TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 46
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....e Tribunal and so also the orders passed by the authorities below. We find that the contention of the assessee in respect of their status as Trust had not been considered by the Tribunal in proper perspective. We, however, do not wish to express any opinion on merits of the case, since learned counsel appearing for the parties have agreed for the order that we propose to pass. Learned counsel for the parties fairly stated that we need not record any further reasons for the following order: (i) The order dated 20th June 2013 rendered by the Tribunal, impugned in these appeals, is set aside and the appeals filed by the Revenue as well as the Cross-Objections filed by the assessee are restored to file. (ii) The Tribunal shall endeavour to dispose of the appeals as well as the cross-objections afresh on merits. 5. All the contentions of the parties are kept open. 6. It is needless to mention that the parties, if so desire, may be allowed to file additional documents in support of their case. 7. We make it clear that we have not expressed any opinion on merits of the case. We hope and trust that the Tribunal shall decide all the grounds of challenge raised by the partie....
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.... of assessee as NIL without appreciating the fact that decisions of the Karnataka High Court relied upon by him is distinguishable and not applicable to the assessee's case. (3) The CIT (A) erred in not appreciating that the assessee itself had filed the return of income in Form No. 3A in the status code No. 8 being 'Association of persons (Trust)' and there was no change of status by the Assessing Officer. (4) The CIT (A) erred in not appreciating that on denial of exemption U/s. 11 of the Income Tax Act, the charging section will be section 164(2) of the Act as per which the tax has to be charged at maximum marginal rate as the income so exempt were the income of the association of person. (5) Any other grounds which may arise at the time of hearing. (6) The order of the learned CIT (A) may be set-aside and the order of the A.O. may be confirmed." 7. In the CO, the assessee raised the grounds as under:- "1. The order of the authorities below in so far as it is against the Respondent/Cross Objector are opposed to law, weight of evidence, natural justice, facts and circumstances of the case. 2. The order passed under section 143(3) r.w.s. 147 of the Act is bad in....
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....12 of the Act, shall be chargeable to tax as it were the income of the AOP. Thus, the ld. DR submitted that the CIT (Appeals) has committed an error while holding that the assessment order framed in the status of AOP is bad in law. The ld. DR has contended that when there is a special provision u/s. 164(2) that an income which is not exempt u/s. 11 or 12 is to be assessed as if it was the income of AOP and therefore the AO has rightly treated the assessee as AOP while passing the assessment order. He has relied upon the orders of the AO. 9. On the other hand, the ld. AR of assessee has submitted that as per provisions of section 139(4A) of the Act, return of income is required to be filed only when a person has a taxable income. The assessee trust has no taxable income and therefore there was no need to file return of income. Further, when the registration u/s. 12A was granted w.e.f. 1.4.2008, then the benefit of sections 11 and 12 ought to have been given to the assessee as per the first proviso to section 12A(2) of the Act. He has further submitted that the application filed on 14.3.2005 was not acted upon by the DIT (E) and therefore upon the expiry of six months from the date ....
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....amendment and therefore the benefit of amendment is not available to the assessee. 12. As regards the deemed registration, when the assessee itself filed application on 21.10.08, then the earlier application stands withdrawn or becomes infructuous. In any case, the assessee has filed a fresh application on 21.10.2008 without praying for adjudication of the alleged earlier application filed on 14.3.05. He has relied upon the decision of the Hon'ble Madras High Court in the case of CIT v. Sheela Christian Charitable Trust 2013 (3) TMI 268 - MADRAS HIGH COURT and submitted that the Hon'ble High Court has held that the time frame u/s. 12AA of the Act is only directory and not passing the order within six months would not grant deemed registration to the trust. 13. We have considered the rival submissions as well as relevant material on record. The primary issue is denial of exemption u/ss. 11 & 12 as well as u/s. 10(23C) of the Act and framing the assessment on the status of assessee would not affect the tax liability in respect of the income, not eligible for exemption u/ss. 11 and 12 or u/s. 10(23C) of the Act. 14. The question of assessment of income in the status of AOP ....
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.... non-compliance. 4. Accordingly, the assessee's application u/s. 12A of the Income Tax Act, 1961 is rejected." 16. It reveals that the said application was rejected in limine for want of appearance and necessary details and it was not decided on the objects of the assessee being charitable or genuineness of the activity for achieving the objectives. Immediately after the said order of DIT (E), the assessee filed another application dated 14.3.2005 for registration u/s. 12A and explained the difficulties for not filing the necessary details on earlier occasions. The said application was not acted upon for a considerable period and therefore assessee filed third application dated 21.10.2008 which was rejected on merits vide order dated 24.4.09. However, the matter was remanded back by this Tribunal to DIT (E) and subsequently registration was granted vide order dated 5.3.10 w.e.f. 1.4.2008. It is apparent from the record that the AO issued notice u/s. 148 on 30.12.08 primarily on the ground that the assessee has not been registered u/s. 12A of the Act, whereas registration was finally granted w.e.f. 1.4.2008. 17. The reasons recorded by the AO for initiating proceedings u/s. 1....
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....tution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds fifty thousand in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed." 20. Explanatory Note on the proviso introduced by the Finance Act, 2014 explains as under:- "8. Applicability of the registration granted to a trust or institution to earlier years 8.1 The provisions of section 12A of the Income-tax Act, before amendment by the Act, provided that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA of the said Act has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively. 8.2 Non-application of registration for the period prior....
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....on would be that this amendment on a purposive construction would warrant to be given a retrospective effect. Since the amendment by way of inserting the proviso is remedial in nature, therefore even though the amendment is w.e.f 1.10.2014, it is applicable in the cases where the application for registration is made after 1.6.2007 because of withdrawal of powers of granting registration from the earlier date prior to the financial year of application. Further in the case of assessee, there is no allegation of change of objects or activities as it was at the time of granting registration in comparison to the objects of activity during the years under consideration. 22. Thus, benefit of sections 11 and 12 of the Act cannot be denied merely on the ground that registration is granted w.e.f. 1.4.2008, though by a subsequent order, but the registration u/s. 12A came into effect prior to the initiation and completion of assessment proceedings of these four years. Accordingly, we hold that assessee is eligible for exemption u/s. 11 of the Act. 23. As regards the receipt of each educational institution to be considered separately for the purpose of exemption u/s. 10(23C) of the Act, the H....
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....are not wholly or substantially financed by the Government, then the benefit of that exemption is also extended to the income derived from such educational institutions and received by the assessee under sub-clause (iiiad) reading with sub-clause (iiiad) along with rule 2BC. It was contended, the Legislature used the word "aggregate annual receipt" and "amount of annual receipts" and, therefore, the provisions are not one and the same. The word "aggregate" has been defined in Chambers 21st Century Dictionary as under: "Aggregate noun = a collection of separate units brought together, a total taken altogether, bring together." In Wharton's Law Lexicon, it is defined as thus : "a collocation of individuals, units or things in order to form a whole." 22. Similarly, relying on the judgment of the apex court in the case of Aditanar Educational Institution v. Addl. CIT, it was contended the words "other educational institution" refers to the assessee society and not to the individual educational institution. If the intention of the Legislature was to club the annual receipts of all educational institutions run by the assessee society, they could have said so in clear terms. On con....
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....separate entity controlled under various statutes for various purposes. May be the management of these educational institutions would be in the hands of the societies or the trust, but for all other purposes they are different, independent entities. That is the reason why section 10(23C) is worded as under: "any income received by any person on behalf of. . . . " 24. Here "any person" refers to the assessee and "on behalf of" refers to such institutions. It may be an university, it may be an educational institution, it may be a hospital or other institutions of similar nature. As all such institutions are independent entities and they generate income and when that income is received by the assessee, it becomes the income in the hands of the assessee and it is such income which is sought to be excluded while computing the total income of the assessee under section 10. The test prescribed under the aforesaid provision is not the income of the educational institution. It is the aggregate annual receipts of such educational institution that is prescribed at Rs. 1 crore. Therefore, irrespective of the expenditure incurred by those institutions, the exemption is based on the total rece....
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....nfructuous and academic in nature in view of our finding on the issue of eligibility of exemption u/s. 11 of the Act, however, we find that the Hon'ble High Court in the case of Children's Education Society (supra) had an occasion to deal with this issue in paras 5 to 8 as under:- '5. The word "person" is defined under section 2(31) of the Act. It reads as under : "2. (31) 'person' includes- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. Explanation. - For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains." 6. A reading of the aforesaid definition makes it clear that a "person" includes an association of persons or body of individuals whethe....
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....ed on so much of the relevant income as is not exempt under section 11 or section 12, as if the relevant income not so exempt were the income of an association of persons: Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate." 27. Therefore, the status as per section 164(2) is only for the assessment purpose and not to after the real status of the trust. In the case of society, there is no special provision providing the status of the person in terms of section 2(31) of the Act and therefore it was held by the Hon'ble High Court that it would fall in the residual category of Artificial Juridical Person ["AJP"]. Whereas in case of income from property held under trust which is not eligible for exemption u/ss. 11 and 12 of the Act, it will be dealt with as per the special provisions of section 164(2) of the Act, which stipulates the status in which the income is assessable. Therefore, this provision is applicable on....
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...., the receipts of the trust/institution has to be considered and there is no provision in the statute to separate the receipts of each college. Hence, what is required at the time of initiation of proceedings u/s. 148 is a prima facie reasonable belief that assessee is not eligible for exemption u/s. 10(23C) because the gross amount of receipts are more than the prescribed limit. He has relied upon the orders of authorities below. 32. We have considered the rival submissions as well as relevant material on record. It is undisputed fact that at the time of issuing notice u/s. 148, an application for registration was rejected by the DIT (E) and therefore as per the provisions of section 12A as existed at the relevant point of time, the AO has valid reason to believe that the income assessable to tax has escaped assessment. As regards the composite amount of receipts, it is only a matter of interpretation that for the purpose of section 10(23C) of the Act, the receipt of each educational institution has to be considered separately and not by clubbing together of all the institutions of the trust. In the absence of any provision in the statute as well as any binding precedent at the t....
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....ght to have transferred the case of the Respondent/Cross Objector to the respective ward in which the jurisdiction for assessing the Respondent/Cross Objector lies under the facts and circumstances of the case. 3. The Respondent/Cross Objector craves leave to add, alter, delete or substitute any of the grounds urged above. 4. In view of the above and other grounds that may be urged at the time of hearing of the Cross Objection, your Respondent/Cross Objector humbly pray that the Cross Objection may be allowed in the interest of equity and justice." 38. We have heard the ld. AR as well as ld. DR and considered the relevant record on the point of admission of additional ground. Since it is a pure question of law and does not require any investigation of facts, therefore in view of the decision of the Hon'ble Supreme Court in the case of NTPC Ltd. v. CIT [1998] 229 ITR 383, the additional ground raised by the assessee is admitted for adjudication. 39. The ld. AR for the assessee has submitted that when the AO has not recognized the assessee as trust and framing the assessment by treating the assessee as AOP, then the jurisdiction to pass assessment order other than the trust, ....