Trust wins appeal for retroactive registration under section 12AA, exempting corpus donations from income tax

The appellant trust challenged the addition made by the Assessing Officer regarding corpus donations claimed as exempt under section 11(1)(d) of the Income Tax Act. The Assessing Officer held that since the trust was not registered under section 12A, the donations were added to income. The Ld. CIT(A) upheld this decision. The Tribunal found in favor of the appellant, granting registration under section 12AA retrospectively, entitling the trust to the exemption. As a result, the addition was deleted, and the Revenue's appeal against the penalty order was dismissed.

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Issues:
1. Challenge to addition made by Assessing Officer regarding corpus donations claimed as exempt under section 11(1)(d) of the Income Tax Act.
2. Dispute over penalty imposed by Assessing Officer and subsequently deleted by Ld. CIT(A).
3. Registration under section 12A of the Act and its implications on the exemption claimed by the appellant trust.
4. Interpretation of the proviso of section 12A(2) inserted by the Finance Act, 2014 and its retrospective applicability.
5. Effect of registration granted under section 12AA of the Act on pending assessment proceedings.

Analysis:
1. The appellant trust challenged the addition made by the Assessing Officer regarding corpus donations claimed as exempt under section 11(1)(d) of the Income Tax Act. The Assessing Officer held that corpus donations are in the nature of income under the amended provision of section 2(24) of the Act and subject to exemption under section 11(1)(d) only if the trust or society is registered under section 12A of the Act. As the appellant was not registered under section 12A, the donations were added to the income. The Ld. CIT(A) upheld this decision based on non-registration under section 12AA of the Act.

2. The Revenue Department also filed an appeal challenging the deletion of penalty imposed by the Assessing Officer, which was subsequently deleted by Ld. CIT(A). The Tribunal found that since the appellant's appeal against the addition was allowed, the penalty order could not survive, leading to the dismissal of the Revenue's appeal against the penalty order.

3. The appellant had applied for registration under section 12A of the Act for the relevant assessment years, but the application was rejected for being filed beyond the prescribed time limit. The CBDT later condoned the delay for registration for the said assessment years. The appellant was eventually granted registration under section 12AA of the Act, raising the question of whether the pending assessment proceedings could be considered a continuation.

4. The Tribunal examined the proviso of section 12A(2) inserted by the Finance Act, 2014, which was retroactively applied to prevent genuine hardships due to non-registration under section 12A. Citing various cases, including the Apex Court's decision in 'CIT vs. Vatika Township Pvt. Ltd.', the Tribunal held that the proviso should be construed retrospectively. The registration granted under section 12AA was deemed effective from the date of formation of the society, entitling the appellant to the benefit of registration for the relevant assessment years.

5. Considering the registration granted under section 12AA and the pending assessment proceedings, the Tribunal concluded that the appellant was entitled to the benefit of registration for the assessment years in question. Consequently, the impugned orders were set aside, and the addition was deleted, allowing the appellant's appeal. This decision also led to the allowance of the related appeal and the dismissal of the Revenue's appeal against the penalty order.

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