship, it is applicable retrospectively.
19. In 'C.B. Richards Ellis Mauritius Ltd. Vs. CIT', W.P.(C) No. 8359/2010, decided on 25.05.2012 (copy on record), it has been held that "procedural law, when amended or substituted, is generally retrospective and applies from the date of its enforcement and to this extent, it can be retrospective".
20. In 'Allied Motors (P) Ltd. Vs. ITO', 224 ITR 677 (SC), it has been held that a proviso, which is intended to remedy unintended consequences to make the provisions workable, a proviso which supplies and obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, is required to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole." It is, thus, trite that if a provision is curative or merely declaratory of the previous law, retrospective operation thereof is generally intended.
21. In 'CIT Vs. Vatika Township Pvt. Ltd', 367 ITR 466 (SC), the Constitutional Bench of the Hon'ble Supreme Court held that "if a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators' object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect."
22. In 'Government of India Vs. Indian Tobacco Association', [2005] 7 SCC 396, the doctrine of fairness was held to be a relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation.
23. In 'Vijay Vs. State of Maharashtra', [2006] 6 (SC) 286, the Hon'ble Supreme Court went to the extent of holding that where a law is enacted for the benefit of the community as a whole, even in the absence of a provision, the statute may be held to be retrospective in nature."
24. Now, undeniably, the assessment of income is a matter of procedure. Even the heading of Chapter (xiv) of the Act, which deals with assessment, itself is "PROCEDURE FOR ASSESSMENT". Likewise, grant of registration is also a procedural aspect, since registration is but a step-in-aid for exemption u/s 11. As such, the provisos to Section 12A(2) are also procedural.
25. So far as regards the bringing in of the first proviso to Section 12A(2), the Memorandum explaining the provisions of the Finance (No.2) Bill, 365 ITR (Statute) 175 itself elaborates the intention of the Legislature behind 7 M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011 insertion thereof in the statute book. It states, inter alia, that "non- application of registration for the period prior to the year of registration causes genuine hardship to charitable organizations. Due to absence of registration, tax liability gets attached even though they may otherwise be eligible for exemption and fulfill the other substantive conditions. The power of condonation of delay is not available under the section. In order to provide relief to such Trusts and remove hardship in genuine cases, it is proposed to amend Section 12A of the Act to provide that in a case where a Trust or Institution has been granted registration U/s 12AA of the Act, the benefit of Sections 11 and 12 shall be available in respect of any income derived from property held under Trust in any assessment proceedings for any 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."
26. Thus, clearly, the provisions of Section 12A of the Act entailed unintended consequences of non-application of registration for the period prior to the year of registration and, thereby, non-grant of exemption U/ss 11 and 12 up to grant of registration. This position was also recognized by the CBDT while issuing the Explanatory Notes to the provisions of the Finance (No.2) Act, 2014, vide CBDT circular No. 1 of 2015, dated 21.01.2015. It was this anomaly, which was cured by brining in the first proviso to Section 12A(2). This proviso, even as avowed by the above-quoted Memorandum explaining the provisions of the Finance (No.2) Bill, has sought to remedy the said unintended hardship visiting Trusts and Institutions. It has supplied the aforesaid omission in the section and has thereby made the provision of the section workable, providing a reasonable interpretation to it by providing the benefit mandated by it. It is, thus, a curative proviso, which is but merely declaratory of the previous law. It has, by removal of the hardship, rendered the procedure more relief-oriented. It adequately complies with the natural justice principle of fairness to all. Hence, it has to be presumed and construed as retrospective in nature, in order to give the section a purposive interpretation.
27. In 'Shree Shree Ramkrishna Samity Vs. Dy.CIT', [2016] 156 ITD 646 (Kol), the above position has elaborately been considered to hold the first proviso to Section 12A(2) to be retrospectively applicable. The said decision has been followed in 'SNDP Yogum', (supra).
28. In view of the above discussion and respectfully following these decisions in the absence of any decision to the contrary having been cited before us by the department, we hold that the first proviso to section 12A(2) of the Act is applicable retrospectively.
29. Likewise, for the same reasoning, it is also held, regarding the second batch of appeals, that even the second proviso to Section 12A(2) is retrospective in nature and the completed assessments in these cases ought not have been reopened only for non-registration for the relevant assessment years.
8M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011
30. This brings us to the next question, i.e., whether the assessment proceedings "pending before the Assessing Officer", as stated in the first proviso to Section 12A(2) can be taken as "pending in appeal", or, in other words, whether proceedings pending in appeal can be taken to be proceedings pending before thee Assessing Officer. This issue also stands answered in favour of the assessee by 'Shreee Bhanushali Mitra Mandal Trust', (supra), wherein, it was held that appeal is a continuation of the original proceedings and assessment proceedings pending before an appellate authority should be deemed to be "assessment proceedings pending before the Assessing Officer" within the meaning of Section 12A. 'SNDP Yogum', (supra), is to the same effect. Again, no contrary decision has been brought to our notice. Accordingly, it is held that the appellate proceedings before the appellate authorities are deemed to be assessment proceedings pending before the Assessing Officer.
31. In all these cases, the impugned orders were passed after the respective dates of grant of registration. Thus, we hold that subsequent grant of registration in all these cases operate retrospectively for all the relevant years under consideration.
32. Now, apropos the merits, the question is whether payment of Education Extension Services to the Diocese of Jalandhar, notified U/s 10 (23C)(vi), as well as registered U/s 12A of the Act and persuing the object of prompting education through running various schools, can be regarded as application of income.
33. Here, it is not in dispute that the Diocese of Jalandhar is not only registered U/s 12A of the Act, it is also notified U/s 10(23C)(vi) of the Act. Besides, for A.Ys. 2007-08 to 2013-14, vide orders passed U/s 143(3) of the Act (copies on record), its stands taken note of that the Diocese of Jalandhar is running various schools and that exemption U/ss 11 and 12 of the Act has been allowed with regard to its income. Therefore, it has wrongly been held in the impugned order that the payment of education extension services made by the assessee to the Diocese of Jalandhar out of the current year income, as is also available from the income and expenditure account of the relevant financial years, is not allowable as application of income.
34. In this regard, in 'CIT Vs. Sarladevi Sarabhai Trust (No. 2)', 172 ITR 698 (Guj), it has been held that when a charitable Trust donates its income to another Trust having similar objects, the provisions of Section 11(1)(a) can be said to have been met by such donor Trust. For this proposition, the assessee has correctly relied on the following decisions too:
(i) CIT Vs. Thanthi Trust 239 ITR 502 (SC)
(ii) CIT Vs. Hindustan Charity Trust 139 ITR 913 (Cal.)
(iii) CIT Vs. Shri Ram Memorial Foundation 269 ITR 35 (Del.)
(iv) CIT Vs. Nirmala Bakubhai Foundation 226 ITR 394 (Guj).
Yet again, these decisions have remained uncontroverted.
9M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011
35. Then, Section 11(3)(d) of the Act, which was brought in by the Finance Act, 2002, w.e.f. 01.04.2003, bars donation by a charitable Trust to another charitable Trust, out of accumulated income, from being considered as application of income. However, as is patent on record, the payment of Education Extension Services made by the assessee to the Diocese of Jalandhar is out of its current year's income and not out of any accumulated income.
36. In this regard, in 'DIT(E) Vs. Bagri Foundation', 344 ITR 193 (Del), it has been held that the restriction/embargo in donation by one charitable Trust to another is only restricted to accumulations made in excess of 15% of income of the Trust, as referred to in Section 11(2) of the Act; and that the said prohibition does not apply to current year income, or even to accumulations up to 155% U/s 11(1)(a) of the act.
37. Other than the above, the Assessing Officer has observed that the Diocese of Jalandhar was also having some religious objects. This, however, is not at all detrimental to the claim of the assessee. It may be reiterated that the Diocese of Jalandhar stands notified U/s 10(23C)(vi) of the Act. This provision, it may be noted, is applicable to universities and educational institutions, which exist solely for educational purposes and not for purposes of profit. Neither the assessment order/s of the assessee/s, nor the assessment order/s of the Diocese of Jalandhar, carry any finding of the Diocese of Jalandhar pursuing religious objects. Merely having religious objects does not amount to pursuing religious objects. It is the actual objects perused and the actual activities undertaken, which are of consequence so far as regards our present purposes. The decisions in 'Harf Charitable, Trust Vs. CCIT', 376 ITR 110 (P&H) and 'Digember Jain Society for Child Welfare Vs. DGIT(E)', 185 Taxmann 255 (Del.) are eloquent decisions on this matter, in favour of the assessee.
38. Therefore, it cannot be denied that the Diocese of Jalandhar is engaged solely in pursuing the object of education. It runs various schools. Hence, it is but charitable institution pursuing objects which are similar to those of the assessee. That being so, the amount paid to the Diocese of Jalandhar being out of the current year income and not out of accumulated income, such payment of education extension services to the Diocese of Jalandhar is to be allowed as application of the income. It is so ordered.
39. In view of the above discussion, we hold that (1) the subsequent grant of registration in all the cases respectively operates retrospectively for all the years under consideration; and (2) payment of education extension services to the Diocese of Jalandhar is application of income, duly satisfying the provisions of Sections 11(1)(a) and 11(3)(d) of the Act.
40. To reiterate, the issues raised in all these appeals are the same and, therefore, our above observations shall, mutatis mutandis, apply to all these appeals, respectively."
10M.A No.1,2&3(Asr)/2017 ITA Nos.746 to 748(Asr)/2013 A.Y: 2005-06, 2006-07 & 2010-2011 We find that the facts in the present appeals are para-materia to the facts decided in the Tribunal vide order dated 26.9.2016, therefore, respectively following the same, we allow the additional ground of appeal raised by assessees in favour of assessee.
8. In view of the above, the miscellaneous applications and appeals filed by the assessee are allowed.
Order pronounced in the open Court on 21.02. 2017.
Sd/ Sd/
(A.D. JAIN) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 21.02.2017.
/GP/Sr. Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By order