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TMI Blog2017 (11) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with law. We make it clear that our opinion on the merits of the addition are left open and direct the ld AO to adjudicate the same afresh in accordance with law, after grant of exemption u/s 11 and 12 of the Act for the Asst Years 2006-07 and 2007- 08 . - I.T.A Nos. 723 & 724/Kol/2013, I.T.A Nos. 523 And 524/Kol/2013 - - - Dated:- 18-8-2017 - Shri A.T. Varkey, JM And Shri M. Balaganesh, AM For The Appellant : Shri J.P. Khaitan, Sr. Counsel of Assessee For The Respondent : Shri Anand R. Baiwar, CIT ORDER Per M.Balaganesh, AM 1. The appeals of the assessee in ITA Nos. 723-724/Kol/2013 are directed against the orders passed by the learned Commissioner of Income Tax (in short the ld CIT) u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 22.3.2013 setting aside the orders framed by the ACIT, Circle -50, Kolkata (in short the ld AO) u/s 143(3) / 147 of the Act on 8.12.2010 for the Asst Years 2006-07 2007-08. The appeals of the assessee in ITA Nos. 523-524/Kol/2015 are directed against the orders passed by the learned Commissioner of Income Tax (Appeals) (in short the ld CITA) in Appeal Nos. 39 40/CIT(A)-15/14-15/JCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng u/s 263 of the Act on various grounds both on merits and on legal grounds, including inter alia, on the question of lack of jurisdiction on the part of the ld CIT. The jurisdiction issue was raised on the ground that in the order dated 9.7.2012 passed by the learned Director of Income Tax (Exemptions), it was clearly indicated that, henceforth , the assessee would be assessable by the Assistant Director of Income Tax (Exemptions) II, Kolkata , meaning thereby, the jurisdiction of the lies with the Exemptions wing of the income tax department and the jurisdictional CIT would be DIT(Exemptions) and not the regular CIT from the field. (v) The ld CIT, Kolkata XVII, Kolkata, however, vide her impugned order dated 22.3.2013 passed an order u/s 263 of the Act setting aside the order of assessment framed for the Asst Year 2006-07 by the ld AO as erroneous and prejudicial to the interest of the revenue to reframe the assessment afresh. (vi) Being aggrieved by the order u/s 263 of the Act, the assessee had preferred an appeal before this tribunal which is numbered as ITA No. 723/Kol/2013 for the Asst Year 2006-07 . (vii) The ld AO framed the fresh assessment order on 25.2.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total income of the Appellant Authority for the assessment year 2006-07 the impugned sum of ₹ 17 ,35,46,848 representing interests on loans granted to the Statutory and Local Bodies on the alleged ground that the alleged income by way of interest had accrued to the Appellant Authority even as per the real income theory. Kolkata Metropolitan Development Authority 3. That the learned Commissioner of Income Tax (Appeals)-15, Kolkata should have held that the facts and documents on record clearly and conclusively proved that the Appellant Authority did not realize any portion of either the principal amount of loans granted to the Statutory and Local Bodies and/or any portion of interests thereon at any time during the last two decades or so; and that the entire loans including the interest thereon were not only doubtful of recovery, but in fact oily irrecoverable; and that no portion thereof could be lawfully brought to tax on the alleged ground of deemed accrual and/or on the alleged ground of real income theory. 4.That the learned Commissioner of Income Tax (Appeals)-15, Kolkata erred in arbitrarily and wrongly ignoring the observations and directions given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate to admit the additional ground raised by the assessee. However, since the appeals of the assessee preferred against the section 263 order of the ld CIT has been stated to be withdrawn by the assessee, we do not deem it fit and appropriate to adjudicate the second portion of the additional ground with regard to validity of section 263 proceedings. Hence we dismiss the second part of the additional ground with regard to validity of section 263 proceedings raised by the assessee. 6. We have heard the rival submissions and perused the materials available on record. We find that the short point that arises for our consideration in the first part of the additional ground is as to whether the assessee would be entitled for exemption u/s 11 and 12 of the Act for the Asst Year 2006-07 in view of amendment brought in by Finance (No.2) Act , 2014 w.e.f. 1.10.14 by construing the same as retrospective in operation in the absence of alteration of activities carried out by the assessee in the earlier years. For the sake of convenience, the provisions of section 12A(2) are reproduced hereunder:- [( 2) Where an application has been made on or after the 1st day of June, 2007, the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Years 2006-07 and 2007-08. The ld AR argued that the issue under dispute is already settled by the following decisions of the co-ordinate benches of various tribunals :- Kolkata Metropolitan Development Authority a) Decision of this tribunal in the case of Sree Sree Ramakrishna Samity vs DCIT reported in (2016) 156 ITD 646 (Kolkata Trib.) dated 9.10.2015. b) Decision of Ahmedabad Tribunal in the case of Shree Bhanushali Mitra Mandal Trust vs ITO reported in (2016) 68 taxmann.com 250 (Ahmedabad-Trib.) dated 22.2.2016. c) Decision of Cochin Tribunal in the case of SNDP Yogam vs Asst DIT (Exemption) reported in ( 2016) 161 ITD 1 (Coch-Trib.) dated 1.3.2016. d) Decision of Amritsar Tribunal in the case of St.Jude s Convent School vs ACIT reported in (2017) 164 ITD 594 (Amritsar-Trib.) dated 26.9.2016. 9. We find that this tribunal in the case of Sree Sree Ramakrishna Samity vs DCIT reported in (2016) 156 ITD 646 (Kolkata Trib.) dated 9.10.2015 had held as under:- 6.2 We find that the objects of the assessee society are charitable in nature within the meaning of section 2(15) of the Act on which fact there is absolutely no dispute. It is pertinent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.6 The third proviso to section 12A(2) of the Act also provides that the first and second proviso shall not be applicable if the trust or institution had been refused registration earlier or the registration granted earlier is cancelled by the Commissioner u/s 12AA of the Act. This also goes to prove that the first and second proviso shall be made applicable for the trusts for earlier assessment years also who had not applied for registration u/s 12AA of the Act at all. 6.7 We hold that the registration of trust under section 12A of the Act once done is a fait accompli and the AO cannot thereafter make further probe into the objects of the trust. Reliance in this regard is placed on the decision of the Hon'ble Apex Court rendered in the case of Asstt. CIT v.Surat City Gymkhana (2008) 300 ITR 214 (SC). Drawing analogy from this judgement, the logical inference could be that as long as the objects were charitable in nature in the earlier years and in the year in which registration u/s 12AA was granted, the existence of trust for charitable purposes in the earlier years cannot be doubted with. Even otherwise, no adverse findings were given by the revenue with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined in a statute. The word income as is commonly understood does not include any donation specifically meant for utilization for acquiring, constructing a capital asset, as is the case here. Further section 2(24) had undergone amendment by way of insertion of clause (iia) by Finance Act, 1972 with effect from 1.4.1973. In this connection, it will be relevant to get into the Memorandum explaining the provisions in Finance Act 1972 reported in 83 ITR (St.) 173, wherein Paragraphs 24 and 25 clearly define the scope of the amendment wherein in paragraph 25(i) , the concluding sentence is as under:- contributions received with a specific direction that they will form part of the corpus of the trust or distribution will, however, not be regarded as income. Thus the relevant clause defining income in section 2(24)(iia) as introduced with effect from 1.4.1973 was clearly not intended to cover contributions/donations received with a specific direction that they will form part of the corpus of the trust for utilization in acquisition/construction of a capital asset. Thus what is not income as per the definition of the word income in the Act cannot be brought to tax under an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. As observed by G.P. Singh in his Principles of Statutory Interpretation, 4th Edn., Page 291, It is well settled that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended . In fact the amendment would not serve its object in such a situation, unless it is construed as retrospective. The view, therefore, taken by the Delhi High Court cannot be sustained. CIT v. Virgin Creations in ITAT No. 302 of 2011 in GA 3200/2011 dated 23.11.2011 , the Hon'ble Calcutta High Court in the context of retrospective applicability of amendment to section 40(a)(ia) of the Act held as below:- The supreme court in the case of Allied Motors P ltd and also in the case of Alom Extrusions Ltd has already decided that the aforesaid provision has retrospective application. Again, in the case reported in 82 ITR 570, the Supreme Court held that the provision, which has inserted the remedy to make the provision workable, requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well . CIT v. Vatika Township (P.) Ltd. [2014] 367 ITR 466/227 Taxman 121/49 taxmann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he whole of the scheme of the Act which in this case, is to counteract the effect of transfer of assets so far as computation of income of the assessee is concerned, then bearing that purpose in mind, we should find out the intention from the language used by the legislature and if strict literal construction leads to an absurd result, i.e., result not intended to be subserved by the object of the legislation found in the manner indicated before, then another construction is possible apart from strict literal construction then that construction should be preferred to the strict literal construction. 6.11 We also hold that though equity and taxation are often strangers , attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e to make it workable rather than redundant. Applying this legal maxim, it would be just and fair to hold that the amendment in section 12A is brought in the statute to confer benefit of exemption u/s 11 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all the receipts of the donation were proved on enquiry to have been received from the claimed donors and utilized for the specific purpose (construction of old age home) for which they were received. In conclusion, we hold that the insertion of the proviso to section 12A(2) of the Act has to be construed as retrospective in operation. 10. In view of the aforesaid facts and respectfully following the judicial precedent relied upon hereinabove, we hold that the amendment brought in Finance (No.2) Act, 2014 w.e.f. 1.10.2014 in section 12A(2) of the Act should have to be construed as retrospective in operation and accordingly the assessee would be entitled for exemption u/s 11 and 12 of the Act for the Asst Years 2006-07 and 2007-08 also. Hence we allow the additional ground raised by the assessee for both the years under appeal before us. Since the preliminary ground of claim of exemption u/s 11 and 12 for the Asst Years Kolkata Metropolitan Development Authority 2006-07 and 2007-08 is allowed , the regular grounds raised by the assessee on the validity of proceedings and the merits thereon are not required to be adjudicated herein. Hence we direct the ld AO to grant exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X
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