2017 (11) TMI 365 - AT - Income Tax

Exemption claimed u/s 10(23C) denied - entitlement to exemption u/s 11 and 12 - assessee is carrying on educational activity and entitled for registration u/s 12A - Held that - Delay for making application for granting registration was due to the fact that the assessee has chosen a path of 10(23C). The registration was granted w.e.f. 1.4.2011 on 30.03.2012 and the CIT has never rejected the Registration earlier. Had the society did not prefer the path of 10(23C), it would have applied well in advance for registration u/s 12A, thus we find reasonable cause for delay in applying for the registration u/s 12A. As on the date of registration, the impugned assessments for the assessment year 2010-11 and 2011-12 are pending. The facts of the case are similar to that of Sree Sree Ramakrishna Samity Vs. DCIT reported (2015 (11) TMI 119 - ITAT KOLKATA). Accordingly we hold that exemption u/s 11 and 12 should be granted to the assessee subject to satisfactory compliance of the terms and conditions laid down in the section 11 and 12 for the pending assessments i.e. 2010-11 and 2011-12. Accordingly appeal of the assessee is allowed.

Summary

Issues Involved:
1. Registration under Section 12A of the Income Tax Act.
2. Applicability of Section 11 and 12 benefits for pending assessments.
3. Retrospective application of the proviso inserted by the Finance Act, 2014.

Detailed Analysis:

1. Registration under Section 12A of the Income Tax Act:
The assessee, engaged in running educational institutions, registered as a society on 23.08.2007, applied for exemption under Section 10(23C)(vi) of the Income Tax Act when its gross receipts exceeded ?1 crore. The Chief Commissioner of Income Tax, Visakhapatnam, rejected this request. Subsequently, the assessee applied for registration under Section 12A on 30.09.2011, which was granted on 30.03.2012, effective from 01.04.2011. The Assessing Officer reopened assessments for AY 2010-11 and 2011-12, bringing sums of ?61,93,820 and ?1,49,20,271 to tax, respectively. The CIT(A) confirmed these assessments, stating that the registration under Section 12A was applicable from AY 2012-13 onwards, not for AY 2010-11 and 2011-12. The assessee appealed this decision.

2. Applicability of Section 11 and 12 benefits for pending assessments:
The assessee argued that the proviso inserted by the Finance Act, 2014, effective from 01.10.2014, allowed the benefits of Sections 11 and 12 for pending assessments if registration under Section 12A was granted. The assessee contended that this beneficial provision should apply retrospectively to their pending assessments for AY 2010-11 and 2011-12. The Department Representative (DR) opposed this, arguing that the proviso was not retrospective and should not be liberally interpreted to defeat legislative intent. The DR also noted an alternative remedy for the assessee to seek registration for earlier years.

3. Retrospective application of the proviso inserted by the Finance Act, 2014:
The Tribunal considered the issue in detail. It noted that the proviso to Section 12A(2) was intended to prevent genuine hardship for charitable organizations, as indicated by the explanatory notes to the Finance Act, 2014. The Tribunal referred to the ITAT Kolkata decision in Sree Sree Ramakrishna Samity Vs. DCIT, which held that the benefit of exemption under Section 11 should be given to all pending assessments. The Tribunal also cited relevant Supreme Court decisions, including Allied Motors P. Ltd. Vs. CIT and CIT v. Vatika Township (P.) Ltd., which supported the retrospective application of beneficial provisions. Based on these precedents, the Tribunal concluded that the proviso to Section 12A(2) should be applied retrospectively, allowing the assessee the benefits of Sections 11 and 12 for AY 2010-11 and 2011-12.

Conclusion:
The Tribunal held that the assessee, engaged in educational activities, was entitled to registration under Section 12A. The delay in applying for registration was reasonable due to the initial pursuit of exemption under Section 10(23C). The Tribunal found the facts of the case similar to those in Sree Sree Ramakrishna Samity Vs. DCIT and concluded that the benefits of Sections 11 and 12 should be granted to the assessee for the pending assessments of AY 2010-11 and 2011-12, subject to compliance with the conditions of these sections. Accordingly, the appeals of the assessee were allowed.

Judgment:
The appeals of the assessee are allowed.