2017 (12) TMI 989 - AT - Income Tax

Tribunal grants assessee benefits retrospectively, deletes addition of Rs. 34,31,521 under Sec. 11 & 12

The tribunal allowed the appeal, applying the first proviso to Sec. 12A(2) retrospectively, granting the assessee benefits under Sec. 11 and 12 for AY ... Grant of registration under Sec. 12AA - first proviso of Sec.12A(2) applicability - retrospective effect - Held that:- The first proviso of Sec. 12A(2) as had been made available on the statute vide the Finance (No. 2) ‘Act’. 2014, with effect from 01.10.2014, being a beneficial provision intended to mitigate the hardships in case of genuine charitable institutions, thus, find ourselves to be in agreement with the view taken by the Tribunal in the aforesaid appeals. We thus, are of the considered view that the first proviso of Sec. 12A(2) would be applicable to the case of the present assessee. We therefore set aside the order of the CIT(A) and consequently delete the addition - Decided in favour of assessee Issues Involved:1. Addition of Rs. 34,31,521 as surplus of the Society due to non-approval under Sec. 10(23C)(vi) or (via) of the Income Tax Act.2. Applicability of amended provisions of Sec. 12A/12AA of the Income Tax Act retrospectively.3. Rejection of the additional ground of appeal regarding the society's registration status under Sec. 12A/12AA during the period under consideration.Issue-wise Detailed Analysis:1. Addition of Rs. 34,31,521 as Surplus of the Society:The assessee, an educational institution, filed its return for AY 2011-12 declaring nil income. The Assessing Officer (A.O) observed that the assessee had an excess income of Rs. 34,31,521, transferred to its Reserve and Surplus account. Since the society was neither registered under Sec. 12A nor approved under Sec. 10(23C)(vi) during the period, the A.O added Rs. 34,31,521 to the assessee's income. The assessee argued that it was registered under Sec. 12AA from AY 2012-13 and had applied its income for charitable purposes, thus should not be taxed. However, the A.O did not accept this contention and made the addition.2. Applicability of Amended Provisions of Sec. 12A/12AA Retrospectively:The assessee contended before the CIT(A) that the first proviso to Sec. 12A(2), effective from 01.10.2014, should apply retrospectively, allowing benefits of Sec. 11 and 12 for prior years if the registration was granted later and assessment proceedings were pending. The CIT(A) rejected this, stating the amendment was not retrospective and did not apply to AY 2011-12. The assessee argued that the provision was intended to mitigate hardships for charitable institutions and should be given retrospective effect, citing various tribunal judgments supporting this view.3. Rejection of Additional Ground of Appeal Regarding Registration Status:The assessee raised an additional ground of appeal before the CIT(A), stating that the society was granted registration under Sec. 12AA on 03.04.2012, and the objects and activities during AY 2011-12 were the same as at the time of registration. The CIT(A) rejected this, maintaining that the society was not registered under Sec. 12AA during the year under consideration and was not eligible for exemption under Sec. 11 and 12.Tribunal's Decision:The tribunal examined whether the first proviso to Sec. 12A(2) should apply retrospectively. It noted that the provision was intended to mitigate hardships for charitable institutions and should be considered retrospective, aligning with previous tribunal decisions and the Supreme Court's judgment in CIT Vs. Vatika Township Pvt. Ltd. The tribunal concluded that the first proviso to Sec. 12A(2) applied to the assessee's case, thus allowing the benefit of Sec. 11 and 12 for AY 2011-12. Consequently, the tribunal set aside the CIT(A)'s order and deleted the addition of Rs. 34,31,521.Conclusion:The tribunal allowed the appeal, determining that the first proviso to Sec. 12A(2) should be applied retrospectively, thus granting the assessee the benefits of Sec. 11 and 12 for AY 2011-12 and deleting the addition of Rs. 34,31,521.