Tribunal upholds assessee's tax exemption under section 11 for 2011-12, dismisses revenue's appeal.

The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s order. It held that the insertion of the proviso to section 12A(2) is retrospective, and the assessee is eligible for exemption under section 11 for the assessment year 2011-12. Additionally, the Tribunal upheld the deletion of additions made on account of amortized lease rent payment and depreciation on leasehold land.

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Issues Involved:
1. Retrospective application of the first proviso to sub-section (2) of section 12A of the Income-tax Act, 1961.
2. Eligibility of the assessee for exemption under section 11 of the Income-tax Act.
3. Deletion of additions made on account of amortized lease rent payment and depreciation on leasehold land.

Issue-wise Detailed Analysis:

1. Retrospective Application of the First Proviso to Sub-section (2) of Section 12A:

The primary issue raised by the revenue was whether the insertion of the first proviso to sub-section (2) of section 12A of the Income-tax Act, 1961, by the Finance Act, 2014, effective from 01.10.2014, is retrospective. The assessment order was passed on 28.03.2014, and the assessee was assessed as a company with a profit motive due to the absence of registration under section 12AA for the assessment year 2011-12.

The Tribunal noted that the CIT(A) held the proviso to be retrospective, relying on the Tribunal's decision in Sree Sree Ramkrishna Samity Vs. DCIT (2015) 44 ITR (Trib) 678 (ITAT, Kol). The Tribunal reproduced the relevant portions of the order, emphasizing that the proviso to section 12A(2) should be construed as retrospective to prevent genuine hardship to charitable organizations. The Tribunal cited various judgments, including Allied Motors P Ltd vs CIT and CIT vs Vatika Township P Ltd, supporting the retrospective application of beneficial provisions.

The Tribunal concluded that the insertion of the proviso to section 12A(2) is retrospective in operation, aligning with the CIT(A)'s decision.

2. Eligibility for Exemption Under Section 11:

The assessee, a consortium of the Central Government, State Government, and Kolkata Municipal Corporation, was incorporated as a company under section 25 of the Companies Act, 1956, with charitable objectives. The CIT(A) noted that the assessee's activities were for charitable purposes and granted the benefit of registration under section 12AA retrospectively for the assessment year 2011-12.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee was granted registration under section 12AA on 03.05.2013, effective from 01.04.2012. The Tribunal emphasized that the CIT(A) has co-terminus power with the AO and that the assessee's activities were charitable. Therefore, the benefit of registration under section 12AA should be extended to the assessment year 2011-12.

3. Deletion of Additions on Account of Amortized Lease Rent Payment and Depreciation on Leasehold Land:

The revenue challenged the deletion of additions of Rs. 4 lakhs for amortized lease rent payment and Rs. 19,40,000 for depreciation on leasehold land. Since the Tribunal upheld the CIT(A)'s direction to extend the benefit of registration under section 12AA to the assessment year 2011-12, the assessee was eligible to claim exemption under section 11 of the Act.

The Tribunal noted that the expenditure incurred by the assessee would be treated as an application of income for charitable objects, as the revenue did not dispute the incurrence of expenditure for charitable purposes. Therefore, the Tribunal found no merit in the revenue's grounds of appeal regarding these additions and dismissed them.

Conclusion:

The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s order. The Tribunal held that the insertion of the proviso to section 12A(2) is retrospective in operation, and the assessee is eligible for exemption under section 11 for the assessment year 2011-12. The Tribunal also upheld the deletion of additions made on account of amortized lease rent payment and depreciation on leasehold land. The order was pronounced in the open court on 5th July, 2018.

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