2018 (4) TMI 1762 - HC - Income Tax

Specific requirement of registration under section 12A - Eligibility to grant of registration u/s 12A - denial of exemption of corpus receipts under section 11(1)(d) of the Act and the denial of exemption as regards voluntary contributions on the ground that the assessee was not registered under section 12A of the Act as it held that there was no such requirement for grant of registration - HELD THAT - Application filed by the assessee in the present case was on December 31, 1993 which was before the introduction of section 12AA which came into effect only from April 1, 1997. As per the substantive law applicable to the present case in force at the relevant point of time, the only condition mandated under section 12A to claim benefit of exemption under section 11 would be to have filed the application for registration of the trust in the prescribed manner before July 1, 1973 or before the expiry of a period of one year from the date of creation of the trust or the establishment of the institution whichever was later. There is no mandate in the law as it then stood to have applied and obtained registration to claim exemption. Mere filing of an application in terms of section 12A was sufficient to claim the benefit of exemption. The Central Board of Direct Taxes Circular No. 762 dated February 18, 1998 ( 1998 230 ITR (St.) 12 ) which provides for an explanatory note relating to the amendment stipulates that the amendment relating to exemption from income- tax in respect of income from a charitable or religious Trust or institution would take effect from April 1, 1997 which seeks to re-emphasize that the provisions of section 12AA which provides that registration is mandatory to claim exemption would come into force with prospective effect. As regards the finding of the Tribunal that the omission of the word Prathisthana in the name of the assessee-trust was the fault of the Department and not of the assessee for which the assessee cannot be penalised, the same being a finding of fact and not requiring any interference, no ground is made to entertain the appeals on the said finding. Tribunal was correct in holding that the assessee is entitled for section 12A registration by holding that there was no requirement for granting section 12A registration by the Commissioner of Income-tax for the period under consideration

Summary

Issues involved:
- Eligibility for grant of registration under section 12A of the Income-tax Act, 1961
- Exemption under section 11(1)(d) of the Act for corpus receipts
- Exemption for voluntary contributions
- Correctness of the Tribunal's decision regarding the eligibility for exemption under section 12A
- Error in the description of the assessee-trust
- Interpretation of section 12A and 12AA of the Income-tax Act, 1961
- Application of law in force during the relevant assessment years

Analysis:

1. Eligibility for Grant of Registration under Section 12A:
The Tribunal allowed the appeals by the assessee for the assessment years 2008-09 to 2012-13, affirming eligibility for registration under section 12A prior to the amendment by the Finance (No. 2) Act, 1996. The Tribunal held that there was no specific requirement for registration under section 12A before April 1, 1997. The Tribunal relied on the case of Karnataka Golf Association v. DIT (Exemption) [2005] 272 ITR (AT) 123 (Bangalore) to support its decision.

2. Exemption under Section 11(1)(d) for Corpus Receipts:
The Tribunal set aside the denial of exemption for corpus receipts under section 11(1)(d) of the Act, emphasizing that the assessee was eligible for exemption under section 11 without the need for registration under section 12A as per the law in force during the relevant assessment years.

3. Exemption for Voluntary Contributions:
Similarly, the Tribunal overturned the denial of exemption for voluntary contributions, stating that the assessee's registration under section 12A was not a prerequisite for claiming such exemptions under the Act.

4. Interpretation of Section 12A and 12AA:
The Tribunal highlighted that section 12AA, introduced in 1996, was prospective in nature. Since the assessee's trust was registered before the amendment, the requirement for registration under section 12A was not mandatory until the insertion of section 12AA in 1997. This interpretation was based on the law applicable at the time.

5. Application of Law in Force:
The judgment clarified that under the law prevailing during the relevant assessment years, merely filing an application under section 12A sufficed to claim exemption under section 11. The Central Board of Direct Taxes Circular No. 762 dated February 18, 1998, reiterated that the provisions of section 12AA, mandating registration for exemption, were prospective and effective from April 1, 1997.

6. Error in Description of Assessee-Trust:
The Tribunal found that the omission of the word "Prathisthana" in the name of the assessee-trust was the fault of the Department, not the assessee. Therefore, the Tribunal concluded that penalizing the assessee for this error was unwarranted.

7. Conclusion:
The High Court dismissed the appeals by the Revenue against the Tribunal's orders for the assessment years 2008-09 to 2012-13. It held that the Tribunal's decisions were in accordance with the law prevailing at the time, and no substantial questions of law were raised to warrant admission of the appeals.