Tribunal grants retroactive registration, allows exemption under Section 11 of Income Tax Act

M/s. Alpha Educational Trust Versus The DCIT (Exemptions), Chennai

M/s. Alpha Educational Trust Versus The DCIT (Exemptions), Chennai - TMI Issues Involved:

1. Reassessment and Assumption of Jurisdiction under Section 147 of the Income Tax Act.
2. Denial of Exemption under Section 11 of the Income Tax Act due to lack of registration under Section 12AA.

Summary:

1. Reassessment and Assumption of Jurisdiction under Section 147:

The first jurisdictional issue raised by the assessee regarding reassessment and assumption of jurisdiction under Section 147 of the Act was not prosecuted by the assessee. Consequently, the issue was dismissed as not pressed.

2. Denial of Exemption under Section 11:

The primary issue was whether the CIT(A) erred in confirming the action of the Assessing Officer in denying the claim of exemption under Section 11 of the Act. The assessee, a registered charitable trust running an educational institution, claimed exemption under Section 11 for the assessment year 2011-12, which was denied by the Assessing Officer on the grounds that the trust was not registered under Section 12AA.

The CIT(A) upheld the Assessing Officer's decision, stating that the second proviso to Section 12A of the Act is prospective and not retrospective. The CIT(A) referenced the Supreme Court judgment in the case of UP Forest Corporation, which held that registration is a condition precedent for availing exemption.

The assessee argued before the Tribunal that the application for registration under Section 12AA, filed in 1991, had not been disposed of, and relied on the Supreme Court judgment in CIT Vs Society for Promotion of Education, which approved deemed registration in cases where the application was not disposed of within the prescribed time limit. The assessee also argued that the second proviso to Section 12AA, introduced by Finance (No.2) Act, 2014, should be applied retrospectively.

The Tribunal noted that the assessee had indeed applied for registration in 1991 and again in 2012, with registration eventually granted in 2015, effective from 01.04.2011. The Tribunal referred to explanatory notes and various Tribunal decisions, including ITAT Cochin Bench in SNDP Yogam Vs. ADIT, which supported the view that the second proviso to Section 12A should be applied retrospectively to provide relief to genuine trusts.

The Tribunal concluded that the registration granted to the assessee trust should be considered retrospective and not prospective. Consequently, the Tribunal allowed the assessee's claim for exemption under Section 11, reversing the orders of the lower authorities.

Conclusion:

The appeal was partly allowed, granting the assessee exemption under Section 11 of the Income Tax Act, holding that the registration under Section 12AA is retrospective.