2019 (8) TMI 239 - AT - Income Tax

Exemption u/s 11/12 - claim denied due to non-furnishing of certificate u/s 12A - HELD THAT - Section 12AA governs the procedure for Registration and revocation of Registration once granted. Sub-section (3) of the said Section mandates that Commissioner or the Principal Commissioner as it may, without affording a hearing to the Trust or Institution in terms of the said provision, the Certificate once granted u/s 12A cannot be cancelled. The Statute mandates that a written order be passed and that too only after giving the assessee a reasonable opportunity of being heard. No such written order revoking the Registration has been made available by the Revenue in the present proceedings. In the facts of the present case, nothing has been placed by the Revenue on record to show that the Registration granted to the assessee vide order dated 23.04.1982 has been subsequently cancelled or revoked. When the above facts, submissions and the conclusion of the CIT(A) are taken into consideration we are of the view that the inference drawn by the CIT(A) that the assessee had been granted registration u/s 12AA has to be upheld. Accordingly, we find no good reason available on record to vary the conclusion arrived at. - The departmental ground in view thereof is dismissed. Exemption u/s 10(23C)(iiiab) - request for remand as the said claims were never considered by the AO as no such claim was made before the AO - HELD THAT - AO has examined the facts and rejected the claim holding that the assessee cannot change its stance and claim exemption in a different section and noting the fact that in earlier years, no such claim was made and in the year under consideration it was made, due to non-furnishing of Certificate u/s 12AA. He further took note of the fact that the term substantially financed by the Government has been defined from 01.04.2015 prospectively through explanation below section 10(23C)(iiiab). Considering the provisions, he holds that, No benefit of it can be claimed retrospectively for any earlier year. In view of this reasoning, he relies to hold that, I am not inclined to grant exemption u/s 12A or 10(23C)(iiiab) of the I.T.Act to the assessee - Thus, we see that the departmental arguments that the claim was not made before the AO and the CIT(A) having considered the claim afresh warrants a remand, we find is not borne out from record. The prayer has to be rejected. Substantially financed by the Government of Haryana - percentage of government grant is 60% of the total receipts - covered u/s 10(23C)(iiiab) - scope of amendment - HELD THAT - In the facts of the present case, the position on facts as considered and available on record is that about 60% of the institution s total receipts have been received from the Government. This finding of fact as noted has not been upset by the Revenue. Thus, where on facts the finding of fact arrived at by the CIT(A) that the assessee has received government aid to the tune of 60% of its receipts remains unrebutted by the Revenue, we find no merit in the departmental appeal. Though we have concluded on a consideration of facts, provisions and position of law in favour of the assessee we may also make a reference to the decision of the Hon'ble Bombay High Court in the case of DIT(E) Vs Tata Institute of Social Sciences 2019 (3) TMI 1619 - BOMBAY HIGH COURT in support of the conclusion drawn. It is unambiguously clear that even though the provision was held to be prospective, the Court held that the legislative intent could well be used as an aid in construing the provision which had remained ambiguous in the absence of the amendment. Thus, on a consideration of the facts, provisions and the position of law, we find that the second issue framed by us also has to be decided in favour of the assessee by way of an affirmative yes The departmental ground, accordingly, in view thereof fails. Said order was pronounced on the date of hearing itself in the presence of the parties. - Decided against revenue.

Summary

Issues Involved:

1. Whether the inference drawn by the CIT(A) that the assessee has 12A registration certificate is an incorrect conclusion required to be upset?
2. Whether the assessee can be said to be entitled for relief under section 10(23C)(iiiab)?

Issue-wise Detailed Analysis:

1. Inference of 12A Registration Certificate:

The assessee failed to produce the 12A registration certificate before the Assessing Officer (AO) and the CIT(A), instead relying on an 80G certificate. The CIT(A) inferred that registration under section 12AA was available based on the 80G certificate. The Revenue challenged this conclusion, arguing that the 12A certificate was never produced.

The Tribunal noted that the assessee claimed the 12A certificate had been lost/misplaced and provided the 80G certificate and an affidavit to support their claim. The CIT(A) considered these arguments and the provisions of law, granting relief to the assessee. The Tribunal upheld the CIT(A)'s conclusion, noting that the 80G certificate necessitates the fulfillment of conditions set out in Rule 11AA of the Income Tax Rules, 1962, which includes the requirement of a 12A certificate. The Tribunal found no evidence to suggest that the 80G certificate was fraudulently obtained and noted that the 12A registration had not been revoked.

2. Entitlement for Relief under Section 10(23C)(iiiab):

The assessee argued that it was entitled to exemption under section 10(23C)(iiiab) as it was substantially financed by the government. The AO rejected this claim, stating that the assessee could not change its stance due to non-furnishing of the 12A certificate and noting that the definition of "substantially financed by the Government" was defined prospectively from 01.04.2015.

The Tribunal found that the assessee had made an alternate claim before the AO and provided details of government aid received. The AO had examined these facts but rejected the claim. The Tribunal noted that the percentage of government grants received by the assessee was 60% of the total receipts, which was sufficient to meet the threshold for being considered "substantially financed by the Government" even before the statutory definition was introduced.

The Tribunal referred to judicial precedents where institutions receiving less than 50% government funding were considered substantially financed. It concluded that the assessee met the criteria for exemption under section 10(23C)(iiiab) based on the facts and judicial standards set by courts.

Conclusion:

The Tribunal dismissed the Revenue's appeals, upholding the CIT(A)'s conclusions that the assessee had a valid 12A registration and was entitled to exemption under section 10(23C)(iiiab). The Cross Objections filed by the assessee were also dismissed as infructuous. The order was pronounced on 31st July 2019.