2019 (1) TMI 1979 - AT - Income Tax

Exemption u/s 11 - non-registration of the Appellant u/s 12AA - applicability of proviso of Sec.12A (2) which was inserted w.e.f 1st October 2014 - benefit of Sec. 11/12 as well as 10(23C)(iii ad) of the Act was denied to the assessee society on the ground that the assessee is not registered u/s. 12AA - HELD THAT - As observed that the Appellant got registration u/s 12AA of the Act w.e.f. 09-02-2012 and as on that date the appeal against the quantum was pending before the Ld. CIT(A) which was decided on 10-10-2012 and against which the appeal is still pending for adjudication before this bench and hence the assessment proceedings can be construed as continuing and pending. While respectfully following the dictum of the Apex Court as well as the Co-ordinate Benches we are of the considered opinion that the issue is squarely covered by the aforesaid decisions therefore we do not have any hesitation to held that proviso to Sec.l2A(2) which was added by Finance Act 2014 shall be retrospective in operation. There is nothing either on record or otherwise brought on record by the Ld. DR to the effect that there is any change in the objects and activities of Assesse/Trust for the preceding assessment years involved. Hence we are inclined to held that registration granted to the assessee by the CIT(E) vide letter dated 09-02-2012 shall be effective from 10-08-2008 being the date of formation of society and the assessee shall be entitled to get the benefit of registration for A.Ys. 2009-10 and 2010-2011 as well against which appeals are under consideration. Consequently we set aside the impugned order passed by the Id. CIT(A) as well as assessment order and delete the addition by allowing the assessee s appeal.

Summary

Issues:
1. Challenge to addition made by Assessing Officer regarding corpus donations claimed as exempt under section 11(1)(d) of the Income Tax Act.
2. Dispute over penalty imposed by Assessing Officer and subsequently deleted by Ld. CIT(A).
3. Registration under section 12A of the Act and its implications on the exemption claimed by the appellant trust.
4. Interpretation of the proviso of section 12A(2) inserted by the Finance Act, 2014 and its retrospective applicability.
5. Effect of registration granted under section 12AA of the Act on pending assessment proceedings.

Analysis:
1. The appellant trust challenged the addition made by the Assessing Officer regarding corpus donations claimed as exempt under section 11(1)(d) of the Income Tax Act. The Assessing Officer held that corpus donations are in the nature of income under the amended provision of section 2(24) of the Act and subject to exemption under section 11(1)(d) only if the trust or society is registered under section 12A of the Act. As the appellant was not registered under section 12A, the donations were added to the income. The Ld. CIT(A) upheld this decision based on non-registration under section 12AA of the Act.

2. The Revenue Department also filed an appeal challenging the deletion of penalty imposed by the Assessing Officer, which was subsequently deleted by Ld. CIT(A). The Tribunal found that since the appellant's appeal against the addition was allowed, the penalty order could not survive, leading to the dismissal of the Revenue's appeal against the penalty order.

3. The appellant had applied for registration under section 12A of the Act for the relevant assessment years, but the application was rejected for being filed beyond the prescribed time limit. The CBDT later condoned the delay for registration for the said assessment years. The appellant was eventually granted registration under section 12AA of the Act, raising the question of whether the pending assessment proceedings could be considered a continuation.

4. The Tribunal examined the proviso of section 12A(2) inserted by the Finance Act, 2014, which was retroactively applied to prevent genuine hardships due to non-registration under section 12A. Citing various cases, including the Apex Court's decision in 'CIT vs. Vatika Township Pvt. Ltd.', the Tribunal held that the proviso should be construed retrospectively. The registration granted under section 12AA was deemed effective from the date of formation of the society, entitling the appellant to the benefit of registration for the relevant assessment years.

5. Considering the registration granted under section 12AA and the pending assessment proceedings, the Tribunal concluded that the appellant was entitled to the benefit of registration for the assessment years in question. Consequently, the impugned orders were set aside, and the addition was deleted, allowing the appellant's appeal. This decision also led to the allowance of the related appeal and the dismissal of the Revenue's appeal against the penalty order.