2020 (12) TMI 737 - HC - Income Tax

Court denies tax benefits due to late trust deed amendment, rules against appellant on substantial legal questions.

M/s. Soundaram Chokkanathan Educational and Charitable Trust Versus The Income Tax Officer, Exemption Ward, Salem.

M/s. Soundaram Chokkanathan Educational and Charitable Trust Versus The Income Tax Officer, Exemption Ward, Salem. - [2021] 430 ITR 440 (Mad) Issues Involved:1. Applicability of the first proviso to Section 12A(2) of the Income Tax Act, 1961.2. Charitable status of the appellant for the Assessment Year 2013-14.3. Consideration of prior judicial decisions supporting the appellant's claim under the first proviso to Section 12A(2).Detailed Analysis:1. Applicability of the First Proviso to Section 12A(2):The primary issue is whether the appellant's case falls within the first proviso to Section 12A(2) of the Income Tax Act, 1961. The appellant contended that since their appeal was pending before the CIT(A), it should be considered as assessment proceedings pending before the Assessing Officer, thus qualifying for the benefits under the first proviso to Section 12A(2). However, the court noted that the appellant's application for registration was filed only on 23.02.2016 and was granted with effect from 01.04.2015, following amendments to the trust deed. Therefore, the Tribunal correctly held that the appellant could not claim benefits for the Assessment Year 2013-14 as the registration was granted only after the deed was amended. The court also highlighted that the appeal before the CIT(A) was against an order passed on a rectification petition under Section 154, not an assessment order, raising doubts about whether it could be considered as pending assessment proceedings.2. Charitable Status for the Assessment Year 2013-14:The appellant argued that despite being granted registration effective from 01.04.2015, they should be considered charitable for the Assessment Year 2013-14 based on compliance with Sections 11 and 12 of the Act. The Tribunal, however, found no evidence that the appellant's activities for the Assessment Year 2013-14 were examined for exemption purposes. The court upheld this view, noting that the appellant's registration was granted only after amending the trust deed, and thus, they could not claim benefits retrospectively for the Assessment Year 2013-14.3. Consideration of Prior Judicial Decisions:The appellant relied on decisions in Commissioner of Income Tax (Exemptions) Vs. Shree Shyam Mandir Committee and Mathew M. Thomas Vs. Commissioner of Income Tax to support their claim. The court distinguished these cases, noting that the factual circumstances in Shree Shyam Mandir Committee involved re-assessment proceedings, which were not analogous to the appellant's situation. Similarly, Mathew M. Thomas dealt with issues under Section 269C, unrelated to the present case. The court found the decision in Commissioner of Income Tax (Exemption), Lucknow Vs. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan more applicable, where it was held that the benefit of Sections 11 and 12 could not be extended retrospectively if the registration was granted for a later assessment year.Conclusion:The court concluded that the appellant's case did not meet the criteria under the first proviso to Section 12A(2), and the Tribunal rightly denied the benefits for the Assessment Year 2013-14. The court also emphasized that exemption provisions must be strictly interpreted in favor of the Revenue. Consequently, the Tax Case Appeal was dismissed, and the Substantial Questions of Law were answered against the appellant.