M/S.soundaram Chokkanathaneducational And Charitable Trust v. The Income Tax Officer,Exemption Ward,Salem

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYANT.C.A.No.1015 of 2019 M/s.Soundaram ChokkanathanEducational and Charitable Trust,389/1B2, Dharmapuri Main Road,Papparappatti Post, Pennagaram Taluk,Dharmapuri District.[PAN: ] .. Appellant Versus The Income Tax Officer,Exemption Ward,Salem... Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the IncomeTax Act, 1961, against the order of the Income Tax AppellateTribunal, 'B' Bench, Chennai, made in I.T.A.No.1844/CHNY/2017dated 30.08.2019 relating to the Assessment Year 2013-14 againstthe commissioner of Income Tax (A),Salem dated 30.05.2017 inITA.NO.250/2015-2016 and against the proceeding of the IncomeTax Officer,Exemptions Ward,Salem dated 17.11.2015 made inF.NO.AAKTS2799A/154/SCM 2015-2016. For Respondent : Mr.J.Narayanasamy Senior Standing counsel JUDGMENT [Order of the Court was made by T.S.SIVAGNANAM, J.]This appeal filed by the assessee under Section 260A of theIncome Tax Act, 1961 ('the Act' for brevity), is directedagainst the order dated 30.08.2019 passed by the Income TaxAppellate Tribunal, 'B' Bench, Chennai ('the Tribunal' forbrevity) in I.T.A.No.1844/CHNY/2017 for the Assessment Year2013-14. The appeal was admitted on 10.12.2019 on the followingSubstantial Questions of Law: “1. Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal isright in law in holding that case of the appellant https://hcservices.ecourts.gov.in/hcservices/ would not fall within 1[st] proviso to Section 12A(2) ofthe Income Tax Act, 1961? 2. When the Appellant having been grantedexemption u/s 12A of Income Tax Act, 1961, with effectfrom 01.04.2015, is the Income Tax Appellate Tribunalright in law in holding that the Appellant cannot betreated as charitable for the A.Y.2013-14, in spite ofcomplying and satisfying with all other provisions andpreconditions for availing the benefit under Sections11 & 12 of Income Tax Act, 1961? 3. Whether on the facts and in the circumstancesof the case, the Appellate Tribunal is right in law innot considering and following a catena of decisionsrelied by the Appellant in support of its claim that1[st] Proviso to Section 12A(2) of Income Tax Act, 1961,squarely applies for the A.Y.2013-14?” 2. We have heard Mr.G.Baskar, learned counsel for theappellant/assessee and Mr.J.Narayanasamy, learned SeniorStanding counsel for the respondent/Revenue. 3. The assessee is a Trust, which filed the return of incomefor the Assessment Year under consideration, which was processedby the Centralized Processing Center and intimation underSection 143(1) of the Act was sent on 14.03.2015. The assesseefiled a petition under Section 154 of the Act before theAssessing Officer, which was rejected by order dated 17.11.2015on the ground that the assessee was not registered under Section12A(a) of the Act, which being the primary criteria for claimingexemption. Aggrieved by such order, the assessee filed appealbefore the Commissioner of Income Tax (Appeals), Salem ['CIT(A)'for brevity]. By order dated 30.05.2017, the CIT(A) dismissedthe appeal. The said order was put to challenge before theTribunal, which rejected the appeal filed by the assessee andthis is how the assessee is before us by way of this Tax CaseAppeal. 4. Mr.G.Baskar, learned counsel for the appellant, wouldcontend that the Appellate Tribunal erred in concluding that theassessee would not fall within the first proviso to Section 12A(2) of the Act. It is an admitted fact that because the appealwas pending before the CIT(A) and it is deemed to be anassessment proceedings pending before the Assessing Officer andtherefore, the Tribunal ought to have applied the first provisoto Section 12A(2) of the Act. Further, it is submitted that theassessee was granted registration by order dated 02.03.2016 witheffect from 01.04.2015 and the Tribunal erred in holding thatthe activities of the assessee cannot be treated as Charitableactivities for the Assessment Year 2013-14, in spite ofcomplying and satisfying with all the provisions andpreconditions for availing the benefit under Sections 11 & 12 of the Act. In support of his contentions, the learned counselplaced reliance on the decision in the case of Commissioner ofIncome Tax (Exemptions) Vs. Shree Shyam Mandir Committee,reported in (2018) 400 ITR 0466 (Raj) and the decision in thecase of Mathew M.Thomas Vs. Commissioner of Income Tax, reportedin (1999) 236 ITR 691(SC). 5. Per contra, Mr.J.Narayanasamy, learned Senior Standingcounsel appearing for the respondent submitted that the appealfiled by the assessee before the CIT(A) was not against an orderof assessment, but against the order passed on an applicationfor rectification filed under Section 154 of the Act andtherefore, it cannot be construed that the assessment waspending in appeal before the CIT(A). Further, it is submittedthat the facts of the case were rightly taken note of by theTribunal and rejected the claim of the assessee for exemptionfrom the Assessment Year 2013-14. Further, it is submitted thatexemption provision has to be strictly interpreted and that toin favour of the Revenue and the benefit now sought for by theassessee would go beyond the registration granted to theassessee under Section 12AA of the Act. To support hissubmission, the learned counsel placed reliance on the decisionin the case of Commissioner of Income Tax (Exemption), LucknowVs. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan, reportedin [2020] 113 taxmann.com 334 (Allahabad). 6. We have elaborately heard the learned counsel for theparties and carefully perused the materials placed on recordincluding the decisions cited supra. 7. At the outset, we need to point out certain factualaspects before we examine as to the applicability of thedecisions cited. Admittedly, the application for registrationwas filed by the assessee only on 23.02.2016. It appears thatthe application was not processed as the Commissioner of IncomeTax (Exemptions) ['CIT(E)' for brevity] was not satisfied thatthe activities of the petitioner Trust as mentioned in the deedof trust would qualify for an exemption. This necessitated theassessee to amend the various clauses and covenants in the trustdeed and the amended deed of trust was considered by the CIT (E)and an order was passed on 02.03.2016, granting registrationwith effect from 01.04.2015. Therefore, on facts, the assesseeis precluded from contending that the first proviso underSection 12A should be made applicable to them and they should begranted with the benefit from the Assessment Year 2013-14,because the factual position being that only after the deed oftrust was amended, the application was considered that tooregistration having been granted with effect from 01.04.2015only. Therefore, the Tribunal rightly held against the assessee, https://hcservices.ecourts.gov.in/hcservices/ https://hcservices.ecourts.gov.in/hcservices/ stating that there is nothing on record to show that theexemption activities / operations and genuineness of its claimsfor the Assessment Year 2013-14 was examined. Since registrationhas been granted only after the deed of trust was amended, theassessee cannot contend that they are to be granted benefit fromthe Assessment Year 2013-14. Apart from that the other question,which will also stare at the appellant is that the appeal, whichwas filed before the CIT (A) was against the order passed in arectification petition under Section 154 of the Act. Thequestion would be whether the same can be considered to be anassessment proceedings pending before the Assessing Officer.However, since no Substantial Question of Law has been framed tothat said effect, we do not wish to express any opinion on thesaid issue and the question is left open. 8. So far as the decisions cited by the learned counsel forthe appellant, we find that the factual position in the case ofShree Shyam Mandir Committee (cited supra) was entirelydifferent as could be seen from paragraph 6.4 of the saidjudgment as the issue was whether a re-assessment proceedingswould also be construed as a pending assessment proceedings andin the background of those facts, the Court took note of theCircular issued by the CBDT and granted relief. The decision ofthe Hon'ble Supreme Court in the case of Mathew M.Thomas (citedsupra) was entirely a different issue pertaining to a casearising under Section 269C, read with Section 269-I of the Act,pertaining to acquisition of immovable properties and initiationof proceedings. 9. Therefore, we find both the decisions cannot be appliedto the assessee's case. The decision in the case of Shiv KumarSumitra Devi Smarak Shikshan Sansthan (cited supra), in ouropinion, would be applicable to the case on hand. TheSubstantial Questions of Law which fell for consideration in thesaid case was: (i) Whether the Income Tax Appellate Tribunal wasjustified in allowing retrospective coverage to theassessee under Sections 11 and 12 of the Act, by holdingthat the appellate proceedings can be regarded asassessment proceeding?; (ii) Whether the Income TaxAppellate Tribunal has rightly applied the proviso ofSection 12A (2) for the Assessment Year 2011-12 in thecase of assessee therein when admittedly the assesseegot registration under Section12AA from Assessment Year15-16 ?; and (iii) Whether the Income Tax AppellateTribunal was justified in holding that the assessee iseligible for exemption under Section 11 of the Act evenwhen the assessee was not registered under Section 12AAof the Act? 10. The above questions were answered in the followingmanner. “13. We need to consider Section 12 A (2) of Act,1961 along with proviso to determine the issue raisedbefore us. Section 12 A (2) of the Act, 1961 providethat whenever application has been made for registrationof trust or institution is made under Section 12AA ofthe Act on or after first date of 2007, the provision ofSection 11 and 12 of the Act, 1961 shall apply inrelation to income of such Trust or Institution from theassessment year immediately following the financial yearin which application is made. If we go with theprovisions of Section 12 A(2) of the Act, 1961, thequestion raised before us can be answered holding thatthe benefit of Sections 11 & 12 of the Act, 1961 can begiven from the following financial year in which theapplication for registration is made and registrationwas subsequently granted. 14. If the facts of this case are taken intoconsideration then the assessee made an application forregistration on 15.12.2014 i.e. in the assessment year2015-16. The assessment in question is of the year 2011-12. In view of the above, whether the subsequentregistration pursuant to the application dated15.12.2014 would make the assessee entitled for thebenefit of Section 11 & 12. It is in respect of theassessment year prior to the date of application. It isin the circumstances that registration was finally givenon 08.06.2015. We are required to consider proviso belowsub-Section 2 of Section 12 A of the Act, 1961. Theproviso provides that if registration has been given tothe Trust or the Institution under Section 12 AA of theAct, 1961, then provisions of Section 11 & 12 of theAct, 1961 shall apply in respect of any income derivedfrom the property held under the Trust or theinstitution for any assessment year proceeding, forwhich assessment is pending before the AssessingAuthority as on the date of registration. The Tribunalhas given interpretation to the proviso to hold thatirrespective of the date of application, the benefit ofSection 11 & 12 of the Act, 1961 would be available tothe assessee retrospectively, if the assessmentproceedings were pending and pendency of suchproceedings may be not only before the Assessing Office,but even before the Tribunal. 15. According to us, the interpretation of theproviso has been given in ignorance of the mainprovision of Section 12A(2) of the Act, 1961. Wheneverinterpretation of the statutes has to be given it shouldbe after making harmonious construction of the statute.For the purpose of proper interpretation of Section 12Aof the Act, 1961, the Tribunal was required to makeinterpretation after taking into consideration the mainprovision along with the proviso and not by givingmeaning to the proviso in ignorance of substantiveprovision. 16. The Tribunal has even ignored the basicprinciple of law in giving interpretation in chargingprovisions, the benefit is to be given to the assesseebut same principle is not applicable for an exemptionnotification or exemption clause, where the benefit ofambiguity must be given to the Revenue/State. It is alsothat burden to prove applicability of exemption would beon the assessee that it comes squarely within theparameters of the exemption notification or exemptionclause. The Tribunal was required to make distinctionbetween charging provision where benefit of ambiguity isgiven to the assessee and the exemption notification orclause where interpretation is to be given in the formof Revenue. The issue aforesaid has been recentlyconsidered and decided by the Apex Court in the Case ofCommissioner of Customs (Import) v. Dilip Kumar &Company [2018] 9 SCC 1. 17. Section 12A extends benefit of exemption underSection 11 & 12 of the Act at the first instance to thecases referred under sub- section 1 of Section 12 A.Sub-section 2 of section 12 A extends benefit even whenapplication for registration of Trust or Institution hasbeen made on or after first day of June 2007. It wouldhowever be in relation to the income of the Trust or theInstitution from the assessment year immediatelyfollowing the financial year in which application forregistration was made. If the simple meaning of theprovision of section 12A(2) is to be given, it governsthose cases where application was moved for registrationafter first day of June, 2007. The benefit of Section 11and 12 would be extended from the assessment yearimmediately following the financial year in which theapplication was given. In the instant case theapplication for registration was given on 15.12.2014i.e. in the financial year 2014-15. On registration of the Trust, benefit under Section 11 and 12 would beavailable to the assessee from the assessment yearfollowing the financial year in which application wasgiven and not any previous year. The benefit ofregistration could not have been extended for theassessment year 2011-12, even if the matter was pendingbefore the Tribunal when application for registrationwas submitted on 15.12.2014. 18. The proviso to sub-section 2 applies in a givencircumstances, but cannot by making main provision ofsection 12 A as redundant. In the instant case, theapplication for registration was then submitted on15.12.2014. The registration was given on 08.06.2015.Since registration has been given on 08.06.2015, thebenefit of Section 11 & 12 would be available for thefollowing financial year in which application was madeif the assessment proceedings for the relevantassessment year was pending till the date ofregistration. It cannot be for the assessment year 2011-12 due to pendency of the appeal before the Tribunal. Ifthe benefit of Section 11 and 12 is extended for theassessment year 2011-12, despite submission of theapplication for registration on 15.12.2014, it would bein contravention of sub-section 2 of Section 12. Byvirtue of the interpretation taken by the Tribunal themain provision has been made redundant on the facts ofthe case, though not permissible. The proviso has to beread along with main proviso and not in isolation andcontradiction. 19. The Tribunal even ignored the fact that provisonot only require registration of the Trust or theInstitution while the assessment proceedings arepending, but it refers to assessment proceedings beforethe assessing authority and not elsewhere. In a commonparlance, whenever matter is pending before the Tribunalin appeal, considered to be pendency of the assessmentproceedings. The aforesaid principle would be applicablein the instant case is another question because provisoqualifies not only pendency of the assessmentproceedings, but should before the Assessing Officer notelse where, if in the proviso words "pendency of theassessment proceedings", would have been used thenpendency of the appeal against the assessment could havebeen considered to be pendency of the assessmentproceedings, but in the instant case the words used are"pendency of the assessment proceedings before the Assessing Officer". The assessment proceedings of theyear 2011-12 was not pending before the AssessingOfficer, but before the Tribunal. The observationaforesaid is relevant on the facts of this case. ThisCourt has otherwise given proper interpretation to thesubstantive provision as well as the proviso. 20. We have further gone through the instruction ofthe CBDT and find it to be contrary to the proviso toSection 12 A of the Act, 1961. The instruction of theCBDT cannot be forfeited, if it is against the statutoryprovisions. The provision is not to extend benefit incase assessment is pending but it should be before theAssessing Officer. In that case, pendency of theassessment can be treated to be pending before theAssessing Officer though pending before the Tribunal inAppeal. It cannot be in those cases where provision isvery specific, because proviso not only refers to thependency of the assessment when it is pending before theAssessing Officer. In few cases, the assessmentproceedings is considered to be pending before theTribunal due to pendency of the appeal but it isapplicable in those cases where words used are pendencyof the assessment proceedings and not with words"pending before the Assessing Officer". Theinterpretation therein is in reference to the words'pendency of the assessment' and not in reference to thependency of the assessment before the AssessmentOfficer. The instruction of CBDT can not be applied ifseems counter the statue. 21. Accordingly the judgment of Gujarat High Courtin Mayur Foundation (supra), would not apply. The viewexpressed therein cannot be applied to the facts of thiscase, otherwise an anomalous situation may emerge in agiven case where for one or the other reason assessmentproceedings before the Tribunal remain pending for yearstogether or on a remand or for any other reason it comesbefore the Assessing Officer and such cases alsosubsequent application for registration and acceptancewould result to extend benefit of Section 11 and 12creating anomalous position if not meant for. This wasnot the object sought to be achieved by the legislature.If for one or the other reason, the proceedings inreference to the assessment years 1998-99 remainspending and the application for registration underSection 12AA of the Act, 1961 is filed in the year 2014-15 followed by registration, if the proviso is applied, https://hcservices.ecourts.gov.in/hcservices/ then benefit of Section 11 and 12 of the Act, 1961 wouldbe given to the Trust or the Institution even for theyear 1998- 99, though the legislatures have not providedsuch arrangement or to extend the benefit in such cases.The provision is candid to govern only those cases wherethe application for registration is submitted followedby registration, to extend the benefit to the assesseefrom the following financial year of the date ofapplication. Taking aforesaid into mind, we find reasonsto allow the appeal preferred by the revenue and thesubstantial questions of law framed herein above areanswered in favour of the Revenue and thereby we set-aside the order passed by the Tribunal.” 11. The Hon'ble Division Bench rightly took note of thedecision of the Hon'ble Supreme Court in the case ofCommissioner of Customs (Import) Vs. Dilip Kumar & Co., reportedin (2018) 9 SCC 1, in which the Hon'ble Supreme Court hasexplained as to how the exemption provisions have to beinterpreted and such interpretation to lean in favour of theRevenue. Further, we also agreed with the view expressed inParagraph 20 of the aforementioned judgment, wherein it has beenheld that the instruction issued by the CBDT cannot be forfeitedas it is against the statutory provisions.12. Apart from the above legal position, the factual matrixas culled out in the assessee's case would disentitle them forany relief. 13. For the above reasons, the Tax Case Appeal is dismissedand the Substantial Questions of Law are answered against theassessee. No costs. Sd/- Assistant Registrar(CS VIII) https://hcservices.ecourts.gov.in/hcservices/