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TMI Blog2019 (7) TMI 1851X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2006 under the Chhattisgarh Society Registration Act 1973; that it has filed application for registration under s. 12A on 26th March, 2010 before the learned CIT, Raipur, and the registration under s. 12A of the Act, 1961 was granted to the assessee trust w.e.f. 27th April, 2010 that the AO observed from the return of income filed by the assessee for asst. yRs. 2008-09 and 2009-10 that the assessee has claimed exemption of Rs. 5,79,918 and Rs. 20,08,117 respectively, under s. 11 of the Act, without having been registered under s. 12A of the Act for the year under reference although the registration under s. 12A was granted by the CIT, Raipur, w.e.f. 27th April, 2010, before completion of assessment and the objects and genuineness of its activities remain undisputed. However, he has disallowed exemption so claimed by the assessee under s. 11 of the Act, holding that registration under s. 12 is condition precedent to claim exemption under s. 11 of the Act. 4. On appeal before the learned CIT(A), the assessee trust submitted that the assessee is a Charitable Society registered under Chhattisgarh Society Registration Act, 1973 and was engaged in charitable activities, mainly works i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of the learned Authorised Representative was considered carefully with reference to material available on record. The registration under s. 12A was granted to the appellant on 7th June, 2010 i.e., from asst. yr. 2011-12 onwards. The power of the CIT to grant registration with retrospective effect under s. 12A(2) has been withdrawn w.e.f. 1st June, 2007. The appellant society filed the return of income for the asst. yr. 2008-09 on 30th March, 2010 after claiming exemption of Rs. 5,79,918 under s. 11 of the Act. In reply to notice under s. 148 dt. 2nd July, 2012, the appellant requested the AO to treat the return filed on 30th March, 2010 as return filed in response to notice under s. 148. The reasons for claiming net surplus of income over the expenditure of the year under reference as exempt under s. 11 without being registered under s. 12A since not explained, the AO assessed the same as income of the year. I find that registration of a society under s. 12A is a condition precedent to claim of exemption under ss. 11 and 12 as laid down by Hon'ble apex Court in the case of U.P. Forest Corporation & Anr. vs. Dy. CIT (2007) 213 CTR (SC) 473 : (2008) 297 ITR 1 (SC) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of notice under s. 148(2), i.e., on 2nd July, 2012, and the order under s. 143(3)/147 has been passed by the learned AO on 23rd Jan., 2013 and that as per the amended 'provisos' to s. 12A(2) though amendment was made by the Finance (No. 2) Act, 2014 (w.e.f. 1st Oct., 2014), which is retrospective in nature. 5.3.1. The learned Authorised Representative referred to the s. 12A(2) and its provisos which are reproduced for ready reference as under: Sec. 12A(2) and its provisos: "Sec. 12A(2) : Where an application has been made on or after the 1st June, 2007, the ss. 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made: Provided that where registration has been granted to the trust or institution under s. 12AA, then, the ss. 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the AO as on the date of such registration and the objects and activities of such trust or institution remain the same for suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Act to remove the hardship of charitable trusts/institutions. 6. Per contra, the learned Departmental Representative placed-heavy reliance on the impugned order and argued that registration of a society under s. 12A is a condition precedent to claim of exemption under ss. 11 and 12 as laid down by Hon'ble apex Court in the case of U.P. Forest Corporation vs. Dy. CIT (2007) 213 CTR (SC) 473 : (2008) 297 ITR 1 (SC) and the amendment to the section inserted by Finance Act, 2014 has no retrospective effect and therefore, in view of the statutory provisions and the legal propositions the CIT(A) has rightly confirmed the finding of the AO which he prayed to be sustained. 7. We have heard both the parties, perused the material on record and considered the cases cited before us. It is not disputed that the assessee society was granted registration under s. 12A w.e.f. 27th April, 2010 vide order dt. 18th June, 2010 by CIT, Raipur much prior to the date of initiation of proceedings under s. 147 by issuing notice under s. 148(2) dt. 2nd July, 2012 and passing the assessment order under s. 143(3)/147 dt. 23rd Jan., 2013. It is also not dispute that the AO has initiated reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no reopening can be made on account of non-registration of the trust. The relevant para reads as under: "5.4 In our view it is admitted case that the assessee was incorporated in the year 1986 and thereafter has been continued to discharge its function as registered trust and was looking after the affairs of 'Khatu Shyamji'. By virtue of order of the Tribunal dt. 28th Jan., 2010 the registration was granted w.e.f. 1st April, 2008, however have held that the assessee, though was not registered and the application was not processed but the benefit of being the registered trust was required to be extended to the assessee under ss. 11 and 12. In view thereof, the assessee is required to be treated as registered trust w.e.f. 1st April, 2007. Since we have already held that the assessee is required to be treated as registered trust w.e.f. 1st April, 2007, therefore, in our view, if we read the second proviso to 12A(2), then it is clear that the reopening under s. 147/148 is not permitted. For ready reference, we are reproducing herein below second proviso to s. 12A(2): 'Provided further that no action under s. 147 shall be taken by the AO in case of such trust or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst appellate authority. During such pendency, the assessee was granted registration under s. 12AA on 29th July, 2013 w.e.f. the asst. yr. 2013-14. Those appeals were the continuation of the original proceedings and that the power of the CIT(A) was co-terminus with that of the AO [Addl. Director of IT (Exemption)] in the present case] were 2 well established principles of law. In view of the above and going by the principle of purposive interpretation of statues, an assessment proceeding which is pending in appeal before the appellate authority should be deemed to be 'assessment proceedings pending before the AO' within the meaning of that term as envisaged under the proviso. It follows there from that the assessee which obtained registration under s. 12AA during the pendency of appeal was entitled for exemption claimed under s. 11. 7.3. The Explanatory Memo, to Finance (No. 2) Bill, 2014 which sought to amend s. 12A explains the objects and reasons for making such amendments. The explanation makes it clear that it was in order to provide relief to such trusts in respect of which, due to absence of registration under s. 12AA tax liability got attached, though otherwise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) read as follows: '6.10. We hold that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of 'first-proviso' to s. 12A(2) w.e.f. 1st Oct., 2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under ss. 11 and 12 as mentioned in s. 12A provided for registration under s. 12AA as a pre-condition for applicability of s. 12A. 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., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of Nevda Educational Trust (2017), has granted relief to the assessee trust vide para 24 of its order dt. 21st Nov., 2017 as under: "24. In the assessee's case, though the application for registration was initially rejected, the Tribunal restored the matter to the learned CIT, vide order dt. 5th Feb., 2014. The CIT granted registration by allowing that very application. It is also undisputed that the 'objects and activities', which are educational in nature, remain unchanged. As such, the aforesaid proviso to s. 12A(2) is squarely applicable. Therefore, as rightly held by the learned CIT(A), the AO should have granted the benefit of ss. 11 and 12 to the assessee." 13. It is evident from the first proviso to s. 12A(2) that if at the time of grant of registration under s. 12A the assessment proceedings are pending before the AO and the object and activities of the trust remain the same for such preceding assessment years, then the benefit of registration (sic) for ss. 11 and 12 are required to be given to the trust on the income derived from such activities carried out by the trust. In the present case the appellant has filed application for grant of registratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the amendment to the s. 12A(2) by way of inserting proviso through Finance Act, 2014 with retrospective effect and therefore, in view of the statutory provisions and the legal propositions we do not approve finding of the learned CIT(A). 15. Without prejudice to above, even if the reopening is to be treated valid, then also, the learned CIT(A)/AO has not brought any material evidence on record from which it can be inferred that the objects and activities of the assessee trust for the earlier assessment years i.e.. 2008-09 and 2009-10 has been changed as compared the objects and activities of the subsequent assessment year i.e., 2010-11 onwards for which the AO has allowed the exemption under s. 11 to the assessee trust and in the present case there is no change in the objects and activities of the earlier and subsequent assessment years and further, there was no finding that the assessee has carried on any activity not in accordance with its objectives and therefore, in the absence of any finding of facts being given by the AO or the CIT(A), the exemption under s. 11 of the Act, cannot be denied as held by-apex Court in the case of Swat City Gymkhana (supra) and Sree Sre ..... 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