Tribunal grants exemption under section 11 with retrospective application of First Proviso

The Tribunal allowed the appeal of the assessee, granting exemption under section 11 based on the retrospective application of the First Proviso to section 12A(2). The denial of exemption under section 11 was overturned due to the registration being granted during the assessment proceedings. The other issues were withdrawn or allowed in consequence of the primary issue's resolution. The Tribunal highlighted the beneficial nature of the proviso in mitigating hardships for charitable institutions.

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Issues Involved:
1. Denial of exemption under section 11 of the Income Tax Act.
2. Non-granting of deduction of Rs. 10,00,340.
3. Disallowance of exemption under section 11(1)(d) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Denial of Exemption under Section 11 of the Income Tax Act:

The primary issue was whether the assessee was entitled to exemption under section 11 of the Income Tax Act, given that the trust was not registered under section 12AA at the time of assessment. The assessee argued that they had applied for registration on 03.03.2016, and it was granted on 28.03.2016, while the assessment order was passed on 15.03.2016. The Tribunal noted that the First Proviso to section 12A(2), inserted by the Finance Act, 2014, is intended to mitigate hardships for charitable institutions and should be applied retrospectively. This proviso allows the application of sections 11 and 12 for any income derived from property held under trust for any assessment year preceding the year of registration if the assessment proceedings were pending as of the date of registration and the trust’s objects and activities remained unchanged.

The Tribunal referred to several cases, including the Punjab Education Society vs. ITO and SNDP Yogam vs. ADIT(Exemption), which supported the retrospective application of the proviso to section 12A(2). The Tribunal concluded that since the assessee had applied for registration during the assessment proceedings and received it before the appeal, the benefit of exemption under section 11 should be granted. Consequently, the Tribunal set aside the order of the CIT(A) and allowed the appeal of the assessee on this ground.

2. Non-granting of Deduction of Rs. 10,00,340:

This ground was not pressed by the assessee before the Tribunal and was withdrawn. Consequently, this ground was dismissed as withdrawn.

3. Disallowance of Exemption under Section 11(1)(d) of the Income Tax Act:

The assessee contended that the CIT(A) was not justified in denying exemption under section 11(1)(d) for voluntary contributions received as part of the corpus trust or for specific purposes. The Tribunal reiterated its findings from the first issue, emphasizing that the registration under section 12AA, granted during the pendency of the appeal, should apply retrospectively. Therefore, the benefit of exemption under section 11(1)(d) should also be granted, as the conditions for registration and the charitable nature of the trust were met.

Conclusion:

The Tribunal allowed the appeal of the assessee, granting the exemption under section 11 based on the retrospective application of the First Proviso to section 12A(2). The other grounds were either withdrawn or consequentially allowed based on the primary issue's resolution. The Tribunal emphasized the beneficial nature of the proviso and its intent to mitigate hardships for genuine charitable institutions.

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