2020 (10) TMI 31 - AT - Income Tax

Exemption u/s 11 - denying the registration u/s 12AA - as requested to issue only duplicate copy of the certificate of Registration of the trust already been registered since 13.8.1973 - HELD THAT - All the documents are sufficient enough to prove that the claim of the assessee being registered u/s 12A of the Act is a charitable trust since 13.8.1973 has sufficient merit. DR failed to rebut these facts - no dispute to the fact that the assessee trust was enjoying the benefit u/s 12A of the Act as a charitable trust and other benefits available to the charitable trusts u/s 11 of the Act since it is running for charitable purpose. Assessee trust should be granted the registration u/s 12AA of the Act w.e.f. 13.8.1973 in place of the registration granted from assessment year 2019-20 onwards - CIT (Exemption) is directed to amend his order dated 20.8.2019 and issue a fresh order of registration certificate u/s 12AA effective from 13.8.1973 so that the assessee could claim the benefits of the provision of Section 11 12 as and where applicable for the preceding Assessment Years. Once Ld. CIT (Exemption) grants the registration certificate u/s 12AA w.e.f. 13.8.1973 the assessee shall have liberty to move application before Ld. A.O for rectification of the assessment orders for various Assessment Years in order to avail the benefit of Section 11 of the Act available for charitable trust registered u/s 12AA of the Act so that the Ld. A.O could decide accordingly - Decided in favour of assessee.

Summary

Issues Involved:
1. Denial of registration under Section 12AA.
2. Opportunity of being heard not extended.
3. Denial of registration based on the charitable nature of the trust.
4. Prospective registration from Assessment Year 2019-20.
5. Withholding of refunds and raising demands for prior years.

Detailed Analysis:

1. Denial of Registration under Section 12AA:
The primary issue is the denial of registration under Section 12AA by the CIT (Exemption) Bhopal. The assessee trust, formed in 1945 and registered under the Public Trust Act, claimed to have been registered under Section 12A of the Income Tax Act since 13.08.1973. However, the trust could not find the original registration certificate and requested a duplicate from the CIT (Exemption), which was denied. The CIT (Exemption) advised the trust to apply afresh, which it did on 23.05.2018. Despite this, the registration was denied without giving an opportunity of being heard, leading to an appeal before the ITAT.

2. Opportunity of Being Heard Not Extended:
The assessee argued that the CIT (Exemption) denied the registration without extending an opportunity of being heard, which is a violation of principles of natural justice. The CIT (Exemption) acted in a hurried manner as the limitation period of six months was nearing its end.

3. Denial of Registration Based on Charitable Nature:
The CIT (Exemption) initially denied the registration alleging that the trust was not running for charitable purposes. However, the trust contended that it has consistently been engaged in charitable activities and has been treated as a charitable trust in various assessment orders since 1975-76.

4. Prospective Registration from Assessment Year 2019-20:
The CIT (Exemption) eventually granted registration under Section 12AA but made it effective prospectively from the Assessment Year 2019-20. The assessee argued that the registration should be retrospective from 13.08.1973, as the trust has been consistently recognized as a charitable entity by the Income Tax Department.

5. Withholding of Refunds and Raising Demands for Prior Years:
Due to the prospective registration, the Assessing Officer (A.O.) withheld refunds and raised demands for the last six years, amounting to ?21,24,108. The assessee claimed that this was in contravention of the proviso to sub-section 2 of Section 12A of the Income Tax Act, which should allow the trust to be treated as registered for the relevant assessment years.

Judgment:
The ITAT examined the records and found that the trust had been consistently treated as a charitable trust by the Income Tax Department since 1975-76. Various assessment orders confirmed that the trust enjoyed the benefits under Section 11 of the Act. The ITAT held that the trust should be granted registration under Section 12AA retrospectively from 13.08.1973. The CIT (Exemption) was directed to amend the order and issue a fresh registration certificate effective from 13.08.1973. This would allow the trust to claim the benefits of Sections 11 and 12 of the Act for the preceding assessment years. The assessee was also given the liberty to apply for rectification of assessment orders for various years to avail the benefits of exemption under Section 11.

Conclusion:
The appeal of the assessee was allowed, directing the CIT (Exemption) to grant registration under Section 12AA retrospectively from 13.08.1973, ensuring the trust could claim the benefits for the preceding years. The order was pronounced in the open Court on 29.09.2020.