2019 (1) TMI 2056 - AT - Income Tax

Denial of exemption u/s 11 and 12 - findings of the Ld. CIT (A) that the assessee trust is not registered U/s 12AA for the impugned assessment year - HELD THAT - In the instant case the provisions of section 11 and 12 shall apply for assessment year 2016-17. For any assessment year preceding the assessment year 2016-17 it is to be seen that for such assessment year whether assessment proceedings are pending before the AO as on the date of such registration i.e 8.7.2016 and secondly the objects and activities of such trust or institution remain the same for such preceding assessment year. For the impugned assessment year during the pendency of the appeal before the ld CIT(A) the ld CIT(E) has granted the registration on 8.07.2016. Therefore registration u/s 12AA was granted to the assessee trust well before its appeal arising out of the assessment order was disposed off by the ld CIT(E) vide his order dated 13.12.217. It follows that the assessee trust which obtained registration during the pendency of appeal before the ld CIT (A) shall be entitled for exemption under section 11 and 12 As we find that there is no finding of the lower authorities as to whether the objects and activities of such trust or institution for the impugned assessment year remain the same as in assessment year 2016-17. Assessee trust is considered as registered u/s 12AA and eligible for exemption under section 11 and 12 of the Act for the impugned assessment year subject to examination by the Assessing officer as to whether the objects and activities of such trust or institution for the impugned assessment year remain the same as in assessment year 2016-17. The matter is accordingly set-aside to the file of the Assessing officer who shall examine as to whether the objects and activities of such trust or institution for the impugned assessment year remain the same as in assessment year 2016-17.

Summary

Issues Involved:

1. Whether the assessee trust is eligible for exemption under Sections 11 and 12 of the Income Tax Act for the assessment year 2013-14 despite obtaining registration under Section 12AA after the assessment year in question.
2. Whether the assessment proceedings pending before the appellate authority can be considered as pending before the Assessing Officer for the purpose of applying the first proviso to Section 12A(2).

Issue-wise Detailed Analysis:

1. Eligibility for Exemption under Sections 11 and 12:

The primary issue was whether the assessee trust, which obtained registration under Section 12AA on 08.07.2016, could claim exemption for the assessment year 2013-14. The trust argued that the first proviso to Section 12AA should allow the benefits of Sections 11 and 12 to apply retroactively to pending assessments if the trust's objects and activities remained unchanged. The tribunal examined the legislative intent behind the amendment to Section 12A(2) introduced by the Finance Act, 2014, which aimed to alleviate hardships faced by genuine charitable organizations that were otherwise eligible for exemptions but lacked registration. The tribunal concluded that the trust, having obtained registration during the appellate proceedings, was entitled to exemptions under Sections 11 and 12 for the assessment year 2013-14, provided the objects and activities remained consistent with those at the time of registration.

2. Consideration of Pending Assessment Proceedings:

The tribunal addressed whether the appellate proceedings before the CIT(A) could be deemed as assessment proceedings pending before the Assessing Officer. It was determined that appellate proceedings are a continuation of the original assessment proceedings. Therefore, the assessment proceedings pending in appeal before the CIT(A) were considered as pending before the Assessing Officer within the meaning of the first proviso to Section 12A(2). This interpretation was supported by prior decisions, such as SNDP vs. Assistant Director of Income Tax (Exemption) and Sree APO Ramkrishna Samity vs. DCIT, which emphasized a liberal interpretation of procedural provisions to avoid undue hardship to genuine charitable institutions.

The tribunal further noted that the absence of a finding by the lower authorities regarding the consistency of the trust's objects and activities necessitated a remand. The Assessing Officer was directed to verify whether the trust's objects and activities for the assessment year 2013-14 were the same as those for the assessment year 2016-17, when registration was granted.

3. Consequential Grounds of Appeal:

The tribunal did not adjudicate on other grounds of appeal, as they were consequential in nature. These grounds were also remanded to the Assessing Officer for fresh examination, ensuring the assessee trust was given a reasonable opportunity to present its case.

In conclusion, the appeal was allowed for statistical purposes, with the tribunal emphasizing the importance of a purposive interpretation of statutory provisions to ensure fairness and equity in the application of tax laws to charitable trusts.