TaxTMI 
TaxTMI 
2017 (11) TMI 499
X X X X Extracts X X X X
X X X X Extracts X X X X
....the JCIT, Range - 50, Kolkata (in short the ld AO) dated 25.2.2014 giving effect to section 263 order of the ld CIT for the Asst Years 2006-07 & 2007-08. 1.1. As identical facts are involved in both the years, they are taken up together and disposed off by this common order for the sake of convenience. The facts of Asst Year 2006-07 are taken up for adjudication and the decision rendered thereon would apply with equal force for the Asst Year 2007-08 also except with variance in figures. 2. The brief facts of appeal for Asst Year 2006-07 are as under :- (i) The assessee is a statutory authority established under the State Act. The assessee did not file its return of income for the Asst Year 2006-07 within stipulated date. The ld AO felt that it is a local authority and with effect from 1.4.2003 , it came under the ambit of income tax. Accordingly notice u/s 148 of the Act was issued to the assessee. In response to the said notice, the assessee submitted return of income declaring loss of Rs. 1,42,25,340/-. The assessment thereon was framed u/s 148/143(3) of the Act by the ld AO on 8.12.2010 accepting the loss returned by the assessee. (ii) Subsequently the assessee preferred a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nst the loss returned in the sum of Rs. 1,42,25,340/-. In the said assessment, the interest on loan to statutory and local bodies amounting to Rs. 17,35,46,848/- which was claimed as not assessable to tax by the assessee was added Kolkata Metropolitan Development Authority back on the ground that the same is taxable in accordance with the mercantile system of accounting followed by the assessee. (viii) Against this giving effect order, the assessee preferred an appeal before the ld CITA who in turn upheld the order of the ld AO in Appeal No. 39/CIT(A)-15/14- 15/JCIT Rane -50/Kol dated 4.2.2015. Aggrieved, the assessee is in appeal before this tribunal which is numbered as ITA No. 523/Kol/2015 for the Asst Year 2006-07. 3. During the course of hearing, the ld AR stated that the appeals against the order of the ld CIT u/s 263 of the Act have become infructuous in view of the giving effect order passed by the ld AO and accordingly informed the bench that the appeals in ITA Nos. 723 & 724/Kol/2013 for Asst Years 2006-07 & 2007-08 are withdrawn. The same is reckoned as a statement from the Bar and accordingly the appeals for the Asst Years 2006-07 & 2007-08 against section 263 order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the assessment year 2008-09 for the very same issue covered by Ground Nos.2 & 3 hereinabove. 5.That the Learned Commissioner of Income Tax (Appeals)-15, Kolkata erred in arbitrarily and wrongly confirming the charge of interest u/s 234B of the said Act in the instant case of the Appellant Authority for the year under appeal, even when no such interest was chargeable in law. 6. That the impugned Appellant Order dated 4th February, 2015 passed by the learned Commissioner of Income Tax (Appeals)-15, Kolkata is wholly against the facts and evidences on record, arbitrary, illegal, invalid, unreasonable and/or otherwise perverse. 5. The assessee has also raised an additional ground together with the prayer to admit the same in the light of legal propositions. The additional ground raised by the assessee is as under:- " For that the appellant is entitled to exemption under sections 11 and 12 of the Act for the assessment year 2006-07 and the order of the Commissioner of Income Tax under section 263 is wholly illegal and invalid." 5.1. We find that the assessee in the prayer for admission of additional ground had stated that the assessee was granted registration u/s 12AA of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation is made:] [Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding Kolkata Metropolitan Development Authority the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]See More 7. We find that the following facts are not in dispute:- a) The assessee has been granted registration u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....09 on 30.3.2010. Even for the earlier years, the assessee society was carrying on the same charitable objects as per the trust deed on which fact also there is absolutely no dispute. The receipts were brought to tax only on the pretext that the assessee society is not having registration u/s 12AA of the Act in the Asst Years 2003-04 to 2008-09. 6.3 It is relevant at this juncture to get into the amendment brought in section 12A by Finance Act 2014 with effect from 1.10.2014 by way of insertion of first proviso to section 12A(2) of the Act which is reproduced below for the sake of convenience :- ........................ 6.4 Admittedly, the reassessment proceedings were pending before the Learned AO for the Asst Years 2003-04 to 2008-09 as on the date of granting registration u/s 12AA of the Act on 29.10.2010 with effect from 1.4.2010 as reassessment proceedings got commenced pursuant to issuance of notice u/s 148 on 30.3.2010 as stated supra. Admittedly, the objects and activities of the trust had remained the same in preceding assessment years also i.e Asst Years 2003-04 to 2008-09. Though this first proviso to section 12A(2) talks about pendency of assessment proceedings,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5 in reference F.No. 142/13/2014-TPL which is reproduced hereinbelow for the sake of convenience :- Para 8 - Applicability of the registration granted to a trust or institution to earlier years Para 8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organizations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfill other substantive conditions. However, the power of condonation of delay in seeking registration was not available. This clearly goes to prove that the first proviso to section 12A(2) was brought in the statute only as a retrospective effect with a view not to affect genuine charitable trusts and societies carrying on genuine charitable objects in the earlier years and substantive conditions stipulated in section 11 to 13 have been duly fulfilled by the said trust. The Kolkata Metropolitan Development Authority benefit of retrospective application alone could be the intention of the legislature and this point is further strengthened by the Explanatory Notes to Finance (No. 2) Act, 2014 issued by the Central Board of D....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which are liable to taxation but for the provision granting exemption. 6.10 We hold that it is an established position in law that a proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole and accordingly the said insertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under section 11 & 12 as mentioned Kolkata Metropolitan Development Authority in section 12A provided for registration u/s 12AA as a pre-condition for applicability of section 12A. Reliance in this regard is placed on the following decisions :- Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677/91 Taxman 205 (SC) - Judgement by three judges of the Supreme Court "The departmental understanding also appears to be that section 43B, the proviso and Expl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, Kolkata Metropolitan Development Authority would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India v. Indian Tobacco Association reported in (2005) 7 SCC 396, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra reported in (2006) 6 SCC 289. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. In such cases, retrospectivity is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches tow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....io, the assessee society could only be taxed in the status of an AOP does not require any adjudication as we hold that the assessee society to be construed as a public charitable trust and eligible to claim exemption u/s 11 of the Act for the earlier assessment years, more especially, Asst Years 2003-04 to 2008-09 , the donations received from various donors for construction of an old age home would take the character of corpus donations as they are meant for specific purposes and accordingly would be exempt u/s 11(1)(d) of the Act. Even otherwise, the said donation receipts are only capital in nature as it is received for construction of an old age home on which fact there is absolutely no dispute. The Learned AO also had duly accepted the nature of donations, genuinity of the donors and its utilization in the remand proceedings. Hence in any case, a receipt which is by birth, capital in nature, cannot change its character merely for want of registration of society u/s 12AA of the Act. It is not the case of the revenue that the donations received are meant for general functioning of the charitable objects of the society, in which event, the donations received thereon would take th....