Commissioner Of Income Tax ( Exemptions), 3Rd Floor, Kailash Heights, Lal Kothi, Tonk Road, Jaipur v. M/S Shree Shyam Mandir Committee, Khatushyam Ji, Distt. Sikar (Raj

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 234 / 2016 Commissioner of Income Tax ( Exemptions), 3rd Floor, Kailash Heights, Lal Kothi, Tonk Road, Jaipur ----Appellant Versus M/s Shree Shyam Mandir Committee, Khatushyam Ji, Distt. Sikar (Raj.) ----Respondent _____________________________________________________ For Appellant(s) : Mr. Daksh Pareek for Mr. Sameer Jain For Respondent(s) : Mr. Mahendra Gargieya _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASOrder 23/10/2017 1.By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby Tribunal has allowedthe appeal of the assessee. 2.This Court while admitting the appeal on 07.12.2016 framed following substantial question of law: “1. Whether on the facts and circumstances of thecase the Hon’ble ITAT was justified in applying theProviso of Section 12A(2), inserted w.e.f.01.10.2014, with retrospective effect in spite of thefacts that the proviso has no indication of beingapplied for the earlier years retrospectively.” 3.In the case of assessee itself this court has already taken view in D.B. Income Tax Appeal No.224/2010 dated02.08.2017, wherein it has been observed as under:- 1. Since in all these appeals, common questions of lawand facts are involved, they are decided by thiscommon judgment. 2. By way of these appeals, the appellants havechallenged the judgment and order passed by thetribunal whereby the tribunal has allowed the appealsof the assessee, reversing the view taken by theCommissioner of Income Tax Jaipur-III, Jaipur videjudgment and order dated 30.09.2009 whereby theregistration under Section 12A was rejected. 3. This court while admitting the appeal has framed thefollowing substantial questions of law:- D.B. Income Tax Appeal No.224/2010 admitted-on 13.12.2010: (i) Whether granting registration to aprivate trust u/s. 12A was legal and properespecially when Sections 2(15),11,12 &Section 13 specifically restricts use andapplicationofvoluntarilycontribution/income for the benefit ofprivate person u/s.13(3)? (ii) Whether applications of Rajasthan PublicTrust Act, 1959 can be applied to the privatetrust especially when they are covered bythe Indian Trust Act, 1882?” D.B. Income Tax Appeal No.273/2016 admitted-on 17.01.2017: "(i) Whether on the facts and circumstancesof the case and in law, the Hon'ble ITAT wasjustified in allowing Gujara Bhatta asapplication of income of the trust by followingearlier order in spite of the fact that is as notfixed by the State Government as per Section65 of the Rajasthan Public Trust Act, 1959r.w. Rule 38 of the Rajasthan Public TrustRules, 1962?" (iii) Whether the provisions of RajasthanPublic Trust Act are applicable to the Trustwhen the Trust is specifically governed by theIndian Trust Act 1882?" D.B. Income Tax Appeal No.274/2016 admitted -on 7.12.2016: “Whether on the facts and circumstances ofthe case and in law, the Hon’ble ITAT wasjustified in allowing Gujara Bhatta asapplication of income of the trust by following earlier order in spite of the factthat it was not fixed by the StateGovernment as per Section 65 of theRajasthan Public Trust Act, 1959 r.w. rule 38of the Rajasthan Public Trust Rules, 1962.” 4. Counsel for the appellant has taken us to thedefinition of 2(31)(vii), Section 2(24)(iia), 2(15) Section12A, Section 12AA, Section 13(1)(a), and Section 13(3)of the Income Tax Act. He has also taken us to Section17A of the Rajasthan Public Trust Act which reads asunder:- 2. Utility of the Act.-Shri K.N. Shah inBombay Public Trust Act 1950, eightyEdition, p.3 has observed- -on 7.12.2016: “Whether on the facts and circumstances ofthe case and in law, the Hon’ble ITAT wasjustified in allowing Gujara Bhatta asapplication of income of the trust by following earlier order in spite of the factthat it was not fixed by the StateGovernment as per Section 65 of theRajasthan Public Trust Act, 1959 r.w. rule 38of the Rajasthan Public Trust Rules, 1962.” 4. Counsel for the appellant has taken us to thedefinition of 2(31)(vii), Section 2(24)(iia), 2(15) Section12A, Section 12AA, Section 13(1)(a), and Section 13(3)of the Income Tax Act. He has also taken us to Section17A of the Rajasthan Public Trust Act which reads asunder:- 2. Utility of the Act.-Shri K.N. Shah inBombay Public Trust Act 1950, eightyEdition, p.3 has observed- There are instances of how Mahants,Pujaris, Bhatjis and Acharyas who have livedon the temple and its income for years andflourished fat o;n the earnings of the Holyshrines and attempting to devour andappropriate the deity and donations tothemselves. Through they may have forgenerations held out to and invitedinnumerable devotees for Darshan andhundreds of devotees may have openlycome for Darshan, and worshipped the idolfor years, and though donations, offeringsand emoluments may have been begged,askedfor,offeredandreceiveduninterruptedly, when it comes toregistration of the Temple as a Public Trustand accounting for its income, they wouldnot stop of claiming exclusive rights ofownership not only over the income but overidol, the deity of the temple too. They, thepreservers of the deity and the spiritualheads, the supposed saviors of the souls ofsiners & the sanctity of the holy shrinkwould go to any length to perjurethemselves, if they could not establish theirownership over the endowment and itsproperty, and derive the material benefit ofgetting its income. Such instances are notfew. The richer the endowment, the greaterthe temptation to swallow the same. To suchimpious Pujaris, Managers and Mahants,nothing matters, consideration neither ofthis world nor the next, if they could onlyserve their selfish end. Such instances,justify the passing of and the utility of thisAct. These days the Trusts and Temples haveassumed great importance. This is becausethe State has thought it advisable tointroduce legislation for the governance forsafeguarding the interest of the beneficiariesand for avoiding the cases of magnificenceand to check mis-appropriation and criminalbreach of trust. As expressed by the lateHon’ble Justice Chagle C.J. of Bombay, in hisjudgment that “The whole attempt and thewhole object is to see that the propertiessettled on public and charitable trusts areproperly managed and are properlyadministered, that the trustees keep properaccounts that the trustees render thoseaccounts, answer questions put to themarising out of those accounts and everysingle provision contained in the Act isincorporated from that point of view. RatilalPannachand Gandhi Vs. State of Bombay, 55Bom. LR 86= AIT 1953 Bom. 242= ILR1953 Bom. 1187. The utility of this Act isbeing realised by the members of the publicand the Bombay High Court had made asurvey of this Act in a case reported as C.C.vs. Municipality of Taloda, 65 Bom.LR 27.The Gujarat High Court also had made asurvey of this Act in cases reported asKuberbhai vs. Purshottamdas, (1961) 2GLR 564; Lallubhai G. Parikh vs. AcharyaShri Vrijbhushanlal Balkrishanlalji, (1967) 8GLR 42. As the law stands, the trustees of thecharity, however small, has to performonerous duties involving a certain amount ofexpenses, Gross abuses of public trusts andtrust funds by unscrupulous trustees, nodoubt demand statutory control andregulation and the law had its inspirationand jurisdiction. The whole object of theLegislature, in passing the Act a highlylaudable, e.g. to see that public trusts wereproperly and efficiently administered." He also pointed out Section 2(xi) of PublicTrust Act and contended that in view of thedefinition envisaged under the Act, everypublic trust registered under the RajasthanPublic Trust Act is deemed to be a societyand the benefits which are granted underSection 12A are not available to be granted. 5. However, he has taken us to the order ofCommissioner of Income Tax which has declined theregistration and contended that the view taken by thetribunal is required to be reversed, more particularly inview of the provisions of Section 13(1)(a) and 13(3) ofthe Income Tax Act. 6. He has relied upon the decision of Madras High Courtin the case of Commissioner of Income Tax-Madras Vs. MJama Mohammad Sahib reported in (1941)9ITR375(Mad) wherein the courts has observed as under:- In Umar Bakhsh v. Commissioner of Income-tax, Punjab (1931) I.L.R. 12 Lah. 725 : 5I.T.C. 402 (F.B.), the Lahore High Courtexpressly held that the expression "religiousor charitable purposes" in S.4 (3) (i) has tobe construed with reference to English lawand not to the personal law of the assesseeand this opinion was accepted by the PatnaHigh Court in Humayun Rasa Chowdhury v.Commissioner of Income-tax, Bihar andOrissa 10 I.T.C. 7. The learned Advocate forthe assessee (muthavalli) has suggestedthat the decision of the Judicial Committeein The Trustees of Tribune 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.), hasnegatived this opinion, but we cannot readthe judgment in that sense. The passagewhich has just been quoted from thejudgment of the Privy Council speaks of thetest of general public utility. As this is thetest so far as the Indian Income-tax Act isconcerned it is not necessary to considerwhether the trust here would be deemed tobe charitable in England. Even assumingthat the Court may have regard to Muslimideas in deciding whether a Muslim trustfulfils the test of general public utility, itcannot be said that that part of the trustdeed which relates to the setting aside ofincome for the descendants of the donorconstitutes a trust for general public utility.The beneficiaries are to be members of thedonor's own family. The utility is not of apublic, but clearly of a private nature. Forthese reasons we would answer the firstquestion 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.Income of a private trust is not exempt fromtaxation and the muthavalli is assessable inrespect of it, because he holds it. It followsthat the answer to the second question is inthe affirmative.” 7. He therefore contended that the view taken by thetribunal is required to be reversed. 8. Mr. Jain has also taken us to the observations madeby the tribunal in para 6 which reads as under:- The second question calls for no discussion.The position is that the muthavalli has in his hands income belonging to a private trust.Income of a private trust is not exempt fromtaxation and the muthavalli is assessable inrespect of it, because he holds it. It followsthat the answer to the second question is inthe affirmative.” 7. He therefore contended that the view taken by thetribunal is required to be reversed. 8. Mr. Jain has also taken us to the observations madeby the tribunal in para 6 which reads as under:- 6. We have heard and considered thearguments advanced by the parties in viewof orders of the ld.CIT, material available onrecord and the decision relied upon. Theld.CIT has raised two issues. Firstly as towhether the assessee is a private trustsince it is run by the representative of threefamilies and secondly as to whether it is fortheir benefit since they are paid 15% of thetotal receipt as also marriage and otherhelp. We note that there is no specificdefinition of public or private trust in theIncome Tax Act, 1961. Various decidedcases provide guidelines in this regard,according to which a trust would be a publictrust where the benefit enure to the publicat large. The control and management oftrust property left in the hands of a body ofindividual belonging to the settlers family isof no consequence in determining whetherthe trust is public trust or not. In case ofGaneshram Rami Devi Charitable Trust Vs.CIT 71 ITR 696 (Cal.), the Hon’ble HighCourt considered the question whether theprovision that management is left to privateindividuals and not tot he public would, inany way, affect the nature of the trust forthe purpose of the Income-tax Act. It isobserved that the phrase “charitablepurpose” in the Income-tax Act “includesrelief of the poor, education, medical reliefand the advancement of any other object ofgeneral public utility”. It is further providedthat “nothing contained in clause (i) orclause (ii) shall operate to exempt from theprovisions of the Act that part of theincome from property held under a trust orother legal obligation for private religiouspurposes which does not ensure for the benefit of the public.” This definition doesnot deal with the matter of control andmanagement of the fund. There is noreference of the same in it. The implication,therefor, is that the matter of managementof the fund is not an essential matter forthe purpose of defining “charitablepurposes” so far as the Income-tax Act isconcerned; it may be essential for otherpurposes as, for example, for the purposeof section 92 of the Code of Civil Procedure.What is eseential for the Income-tax Act iswhether “it enures to the benefit to thepublic” or not, whoever may control thefund. Therefore, even if the funds arecontrolled by a body of persons which is nota public body in any sense, but if the fund“enures to the benefit of the public”, it woldstill be charitable purpose within themeaning of the Income-tax Act. Therefore,it did not agree with the contention thatbecause the control of the fund is not left tothe public, it must be concluded that it isnot a public charitable trust. The court heldthat it is not a condition essential fordetermining a “charitable” trust for thepurposed of the Indian Income-tax Act. Allthat is required is that the fund is spent oraccumulated for religious and charitablepurposes. The Jodhpur Bench of ITAT incase of Smt. Mansukhi Devi Bihani JanHitkari Trust Vs. CIT 277 ITR 140 (AT)(Jodh.) after discussing the facts of thecase observed that in the case before them,it is not in dispute that application forregistration has been made in theprescribed form i.e. Form No. 10A. It is alsonot the case of the Department that theproperty held by the trust and incometherefrom had not been utilized for thepurposes of charity/public utility. The onlyreason for not granting registration wasthat there is a clause in the trust deed that“in the event of a vacancy arising in theboard of trustees for whatever reasons, theremaining trustees shall co-opt anothermajor male or female person out of thefamily members of that person to fill up thevacancy”. Only on that basis, the learnedCommissioner of Income-tax consideredthatthetrustwasafamily affair/settlement. However, he has notbrought any material on record that by co-opting a person from the family of theprevious trustee, how the object of thetrust has been changed or by co-optinganother family member of the trustee onaccount of vacancy as to how the incomewas not utilized for the public charity.Thereafter, ITAT after considering the objectof the trust, provisions of section 12A andRule 17A concluded that Commissioner ofIncome-tax was not justified in refusingregistration to the assessee merely on thebasis that in the case of a vacancy in theboard of trustees, the remaining trusteesare to co-opt another person from the veryfamily of the outgoing trustee as as suchthe trust appears more in the nature of afamily affair/settlement than a charitabletrust. Accordingly it directed to grantregistration under section 12A of theIncome-tax Act, 1961. These cases clearlylay down the proposition that control onmanagement of the fund is no criteria fordetermining whether the trust is a public orprivate trust. What is required to be seen isthat in enures to the benefit of the public ornot who ever may control the fund. It is notin doubt that activities carried out by theassessee enures to the benefit of the publicand it is for this reason that it is registeredas a public trust under the Rajasthan PublicTrust Act, 1959. The object of the trust arealso for religious and charitable purposeand is not restricted to any particular cast,colour, or creed. We, therefore, hold thatassessee is a public trust and not a privatetrust. 9.However, Mr. Gagria, counsel for therespondent has taken us to paragraph 10 of the orderto the tribunal which reads as under:- 9.However, Mr. Gagria, counsel for therespondent has taken us to paragraph 10 of the orderto the tribunal which reads as under:- “10. We also note that at the time of grantof registration u/s 12AA the ld. CIT is tosatisfy himself about the genuineness of theactivity of the trust and about the object ofthe trust. At this stage he is not required toponder into the provisions of section 13. Theapplicability of section 13 is to be looked bythe AO at the time of assessment. The ld.CIT has not brought on record anypositive evidence that the activities of thetrust are not genuine or the funds of thetrust are not applied for its object. He onlyassumed that since the trusties are gettingbenefit by way of ‘gujara bhatta’ and otherfacilities perpetually, the activities of thetrust are not genuine. This can not be areason for refusing the registration u/s12AA. In case of Modern Defence ShishkanSansthan Vs. CIT 108 TTJ 732 (Jodh.) it washeld that at the stage of consideration of theissue of registration under section 12AA, it isnot a sine qua non to examine the aspect ofthe application of income. When theCommissioner has not doubted the aims andobjects of the society, he cannot throw awaythe application of registration on thispretext. In case of Dream Land EducationalTrust Vs. CIT 109 TTJ (Asr.) 850, it was heldthat for grant of registration under section12AA, only relevant consideration issatisfaction of Commissioner regardingobjects of trust and genuineness of itsactivities; in absence of any dissatisfactionof Commissioner with regard to eitherobjects or genuineness of activities of trust,if registration is refused to trust, it would beviolation of provisions of section 12AA. Incase of Asstt. DIT Vs. Rajasthani ShikshaSamiti 23 SOT 124 (Hyd) it was held thatwhen registration to a trust is granted by theCommissioner u/s 12A, then it is for the AOto examine every year whether income hasbeen applied by assessee for charitablepurpose or not and if income is not so apply,it wold be duty of AO to tax such income buthe cannot further held that trust is notestablished for charitable purpose. TheHon’ble Karnataka High Court in case ofSanjeevammaHanumantheGowdaCharitable Trust vs. DIT 285 ITR 327, (Kar)has held that for the purpose of registrationu/s 12A what the authorities have to satisfyis the genuineness of the activities of thetrust or institution and how the incomederived from trust property is applied tocharitable or religious purpose and not thenature of the activity by which the income isderived from trust property is applied forcharitable and religious purpose as discussed above. Hence, for the detailedreasons stated supra, we direct ld. CIT togrant registration u/s 12A to the assesse.” 10.He has also relied upon the decision of thiscourt in the case of Commissioner of Income Tax Vs.Vijay Vargiya Vani Charitable Trust reported in (2014)90 CCH 0209 RajHC wherein it has been observed asunder:- “In our view, the object of Section 12AA isto examine genuineness of the objects ofthe trust but not the income of the trust forcharitableorreligiouspurpose.theCommissioner cannot sit in the chair ofAssessing Officer to look into amount spenton charitable activities at the time ofcreation of the Trust. The stage forreviewing the application of income has notarrived when such trust or institution filesapplication for registration of thetrust/society.” 11.He has also relied upon the judgmentrendered by the Punjab and Haryana High Court in thecase of Commissioner of Income Tax Vs. SuryaEducational & Charitable Trust reported in (2013) 355ITR (P&H) and the judgment rendered by theAllahabad High Court in the case of Commissioner ofIncome Tax Vs. Red Rose School reported in (2007)212 CTR 394 (All HC). He has also relied upon para 5.2of the Circular No.14/2015 (F.No.197/38/2015-ITA.I)dated 17.08.2005 which reads as under:- 11.He has also relied upon the judgmentrendered by the Punjab and Haryana High Court in thecase of Commissioner of Income Tax Vs. SuryaEducational & Charitable Trust reported in (2013) 355ITR (P&H) and the judgment rendered by theAllahabad High Court in the case of Commissioner ofIncome Tax Vs. Red Rose School reported in (2007)212 CTR 394 (All HC). He has also relied upon para 5.2of 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 whichcalls for denial of exemption merely onaccount of appointment or removal oftrustees. Although answer to sucha situationwould normally depend on the factualimplication of such arrangement, the samejshould generally not be a ground for denyingexemption unless the nature of activities ofthe trust or institution get changed ormodified or no longer remain to exist ‘solelyfor educational purpose and not for purposesof profit’. Hence denial of exemption wouldnot be justifiable only on the ground ofinduction of new trustees or removal ofexisting ones.” 13.Before proceeding with the matter, it will notbe out of place to mention here that in all the questionsof law, the question which consideration before us iswhether taking into account, the observations made inparagraph 10, the view taken by the tribunal is just andproper. At the time of registration, the authority isrequired to look whether it is registered under the stateAct or under any other Act. There is no distinctionbetween private trust and public trust. The contentionwhich has been raised by counsel for the appellantregarding the expenses, diversion or control by theprivate people will come only when the assessment hastaken place. For the purpose of trust registered and theincome used is for the charitable purpose or not andwhether income from public trust if it is going for anyprivate use will negative the very object of the Trust Actwhich is the main intention of the legislation, is not tobe considered at this stage. 14.In that view of the matter, we see noreason for interfere with the finding of the tribunal.Both the issues are answered in favour of the assessee.reason for interfere with the finding of the tribunal.Both the issues are answered in favour of the assessee. 15.The appeals stand dismissed.” 4.Counsel for respondent has relied upon the following decisions: 1. Sree Sree Ramkrishna Samity vs. Deputy Commissioner of Income Tax, (2016) 156 ITD 0646, wherein it observed as under:- 6.3. It is relevant at this juncture to get into the amendmentbrought in section 12A by Finance Act 2014 with effect from1.10.2014 by way of insertion of first proviso to section 12A(2)of the Act which is reproduced below for the sake ofconvenience :- Section 12 A (2) Where an application has been made on or after the1st day of June 2007, the provisions of section 11 and 12 shallapply in relation to the income of such trust or institution fromthe assessment year immediately following the financial year inwhich such application is made: Provided that where registration has been granted tothe trust or institution under section 12AA, then, theprovisions of sections 11 and 12 shall apply in respect ofany income derived from property held under trust ofany assessement year preceding the aforesaidassessment year, for which assessment proceedings are pending before the Assessing Officer as on date of suchregistration and the objects and activities of such trustor institution remain the same for such precedingassessment year: Provided further that no action under section 147 shall betaken by the Assessing Officer in case of such trust orinstitution for any assessment year preceding the aforesaidassessment year only for non-registration of such trust orinstitution for the said assessment year: Provided that where registration has been granted tothe trust or institution under section 12AA, then, theprovisions of sections 11 and 12 shall apply in respect ofany income derived from property held under trust ofany assessement year preceding the aforesaidassessment year, for which assessment proceedings are pending before the Assessing Officer as on date of suchregistration and the objects and activities of such trustor institution remain the same for such precedingassessment year: Provided further that no action under section 147 shall betaken by the Assessing Officer in case of such trust orinstitution for any assessment year preceding the aforesaidassessment year only for non-registration of such trust orinstitution for the said assessment year: Provided also that provisions contained in the first andsecond proviso shall not apply in case of any trust or institutionwhich was refused registration or the registration granted to itwas cancelled at any time under section 12AA. 6.4. Admittedly, the reassessment proceedings were pendingbefore the Learned AO for the Asst Years 2003-04 to 2008-09as on the date of granting registration u/s 12AA of the Act on29.10.2010 with effect from 1.4.2010 as reassessmentproceedings got commenced pursuant to issuance of notice u/s148 on 30.3.2010 as stated supra. Admittedly, the objects andactivities of the trust had remained the same in precedingassessment years also i.e Asst Years 2003-04 to 2008-09.Though this first proviso to section 12A(2) talks aboutpendency of assessment proceedings, it is relevant to get intothe definition of the term ‘assessment’ in section 2(8) of theAct, wherein it is defined as “assessment includesreassessment”. Hence even reassessment proceedings thatwere pending would also come under the ambit of the firstproviso to section 12A(2) of the Act. 6.5. The second proviso to section 12A(2) also provides that noaction u/s 147 of the Act shall be taken merely for non-registration of trust or institution. Reading this proviso with thefirst proviso to section 12A(2) and applying the Rule ofHarmonious Construction, it could safely be concluded that thelegislature in its wisdom had only brought this proviso toprevent genuine hardship that could be caused on the assesseedue to non-registration u/s 12AA of the Act and accordingly inour opinion, the provisos to section 12A(2) of the Act is to beconstrued as retrospective in operation. 6.6. The third proviso to section 12A(2) of the Act alsoprovides that the first and second proviso shall not beapplicable if the trust or institution had been refusedregistration earlier or the registration granted earlier iscancelled by the Commissioner u/s 12AA of the Act. This alsogoes to prove that the first and second proviso shall be madeapplicable for the trusts for earlier assessment years also whohad not applied for registration u/s 12AA of the Act at all. 6.7. We hold that the registration of trust under section 12A ofthe Act once done is a fait accompli and the AO cannotthereafter make further probe into the objects of the trust.Reliance in this regard is placed on the decision of the Hon’bleApex Court rendered in the case of ACIT vs Surat CityGymkhana reported in (2008) 300 ITR 214 (SC). Drawinganalogy from this judgement, the logical inference could bethat as long as the objects were charitable in nature in the earlier years and in the year in which registration u/s 12AA wasgranted, the existence of trust for charitable purposes in theearlier years cannot be doubted with. Even otherwise, noadverse findings were given by the revenue with regard to theexistence of the assessee society for charitable purposes in theassessment years under appeal. earlier years and in the year in which registration u/s 12AA wasgranted, the existence of trust for charitable purposes in theearlier years cannot be doubted with. Even otherwise, noadverse findings were given by the revenue with regard to theexistence of the assessee society for charitable purposes in theassessment years under appeal. 6.8. It will be relevant to get into the Explanatory Notes to theProvisions of the Finance (No. 2), 2014 as given in CBDTCircular No. 01 / 2015 dated 21.1.2015 in reference F.No.142/13 /2014-TPL which is reproduced hereinbelow for thesake of convenience :- –Para 8 Applicability of the registration granted to atrust or institution to earlier years Para 8.2 Non-application of registration for the period prior to theyear of registration caused genuine hardship tocharitable organizations. Due to absence of registration,tax liability is fastened even though they may otherwisebe eligible for exemption and fulfill othersubstantive conditions. However, the power ofcondonation of delay in seeking registration was notavailable. This clearly goes to prove that the first proviso to section12A(2) was brought in the statute only as a retrospective effectwith a view not to affect genuine charitable trusts and societiescarrying on genuine charitable objects in the earlier years andsubstantive conditions stipulated in section 11 to 13 have beenduly fulfilled by the said trust. The benefit of retrospectiveapplication alone could be the intention of the legislature andthis point is further strengthened by the Explanatory Notes toFinance (No. 2) Act, 2014 issued by the Central Board of DirectTaxes vide its Circular No. 01/2015 dated 21.1.2015. Apparently the statute provides that registration once grantedin subsequent year, the benefit of the same has to be appliedin the earlier assessment years for which assessmentproceedings are pending before the Learned AO, unless theregistration granted earlier is cancelled or refused for specificreasons. The statute also goes on to provide that no action u/s147 could be taken by the AO merely for non-registration oftrust for earlier years. 6.9. With regard to the arguments of the Learned DR thatdonations received by assessee falls under the definition ofincome u/s 2(24)(iia) of the Act, we would like to state thatincome definition is an inclusive definition. An inclusivedefinition extends the specific meaning given in the stateditems by the general meaning as commonly understood by thesaid expression which is defined in a statute. The word incomeas is commonly understood does not include any donationspecifically meant for utilization for acquiring, constructing acapital asset, as is the case here. Further section 2(24) hadundergone amendment by way of insertion of clause (iia) byFinance Act, 1972 with effect from 1.4.1973. In thisconnection, it will be relevant to get into the Memorandumexplaining the provisions in Finance Act 1972 reported in 83 ITR (St.) 173, wherein Paragraphs 24 and 25 clearly define thescope of the amendment wherein in paragraph 25(i) , theconcluding sentence is as under:- “contributions received with a specific direction thatthey will form part of the corpus of the trust ordistribution will, however, not be regarded as income.” ITR (St.) 173, wherein Paragraphs 24 and 25 clearly define thescope of the amendment wherein in paragraph 25(i) , theconcluding sentence is as under:- “contributions received with a specific direction thatthey will form part of the corpus of the trust ordistribution will, however, not be regarded as income.” Thus the relevant clause defining income in section 2(24)(iia)as introduced with effect from 1.4.1973 was clearly notintended to cover contributions / donations received with aspecific direction that they will form part of the corpus of thetrust for utilization in acquisition / construction of a capitalasset. Thus what is not income as per the definition of theword income in the Act cannot be brought to tax under anyother provision of the Act. We find that the order of theLearned CITA failed to distinguish between a case where areceipt is not an income at the stage of its receipt and a casewhere it is not so but is claimed to be exempt because of anyexemption provision granting exemption from taxation toreceipts which are liable to taxation but for the provisiongranting exemption. 6.10. We hold that it is an established position in law that aproviso which is inserted to remedy unintended consequencesand to make the provision workable, a proviso which suppliesan obvious omission in the section and is required to be readinto the section to give the section a reasonable interpretation,requires to be treated as retrospective in operation, so that areasonable interpretation can be given to the section as awhole and accordingly the said insertion of first proviso tosection 12A(2) of the Act with effect from 1.10.20 14 should beread as retrospective in operation with effect from the datewhen the condition of eligibility for exemption under section 11& 12 as mentioned in section 12A provided for registration u/s12AA 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 ITR677 (SC) – Judgement by three judges of the SupremeCourt The departmental understanding also appears to be thatsection 43B, the proviso and Explanation 2 have to be readtogether as expressing the true intention of section 43B.Explanation 2 has been expressly made retrospective. The firstproviso, however, cannot be isolated from Explanation 2 andthe main body of section 43B. Without the first proviso,Explanation 2 would not obviate the hardship or theunintended consequences of section 43B. The proviso suppliesan obvious omission. But for this proviso the ambit of section43B become unduly wide bringing within its scope thosepayments, which were not intended to be prohibited from thecategory of permissible deductions. In the case of Goodyear India Ltd vs State of Haryana (1991)188 ITR 402 , this court said that the rule of reasonableconstruction must be applied while construing a statute. Literalconstruction should be avoided if it defeats the manifest objectand purpose of the Act. As observed by G.P.Singh in his Principles of StatutoryInterpretation, 4th Edn., Page 291, “It is well settled that if astatute is curative or merely declaratory of the previous law,retrospective operation is generally intended”. In fact theamendment would not serve its object in such a situation,unless it is construed as retrospective. The view, therefore,taken by the Delhi High Court cannot be sustained. CIT vs Virgin Creations in ITAT No. 302 of 2011 in GA3200 / 2011 dated 23.11.2011, the Hon’ble CalcuttaHigh Court in the context of retrospectiveapplicability ofamendment to section 40(a)(ia) of the Act held asbelow:- As observed by G.P.Singh in his Principles of StatutoryInterpretation, 4th Edn., Page 291, “It is well settled that if astatute is curative or merely declaratory of the previous law,retrospective operation is generally intended”. In fact theamendment would not serve its object in such a situation,unless it is construed as retrospective. The view, therefore,taken by the Delhi High Court cannot be sustained. CIT vs Virgin Creations in ITAT No. 302 of 2011 in GA3200 / 2011 dated 23.11.2011, the Hon’ble CalcuttaHigh Court in the context of retrospectiveapplicability ofamendment to section 40(a)(ia) of the Act held asbelow:- “The supreme court in the case of Allied Motors P ltd and alsoin the case of Alom Extrusions Ltd has already decided that theaforesaid provision has retrospective application. Again, in thecase reported in 82 ITR 570, the Supreme Court held that theprovision, which has inserted the remedy to make the provisionworkable, requires to be treated with retrospective operationso that reasonable deduction can be given to the section aswell”. CIT vs Vatika Township P Ltd reported in (2014) 367 ITR466 (SC) – FiveJudges decision of the Supreme Court “We would also like to point out, for the sake of completeness,that where a benefit is conferred by a legislation, the ruleagainst a retrospective construction is different. If a legislationconfers a benefit on some persons but without inflicting acorresponding detriment on some other person or on the publicgenerally, and where to confer such benefit appears to havebeen the legislators object, then the presumption would bethat such a legislation, giving it a purposive construction,would warrant it to be given a retrospective effect. This exactlyis the justification to treat procedural provisions asretrospective. In Government of India vs Indian TobaccoAssociation reported in (2005) 7 SCC 396, the doctrine offairness was held to be relevant factor to construe a statuteconferring a benefit, in the context of it to be given aretrospective operation. The same doctrine of fairness, to holdthat a statute was retrospective in nature, was applied in thecase of Vijay vs State of Maharashtra reported in (2006) 6 SCC289. It was held that where a law is enacted for the benefit ofcommunity as a whole, even in the absence of a provision thestatute may be held to be retrospective in nature. However, weare confronted with any such situation here”. In such cases, retrospectivity is attached to benefit the personsin contradistinction to the provision imposing some burden orliability where the presumption attaches towards prospectivity.In the instant case, the proviso added to section 113 of the Actis not beneficial to the assessee. On the contrary, it is aprovision which is onerous to the assessee. Therefore, in acase like this, we have to proceed with the normal rule ofpresumption against retrospective operation. Thus, the ruleagainst retrospective operation is a fundamental rule of lawthat no statute shall be construed to have a retrospectiveoperation unless such a construction appears very clearly in the terms of the Act or arises by necessary and distinct implication.Dogmatically framed, the rule is no more than a presumption,and thus could be displaced by out weighing factors. CIT vs J.H.Gotla reported in (1985) 156 ITR 323 (SC) terms of the Act or arises by necessary and distinct implication.Dogmatically framed, the rule is no more than a presumption,and thus could be displaced by out weighing factors. CIT vs J.H.Gotla reported in (1985) 156 ITR 323 (SC) If the purpose of a particular provision is easily discerniblefrom the whole of the scheme of the Act which in this case, isto counteract the effect of transfer of assets so far ascomputation of income of the assessee is concerned, thenbearing that purpose in mind, we should find out the intentionfrom the language used by the legislature and if strict literalconstruction leads to an absurd result, i.e., result not intendedto be subserved by the object of the legislation found in themanner indicated before, then another construction is possibleapart from strict literal construction then that constructionshould be preferred to the strict literal construction. 6.11. We also hold that though equity and taxation are oftenstrangers , attempts should be made that these do not remainalways so and if a construction results in equity rather than ininjustice, then such construction should be preferred to theliteral construction. It is only elementary that a statutoryprovision is to be interpreted ut res magis valeat quam pereat,i.e to make it workable rather than redundant. Applying thislegal maxim, it would be just and fair to hold that theamendment in section 12A is brought in the statute to conferbenefit of exemption u/s 11 of the Act on the genuine trustswhich had not changed its objectives and had carried on thesame charitable objects in the past as well as in the currentyear based on which the registration u/s 12AA is granted bythe DIT(Exemptions). 6.12. We hold that the arguments of the Learned AR that, evenassuming without conceding, in the worst scenario, theassessee society could only be taxed in the status of an AOPdoes not require any adjudication as we hold that the assesseesociety to be construed as a public charitable trust and eligibleto claim exemption u/s 11 of the Act for the earlier assessmentyears, more especially, Asst Years 2003-04 to 2008-09 , thedonations received from various donors for construction of anold age home would take the character of corpus donations asthey are meant for specific purposes and accordingly would beexempt u/s 11(1)(d) of the Act. Even otherwise, the saiddonation receipts are only capital in nature as it is received forconstruction of an old age home on which fact there isabsolutely no dispute. The Learned AO also had duly acceptedthe nature of donations, genuinity of the donors and itsutilization in the remand proceedings. Hence in any case, areceipt which is by birth, capital in nature, cannot change itscharacter merely for want of registration of society u/s 12AA ofthe Act. It is not the case of the revenue that the donationsreceived are meant for general functioning of the charitableobjects of the society, in which event, the donations receivedthereon would take the character of revenue receipts requiringto be credited in the income and expenditure account forutilization towards charitable objects thereon. Hence we holdthat in any case, the donations received by the assessee society cannot be brought to tax in the assessment. society cannot be brought to tax in the assessment. 6.13. We hold that since the only reason for denial ofexemption u/s 11 was absence of registration u/s 12AA (whichwas granted to assessee society on 29.10.2010 with effectfrom 1.4.2010) for the relevant assessment years and on noother ground, the benefit of change in law as above by FinanceAct 2014 should be available and for all the years, the benefitof exemption should be available on the date of registration asall the assessments were pending as shown above. In thisconnection, it requires mention specifically that all the receiptsof the donation were proved on enquiry to have been receivedfrom the claimed donors and utilized for the specific purpose(construction of old age home) for which they were received. In conclusion, we hold that the insertion of the proviso tosection 12A(2) of the Act has to be construed as retrospectivein operation. Respectfully following the various judicial precedents reliedupon and in the facts and circumstances of the case, we allowthe ground nos. 3 to 8 raised by the assessee. 2. SNDP Yogam vs. ADIT (Exemption), (2016) 46 CCH 0736, wherein it observed as under:- 7. We have carefully considered the rival submissions,perused the relevant materials on record and the case lawon which the learned AR had placed strong reliance. Theprimary issue for our consideration is whether the CIT(A) isjustified in confirming the AO's action, for all the assessmentyears under consideration, in assessing the entire incomes ofthe assessee from all the institutions at the maximummarginal rate. In this context, it is appropriate to refer theamendment to section 12A(2) of the Act and its proviso. Forready reference the same is reproduced below: "[(2) Where an application has been made on or after the1st day of June, 2007, the provisions of sections 11 and 12shall apply in relation to the income of such trust orinstitution from the assessment year immediately followingthe financial year in which such application is made:] [Provided that where registration has been granted to thetrust or institution under section 12AA, then, the provisionsof sections 11 and 12 shall apply in respect of any incomederived from property held under trust of any assessmentyear preceding the aforesaid assessment year, for whichassessment proceedings are pending before the AssessingOfficer as on the date of such registration and the objects and activities of such trust or institution remain the same forsuchprecedingassessmentyear: Provided further th