TaxTMI 
TaxTMI 
2017 (10) TMI 1450
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.... under:- 1. Since in all these appeals, common questions of law and facts are involved, they are decided by this common judgment. 2. By way of these appeals, the appellants have challenged the judgment and order passed by the tribunal whereby the tribunal has allowed the appeals of the assessee, reversing the view taken by the Commissioner of Income Tax Jaipur-III, Jaipur vide judgment and order dated 30.09.2009 whereby the registration under Section 12A was rejected. 3. This court while admitting the appeal has framed the following substantial questions of law:- D.B. Income Tax Appeal No.224/2010 admitted on 13.12.2010:- (i) Whether granting registration to a private trust u/s. 12A was legal and proper especially when Sections 2(15),11,12 & Section 13 specifically restricts use and application of voluntarily contribution/income for the benefit of private person u/s.13(3)? (ii) Whether applications of Rajasthan Public Trust Act, 1959 can be applied to the private trust especially when they are covered by the Indian Trust Act, 1882?" D.B. Income Tax Appeal No.273/2016 admitted on 17.01.2017:- "(i) Whether on the....
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....he endowment and its property, and derive the material benefit of getting its income. Such instances are not few. The richer the endowment, the greater the temptation to swallow the same. To such impious Pujaris, Managers and Mahants, nothing matters, consideration neither of this world nor the next, if they could only serve their selfish end. Such instances, justify the passing of and the utility of this Act. These days the Trusts and Temples have assumed great importance. This is because the State has thought it advisable to introduce legislation for the governance for safeguarding the interest of the beneficiaries and for avoiding the cases of magnificence and to check mis-appropriation and criminal breach of trust. As expressed by the late Hon'ble Justice Chagle C.J. of Bombay, in his judgment that "The whole attempt and the whole object is to see that the properties settled on public and charitable trusts are properly managed and are properly administered, that the trustees keep proper accounts that the trustees render those accounts, answer questions put to them arising out of those accounts and every single provision contained in the Act is incorporated from that po....
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.... Press, Lahore v. The Commissioner of Income-tax, Punjab, Lahore (1939) 2 M.L.J. 444 : L.R. 66 I.A. 241 : I.L.R. (1939) Lah. 475 (P.C.), has negatived this opinion, but we cannot read the judgment in that sense. The passage which has just been quoted from the judgment of the Privy Council speaks of the test of general public utility. As this is the test so far as the Indian Income-tax Act is concerned it is not necessary to consider whether the trust here would be deemed to be charitable in England. Even assuming that the Court may have regard to Muslim ideas in deciding whether a Muslim trust fulfils the test of general public utility, it cannot be said that that part of the trust deed which relates to the setting aside of income for the descendants of the donor constitutes a trust for general public utility. The beneficiaries are to be members of the donor's own family. The utility is not of a public, but clearly of a private nature. For these reasons we would answer the first question in the negative. The second question calls for no discussion. The position is that the muthavalli has in his hands income belonging to a private trust. Incom....
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....-tax Act is concerned; it may be essential for other purposes as, for example, for the purpose of section 92 of the Code of Civil Procedure. What is eseential for the Income-tax Act is whether "it enures to the benefit to the public" or not, whoever may control the fund. Therefore, even if the funds are controlled by a body of persons which is not a public body in any sense, but if the fund "enures to the benefit of the public", it wold still be charitable purpose within the meaning of the Income-tax Act. Therefore, it did not agree with the contention that because the control of the fund is not left to the public, it must be concluded that it is not a public charitable trust. The court held that it is not a condition essential for determining a "charitable" trust for the purposed of the Indian Income-tax Act. All that is required is that the fund is spent or accumulated for religious and charitable purposes. The Jodhpur Bench of ITAT in case of Smt. Mansukhi Devi Bihani Jan Hitkari Trust Vs. CIT 277 ITR 140 (AT) (Jodh.) after discussing the facts of the case observed that in the case before them, it is not in dispute that application for registration has been made in the ....
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.... of registration u/s 12AA the ld. CIT is to satisfy himself about the genuineness of the activity of the trust and about the object of the trust. At this stage he is not required to ponder into the provisions of section 13. The applicability of section 13 is to be looked by the AO at the time of assessment. The ld.CIT has not brought on record any positive evidence that the activities of the trust are not genuine or the funds of the trust are not applied for its object. He only assumed that since the trusties are getting benefit by way of 'gujara bhatta' and other facilities perpetually, the activities of the trust are not genuine. This can not be a reason for refusing the registration u/s 12AA. In case of Modern Defence Shishkan Sansthan Vs. CIT 108 TTJ 732 (Jodh.) it was held that at the stage of consideration of the issue of registration under section 12AA, it is not a sine qua non to examine the aspect of the application of income. When the Commissioner has not doubted the aims and objects of the society, he cannot throw away the application of registration on this pretext. In case of Dream Land Educational Trust Vs. CIT 109 TTJ (Asr.) 850, it was held that for grant of registr....
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....issioner of Income Tax Vs. Red Rose School reported in (2007) 212 CTR 394 (All HC). He has also relied upon para 5.2 of the Circular No.14/2015 (F.No.197/38/2015-ITA.I) dated 17.08.2005 which reads as under:- "There is no provision under the Act which calls for denial of exemption merely on account of appointment or removal of trustees. Although answer to sucha situation would normally depend on the factual implication of such arrangement, the samej should generally not be a ground for denying exemption unless the nature of activities of the trust or institution get changed or modified or no longer remain to exist 'solely for educational purpose and not for purposes of profit'. Hence denial of exemption would not be justifiable only on the ground of induction of new trustees or removal of existing ones." 12. We have heard counsel for the parties. 13. Before proceeding with the matter, it will not be out of place to mention here that in all the questions of law, the question which consideration before us is whether taking into account, the observations made in paragraph 10, the view taken by the tribunal is just and proper. At the time of registration, the....
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....he 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. 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, it is relevant to get into the definition of the term 'assessment' in section 2(8) of the Act, wherein it is defined as "assessment includes reassessment". Hence even reassessment proceedings that were pending would also come under the ambit of the first proviso to section 12A(2) of the Act. 6.5. The second proviso to section 12A(2) als....
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....e 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 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 Direct Taxes vide its Circular No. 01/2015 dated 21.1.2015. Apparently the statute provides that registration once granted in subsequent year, the benefit of the same has to be applied in the earlier assessment years for which assessment proceedings are pending before the Learned AO, unless the registration granted earlier is cancelled or refused for specific reasons. The....
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....he 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 1.10.20 14 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 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 vs CIT reported in (1997) 224 ITR 677 (SC) - Judgement by three judges of the Supreme Court The departmental understanding also appears to be that section 43B, the proviso and Explanation 2 have to be read together as expressing the true intention of section 43B. Explanation 2 has been expressly made retrospective. The first proviso, however, cannot be isolated from Explanation 2 and the main body of section 43B. Without the first proviso, Explanation 2 would not obviate the hardship or the unintended consequences of section 43B. The provi....
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....s 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 vs 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 towards prospectivity. In the instant case, the proviso added to section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no....
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....ke 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 the character of revenue receipts requiring to be credited in the income and expenditure account for utilization towards charitable objects thereon. Hence we hold that in any case, the donations received by the assessee society cannot be brought to tax in the assessment. 6.13. We hold that since the only reason for denial of exemption u/s 11 was absence of registration u/s 12AA (which was grante....
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.... 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.]" 7.1 Further it would be relevant to reproduce the explanatory note to the provisions of the Finance (No.,2) Act 2014 as given in CBDT No. 1/15 dated 21.1.2015 "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." The first proviso ....
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....tion makes it clear that it was in order to provide relief to such trusts in respect of which, due to absence of registration u/s. 12AA tax liability got attached though otherwise they were eligible for exemption by fulfilling other substantive conditions that the amendment was brought in. That being so, denying such benefit to a trust like the assessee who had obtained registration u/s. 12AA during the pendency of the appeals filed against the orders of the assessing authority, by narrowly interpreting the term, 'pending before the assessing officer' so as to exclude its pendency before the appellate authority, will be doing violence to the provisions of the Statute and, as such, liable to be interfered with. Moreover, under the Scheme of the Act, sections 11 and 12 are substantive provisions which provide for exemptions to a religious or charitable trust. Sections 12A and 12AA detail the procedural requirements for making an application to claim exemptions under sections 11 and 12 by the assessee and the grant or rejection of such application by the commissioner. Thus, in our view, sections 12A and 12AA are only procedural in nature. Hence, it is not the....
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....s a pre-condition for applicability of section 12A." Further, the Kolkata Tribunal observed as under: "6.11. We also hold that though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e. to make it workable rather than redundant. Applying this legal maxim, it would be just and fair to hold that the amendment in section 12A is brought in the statute to confer benefit of exemption u/s. 11 of the Act on the genuine trusts which had not changed its objectives and had carried on the same charitable objects in the past as well as in the current year based on which the registration u/s. 12AA is granted by the DIT (Exemptions)." 7.5 In light of the aforesaid reasoning and order of the Tribunal in case of Sree Sree Ramkrishna Samity (supra), we direct the Director of Income-tax (Exemption) to grant registration to the assessee trust for all the assessment years under dispute, ....
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....v. Commissioner of Income-Tax, [1971] 82 ITR 570 (SC) , TC 40R.279, this Court said that one should apply the rule of reasonable interpretation. 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. 9. This view has been accepted by a number of High Courts. In the case of Commissioner of Income-Tax v. Chandulal Venichand [1994] 118 CTR (Guj) 257: (1994) 209 ITR 7(Guj): TC 19R.748, the Gujarat High Court has held that the first proviso to Section 43B is retrospective and sales-tax for the last quarter paid before the filing of the return for the assessment year is deductible. This decision deals with assessment year 1984-85. The Calcutta High Court in the case of Commissioner of Income-Tax v. Sri Jagannath Steel Corporation [1991]191ITR676(Cal) , has taken a similar view holding that the statutory liability for sales-tax actually discharged after the exp....
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....Yogam (supra). 15. We have heard the rival contentions of both the parties with reference to the merits of the additional ground. The relevant portion of Section 12A of the Act is as follows:- "Section 12A - (1) Conditions as to registration of trusts, etc.- The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely :- (aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA; (2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application 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 ....
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....arily, it ought to be taken as applicable only prospectively, and not retrospectively. However, the law is well settled to the effect that if the proviso brought in as a procedural or beneficial one, intending to remove hardship, it is applicable retrospectively. 19. In C.B. Richards Ellis Mauritius Ltd. v. Asstt. DIT [2012] 208 Taxman 322/21 taxmann.com 535 (Delhi) (copy on record), it has been held that "procedural law, when amended" or substituted, is generally retrospective and applies from the date of its enforcement and to this extent, it can be retrospective". 20. In Allied Motors (P.) Ltd. v. CIT [1997] 224 ITR 677/91 Taxman 205 (SC), it has been held that a proviso, which is intended to intended 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, is required to be treated as retrospective in operation, so that a reasonable interpretation can be given to the section as a whole. It is, thus, trite that if a provision is curative or merely declaratory of the previous law, retrospective oper....
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..... 12AA of the Act, the benefit of Sections 11 and 12 shall be available in respect of any income derived from property held under Trust in any assessment proceedings for any earlier assessment year, which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such Trust or Institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. 26. Thus, clearly, the provisions of Section 12A of the Act entailed unintended consequences of non-application of registration for the period prior to the year of registration and, thereby, non-grant of exemption u/ss. 11 and 12 up to grant of registration. This position was also recognized by the CBDT while issuing the Explanatory Notes to the provisions of the Finance (No. 2) Act, 2014, vide CBDT circular No. 1 of 2015 : dated 21/1/2015. It was this anomaly, which was cured by bringing in the first proviso to Section 12A(2), This proviso, even as avowed by the above quoted Memorandum explaining the provisions of the Finance (No. 2) Bill, has sought to remedy the said unintended hardship visiting Trusts and Institution....
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....nt proceedings pending before the Assessing Officer. 31. In all these cases, the impugned orders were passed after the respective dates of grant of registration. Thus, we hold that subsequent grant of registration in all these cases operates retrospectively for all the relevant years under consideration." 5. CBDT Circular No. 1/2015, dated 21.1.2015, reads as under:- "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 to the year of registration caused genuine hardship to charitable organisations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfil other substantive conditions. However, the power of condonation of delay in seeking registration was not available. 8.3 In order to....