By Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
[2017] 87
taxmann.com 113 (Amritsar – Tribunal.)
Punjab
Educational Society vs. ITO
ITA No. :
459/Asr/2016
A.Y. : 2011-12
Date of Order: 20th November, 2017
FACTS
The assessee, an educational institution,
filed its return of income for AY 2011-12 on 29.09.2011, declaring total income
at Rs. Nil. During the course of assessment proceedings the Assessing Officer
(AO) observed that the assessee society during the year under consideration had
shown excess of income over expenditure of Rs. 34,31,521 which was transferred
to its Reserves and Surplus account. Since the gross receipts of the assessee
society, which was neither registered u/s. 12A nor approved u/s. 10(23C)(vi) of
the Act had during the previous year relevant to assessment year 2011-12
exceeded Rs. One crore, the AO called upon the assessee to explain why the same
may not be brought to tax in his hands.
The assessee submitted that it was
registered u/s. 12AA(1)(b)(i) of the Act with the competent authority with
effect from AY 2012-13, therefore, it being a charitable society which was
running an educational institution, could not be denied exemption for the
reason that its gross receipts had exceeded Rs. One crore. It also submitted
that it had applied its income purely for accomplishment of its objects as per
section 11(5), therefore, its income could not be subjected to tax.
The AO taxed the sum of Rs. 34,31,521 as the
assessee society had not applied for the grant of registration u/s. 12AA with
the prescribed authority nor was approved u/s. 10(23C)(vi) or (via) for AY
2011-12.
Aggrieved, the assessee preferred an appeal
before the CIT(A) who confirmed the action of the AO.
HELD
The Tribunal observed that the issue
involved in the present appeal lies in a narrow compass viz. as to whether the
CIT(A) was right in concluding that the first proviso of section 12A(2) would
be applicable to the facts of the present assessee or not. It noted that the
first proviso of section 12A(2) had been made available on the statute vide
the Finance (No. 2) Act, 2014, with effect from 01.10.2014. It also observed
that a perusal of the Explanatory notes of the Memorandum to Finance (No. 2)
bill, 2014 explaining the objects and reasons for making available the first
proviso to section 12A(2) on the statute reveals that it was in order to
mitigate the hardships caused to charitable institutions, which despite having
satisfied the substantive conditions rendering them eligible for claim of
exemption, however, for technical reasons were saddled with tax liability in
the prior years, due to absence of registration u/s. 12AA.
It noted that the issue as to whether the
beneficial provisions made available on the statute by the legislature in all
its wisdom, vide the Finance (No. 2) ‘Act’, 2014 with effect from
01.10.2014 were to be given a retrospective effect, or not, had already
deliberated upon and adjudicated by this Tribunal in bunch matters of St.
Judes Convent School vs. Asstt. CIT [2017] 164 ITD 594/77 taxmann.com 173
(Asr.).
The Tribunal, having given a thoughtful
consideration to the aforesaid observations of the Tribunal, found itself to be
in agreement with the view taken therein. The Tribunal held that the first
proviso of section 12A(2) as had been made available on the statute vide
the Finance (No. 2) ‘Act’. 2014, with effect from 01.10.2014, being a
beneficial provision intended to mitigate the hardships in case of genuine
charitable institutions, would be applicable to the case of the present
assessee. It set aside the order of the CIT(A) and consequently deleted the
addition of Rs.34,31,521/- sustained by her.
The appeal filed by the assessee was
allowed.
