2017 (2) TMI 1511 - AT - Income Tax

Exemption u/s 11 - Registration u/s 12AA - amendment to sec 12A(2) - Retrospectivity - scope of amendment made in section 12A vide Finance (No.2) Act, 2014 the Income Tax Act - HELD THAT - As decided in ST. JUDE'S CONVENT SCHOOL AND OTHERS 2016 (9) TMI 1382 - ITAT AMRITSAR The first proviso to section 12A(2) of the Act is applicable retrospectively. 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 to have been reopened only for non-registration for the relevant assessment years. - Decided in favour of assessee.

Summary

Issues Involved:
1. Recall of dismissed appeals due to rectification of defects.
2. Admission of additional ground of appeal based on amendment to Section 12A.
3. Retrospective application of the first and second provisos to Section 12A(2).
4. Treatment of payment to Diocese of Jalandhar as application of income.

Issue-wise Detailed Analysis:

1. Recall of Dismissed Appeals:
The appeals were initially dismissed due to defects not being rectified within a reasonable period. The Assessee’s representative argued that the fee was deposited under the wrong head and despite efforts, the mistake could not be rectified by the bankers, leading to a fresh fee deposit. Additionally, there was an error in the name mentioned in the order dismissing the appeals, which was corrected by filing a new form. The Tribunal, noting no objection from the Department Representative, recalled the order dated 18.03.2014 and directed the Assessee to proceed with arguments.

2. Admission of Additional Ground of Appeal:
The Assessee requested the admission of an additional ground of appeal, arguing that the benefit of exemption should be granted for the year under consideration based on the amendment made in Section 12A by the Finance (No.2) Act, 2014. The Tribunal admitted the additional ground, noting that it was a legal ground and there was no objection from the Department Representative.

3. Retrospective Application of Provisos to Section 12A(2):
The Tribunal examined whether the first and second provisos to Section 12A(2) apply retrospectively. It was noted that these provisos were introduced to remedy unintended consequences and to provide relief to charitable organizations. The Tribunal referenced several legal precedents, including decisions from the Supreme Court and various High Courts, which supported the retrospective application of procedural or beneficial provisions. The Tribunal concluded that both provisos to Section 12A(2) are retrospective, thus applicable to the assessment years under consideration.

4. Treatment of Payment to Diocese of Jalandhar as Application of Income:
The Tribunal addressed whether the payment of Education Extension Services to the Diocese of Jalandhar could be regarded as an application of income. The Diocese was registered under Section 12A and notified under Section 10(23C)(vi), pursuing educational objectives. The Tribunal held that payments made to another charitable trust with similar objectives could be considered an application of income, citing several judicial precedents. Additionally, it was noted that the payment was made out of current year income, not accumulated income, thus satisfying the provisions of Sections 11(1)(a) and 11(3)(d) of the Act. The Tribunal allowed the payment as an application of income.

Conclusion:
The Tribunal allowed the miscellaneous applications and appeals filed by the Assessee, following the precedent set in a similar case decided on 26.09.2016. The order was pronounced in open court on 21.02.2017.