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2016 (6) TMI 1269 - AT - Income TaxDenial of registration u/s 12AA - sum received from the trustees towards corpus fund clearly covered by the provision of see 2(24)(iia) - Held that - The first proviso to section 12A(2) was brought in the statute only as a retrospective effect with a view not to affect genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in section 11 to 13 have been duly fulfilled by the said trust. 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 ld. A.O. unless the registration granted earlier is cancelled or refused for specific reasons. The statute also goes on to provide that no action u/s147 could be taken by the AO merely for non-registration of trust for earlier years. Once registration is granted u/s 12AA of the I T Act section 11 and 12 will apply in respect of income of trust for any AY preceding the AY in which registration is granted provided appeal is pending before the CIT(A) and objects and activities of the assessee trust are the same as in the year of registration. In the instant case the assessee trust was granted registration w.e.f 14.9.2009 and the CIT(A) was aware of grant of registration since the appeal was disposed off only on 11.9.2015. Further in the instant case the notice u/s 148 of the Act was issued only on 29.3.2010 i.e subsequent to the grant of registration on 14.9.2009 hence the second proviso put an embargo on the issuance of notice u/s 148 of the Act. Therefore the CIT(A) ought to have taken note of the 1st proviso as well as 2nd proviso to section 12A which was inserted by the Finance Act 2014 w.e.f 1.10.2014. Since both the parties have agreed that the matter needs fresh consideration by the CIT(A) in line of the dictum laid down by the Cochin Bench of the Tribunal in the case of SNDP Yogum (2016 (3) TMI 1110 - ITAT COCHIN ) we restore the issue to the CIT(A). Appeal filed by the assessee is allowed for statistical purpose
Issues Involved:
1. Whether the sum of Rs. 6,50,000 received from the trustees towards the corpus fund should be treated as income under section 2(24)(iia) of the Income Tax Act. 2. Applicability of section 11 and 12 of the Income Tax Act to the assessee trust for the assessment year 2006-07, given the registration under section 12AA was granted in 2009. 3. Relevance and applicability of judicial precedents cited by the assessee and the CIT(A). Detailed Analysis: 1. Treatment of Rs. 6,50,000 as Income: The primary issue revolves around whether the sum of Rs. 6,50,000 received from the trustees towards the corpus fund should be treated as income under section 2(24)(iia) of the Income Tax Act. The Assessing Officer (AO) taxed this amount as income, reasoning that the assessee trust was not granted registration under section 12AA for the assessment year 2006-07. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this view, stating that in the absence of registration under section 12A, contributions amounting to Rs. 6,50,000 were rightly treated as income by the AO. The assessee argued that this amount was a capital receipt and should not be treated as income under section 2(24)(iia), relying on several judicial pronouncements. 2. Applicability of Sections 11 and 12: The assessee trust was constituted on 24th February 2006 and applied for registration under section 12A on 27th March 2009, which was granted effective from the assessment year 2009-10. The CIT(A) and AO did not extend the benefits of sections 11 and 12 for the assessment year 2006-07 due to the absence of registration during that period. The assessee contended that as per the amendment to section 12A(2) by the Finance (No.2) Act, 2014, once registration is granted under section 12AA, the provisions of sections 11 and 12 should apply retrospectively to any income derived from property held under trust for any preceding assessment year for which assessment proceedings are pending before the AO as on the date of registration. The Tribunal in the case of SNDP Yogam vs. ADIT (Exemption) supported this view, holding that the first proviso to section 12A(2) has retrospective effect. 3. Relevance and Applicability of Judicial Precedents: The CIT(A) dismissed the three judicial precedents cited by the assessee, stating they were not applicable due to different facts. Conversely, the CIT(A) relied on the decision of the Lucknow Bench of the Tribunal in the case of Awadh Public School Academy vs. ITO, which the assessee argued was not applicable to their case. The Tribunal in SNDP Yogam emphasized that sections 11 and 12 are substantive provisions, while sections 12A and 12AA are procedural. It held that the amendment to section 12A was intended to provide relief to genuine charitable organizations and should be applied retrospectively. Conclusion: The Tribunal concluded that the CIT(A) should have considered the first and second provisos to section 12A, which were inserted by the Finance Act, 2014 and have retrospective effect. The Tribunal restored the issue to the CIT(A) for fresh consideration in line with the dictum laid down in the case of SNDP Yogam, directing the CIT(A) to dispose of the matter expeditiously after affording a reasonable opportunity of being heard to the assessee trust. Stay Petition: Since the appeal was allowed for statistical purposes, the Stay Petition filed by the assessee became infructuous and was dismissed. Order Pronounced: The appeal filed by the assessee was allowed for statistical purposes, and the Stay Petition was dismissed.
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