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citation codes

Case Number

ITA 364/ASR/2014

Disposition

allowed

Advocates

Acts

FINANCE ACT 2014
INCOME TAX ACT
section 12AA or section 12AB, then, the provisions of sections 11 and 12

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ITAT, Amritsar Bench — Leh Nutrition Project v. DCIT (I.T.A. No. 364/Asr/2014) — Order dated 16.11.2022

Factual and Procedural Background

The appeal arises from an order dated 26.03.2014 of the Commissioner of Income Tax (Appeals) in respect of Assessment Year 2010-11. The assessee is Leh Nutrition Project, a trust engaged in charitable activities in the Leh region, which had applied for and obtained registration under section 12AA/12A. The assessing officer (AO) made an assessment under section 143(3) and made an addition of Rs.1,13,26,754 as income from other sources (and the parties dispute a calculated surplus of Rs.26,75,553). The assessee challenged the assessment and the CIT(A)'s order on multiple grounds, including that it is an NGO/trust receiving specific grants and maintaining receipts & payments accounts and that it was, or should have been, entitled to the benefit of sections 11 and 12 in view of registration under section 12A and amendments to section 12A(2) by the Finance Act, 2014. The Tribunal heard arguments and materials and pronounced its order on 16.11.2022.

Legal Issues Presented

Whether the assessing officer and CIT(A) erred in making an addition of Rs.1,13,26,754 (and treating the appellant as a Public Limited Company) without rejecting the assessee's books and by treating receipts as taxable income.
Whether receipts recorded in the Receipts & Payments account (including specific grants/donations) can be treated as income for taxation when the assessee is an NGO/trust functioning as a 'postman' for project-specific grants and where unspent amounts are to be carried forward or refunded.
Whether the assessee, having been granted registration under section 12AA/12A (registration date in the record: 20-07-11 or 21-07-11; registration document also appears at APB Pg. 498 with date 18-03-11), is entitled to the benefit of sections 11 and 12 for the Assessment Year 2010-11 under the first proviso to section 12A(2) (as amended by Finance Act, 2014) because assessment proceedings for the relevant year were pending before the AO on the date of registration.
Whether judicial precedents and changes in law during pendency should be applied to benefit the assessee in these proceedings (i.e., retrospective or pendency application of changed law).

Arguments of the Parties

Appellant's Arguments (as presented in the written synopsis and oral submissions)

The AO wrongly made the assessment under section 143(3) and added Rs.1,13,26,754 on the basis of Receipts & Payments without rejecting the books of account and without recognising the trust's charitable status.
The Receipts & Payments account is a summary of cash and bank transactions and does not itself reflect profits; it was wrong to treat receipts as taxable income.
The appellant is an NGO/trust acting as a 'postman' for specific project grants and donations; unspent amounts recorded in the Receipts & Payments account were to be adjusted against future grant liabilities or refunded, and therefore cannot form part of corpus or taxable income.
The appellant had been granted registration under section 12AA/12A (dates in the record vary but registration exists), and under the first proviso to section 12A(2) (as explained in Finance Bill/Finance Act 2014) the benefit of sections 11 and 12 should apply to assessment years preceding the date of registration for which assessment proceedings were pending before the AO as on the date of registration.
The appellant relied on a range of judicial precedents (including a Pune Bench decision and several Amritsar Bench decisions and Supreme Court authorities) to support retrospective or pendency application of registration benefits and to distinguish adverse decisions (e.g., an Allahabad High Court decision relied on by the Revenue was argued to be distinguishable on facts).
In terms of relief on merits, the appellant sought allowance of specific carry-forwards, refund obligations to donors, and a 15% allowable deduction from total receipts (argued as a measure that reduces the taxable figure compared to the addition confirmed by CIT(A)).

Respondent's Arguments (as recorded)

The Department (Ld. DR) stood by the impugned order of the CIT(A) that had treated the surplus as taxable because, in the CIT(A)'s view, the appellant was not registered under section 12A for the relevant year as required by the Act (thus the income was taxable).
The Revenue relied on the judgment of the Allahabad High Court in CIT vs. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan (ITA No.11 of 2019) to contend that proceedings before the Tribunal are not covered by the proviso and to oppose retrospective application in the facts of that case; the Revenue pressed that the CIT(A)'s decision be sustained.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Auto & Metal Engineers & Ors. vs. Union of India & Ors. (1998) 229 ITR 399 (SC)	Establishes that the process of assessment commences with the filing of the return or by issuance by the AO of a notice to file a return (i.e., assessment proceedings commence with filing of return).	The Tribunal relied on this Supreme Court precedent (as applied by the Pune Bench) to hold that assessment proceedings commence with filing of the return and therefore could be “pending before the AO” on the date of registration, supporting application of the first proviso to section 12A.
Sansthan Shree Eknath Maharaj Vishwastha Mandal vs. ITO, ITA No. 288/Pun/2020 (Pune Bench)	Interprets the second proviso to section 12A (12AA) to mean that where registration is granted, the provisions of sections 11 & 12 shall apply to earlier years for which assessment proceedings are pending before the AO on the date of registration.	The Tribunal treated the Pune Bench decision as directly relevant and persuasive on the point that registration (when granted while assessment proceedings are pending before the AO) confers benefit to the prior year; it followed that reasoning in allowing relief to the assessee.
Howrah Municipal Corporation & Ors. vs. Gangis Rope Co. Ltd. & Ors. (2004) 1 SCC 663	The principle (as cited in the opinion) that where there is a change in law during the pendency of an appeal, the change in law should be applied to pending appeals.	The opinion cites this Supreme Court authority (through subsequent jurisdictional bench references) to support applying a beneficial change in law to pending proceedings; it formed part of the broader line of authorities relied upon to grant relief.
Sh. Vishwa Mitter Sekhri vs. ITO, ITA No. 75/asr/2016 (2021) (Jurisdictional Bench)	The jurisdictional bench referred to the Howrah decision and applied the principle that a change in law during pendency should apply to appeals pending before the Tribunal.	The opinion refers to this coordinate decision as supportive jurisprudence for applying beneficial changes in law to pending appeals and uses it in the chain of authorities favouring the assessee.
CIT vs. Calcutta Exports Company (2018) 404 ITR 654 (SC)	Cited in the opinion for the proposition that an amendment which is curative in nature may be given retrospective effect.	The opinion relies on this Supreme Court decision (as part of the authorities on retrospective or beneficial application) to reinforce the view that amendments or beneficial changes can apply retrospectively.
Director of Income Tax vs. SRMB Dairy Farming (P) Ltd. (2018) 65 IT Reps 1 (SC)	As cited in the opinion: the Supreme Court indicated that a circular beneficial to the assessee shall be applicable retrospectively.	The Tribunal's synopsis and submissions referenced this authority to support the contention that beneficial provisions or clarifications should be applied retrospectively to assist the assessee.
Queen's Educational Society vs. CIT (2015) 372 ITR 699 (SC)	The opinion cites the case (reference given at Para 25 in the record) but does not set out in the text a specific distilled principle from this decision.	The opinion lists this Supreme Court decision among authorities on exemption matters; the record shows it was placed on file and relied upon in the appellant's synopsis.
CIT (Exemptions) vs. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan (Allahabad High Court), ITA No. 11 of 2019 (06-08-2019)	As used by the Revenue in these proceedings: holds that proceedings before the Tribunal are not covered by the first proviso to section 12A(2) (i.e., the proviso refers to pendency before the AO).	The Tribunal considered this authority but distinguished it on facts, observing that in the present case the proceedings were pending before the AO (and not the Tribunal) and therefore the Allahabad HC decision did not control the present outcome.
Dera Bhai Gurdas Ji Udasin Trust (Regd.) Mansa vs. ITO, ITA No. 228 & 229/Asr/2019 (ITAT Amritsar, pron. 22-06-22)	Applied section 12A(2) and directed the AO to grant the benefit of sections 11 & 12 where registration and facts supported exemption.	The Tribunal relied upon this coordinate Bench decision (extracting para 21) as a supportive Amritsar Bench precedent directing grant of exemption under sections 11 & 12 and applied similar reasoning to the present appeal.
Saint Jute's Convent School vs. ACIT (ITAT, Amritsar) ITA No. 749/Asr/13 (A.Y. 2010-11) dated 26-09-16	The opinion lists this Amritsar Bench decision among authorities favorable to the appellant; the detailed legal principle from the case is not excerpted in the opinion.	Included in the appellant's list of Amritsar Bench decisions relied upon; the Tribunal noted the Amritsar Bench jurisprudence in support of the appellant's position.
Baba Amaranth Educational Society vs. ITO (ITAT, Amritsar) ITA No. 1318/12 (A.Y. 2009-10) dated 31-03-19	The opinion cites this Amritsar Bench decision; no specific principle from the decision is separately extracted in the opinion.	Listed by the appellant as part of Amritsar Bench precedents supporting the claim for exemption under sections 11 & 12; the Tribunal treated the cluster of Amritsar decisions as supportive contextually.

Court's Reasoning and Analysis

The Tribunal heard both sides and examined the record, including the assessee's registration documents and the chronology of events (return filing, registration date, notices and assessment order). The Tribunal made the following analytical steps (based on the content of the opinion):

Admitted factual position: the appellant is a charitable trust continuing charitable work in Leh and registration under section 12AA(1) of the Act exists on record (APB Pg. 498 shows registration).
Identified the crucial statutory provision: the first proviso to section 12A(2) (as explained in legislative and explanatory material) provides that where registration is granted, sections 11 & 12 shall apply to any income of an assessment year preceding the assessment year for which assessment proceedings are pending before the Assessing Officer on the date of registration.
Considered the commencement of assessment proceedings: relying on the Pune Bench decision in Sansthan Shree Eknath Maharaj Vishwastha Mandal and, through it, the Supreme Court authority in Auto & Metal Engineers, the Tribunal accepted that assessment proceedings commence with the filing of the return (or issuance of notice to file a return), and thus the assessment proceedings can be held to be pending before the AO from that point.
Applied precedent to facts: on the facts recorded—return filed (the record contains dates showing filing of the return for the relevant year), registration granted subsequently but while assessment proceedings before the AO were ongoing—the Tribunal concluded that the first proviso to section 12A applied and entitled the assessee to the benefits of sections 11 & 12 for AY 2010-11.
Distinguished contrary authority: the Tribunal expressly distinguished the Allahabad High Court decision relied upon by the Revenue (CIT vs. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan) on the basis that that case involved proceedings pending before the Tribunal rather than pending before the AO; since the proviso speaks of proceedings pending before the AO, the Allahabad decision was held to be factually distinguishable and therefore not controlling.
Referred to other supportive Amritsar Bench and coordinate Bench decisions (e.g., Dera Bhai Gurdas Ji; Saint Jute's Convent School; Baba Amaranth) and to Supreme Court authorities on retrospective/beneficial application of law (e.g., Howrah; Calcutta Exports; SRMB Dairy) to show the line of precedent supporting application of beneficial change or registration effect to earlier years where proceedings were pending before the AO.
On that basis, the Tribunal found merit in the appellant's legal ground and concluded that the disputed addition should be deleted by granting the benefit of sections 11 and 12 for the year under consideration.

Holding and Implications

Holding: The appeal is allowed. The Tribunal held that the assessee is eligible for deduction under sections 11 and 12 for Assessment Year 2010-11 under the first proviso to section 12A(2), and accordingly deleted the disputed addition.

Implications:

Direct effect: The assessed addition (disputed amount) was deleted and the assessee granted the benefit of sections 11 and 12 for AY 2010-11 — i.e., the income which the AO had taxed is treated as exempt under the provisions applicable because registration existed and assessment proceedings were pending before the AO on the date of registration.
Precedential effect within the record: The Tribunal's order applies to the parties in this appeal; the decision follows and relies upon a line of bench and Supreme Court authorities interpreting the commencement of assessment proceedings and the application of the proviso to section 12A(2). The order does not purport to lay down a new Supreme Court principle; it follows existing precedents and distinguishes contrary authority on factual grounds.

Order pronounced in open court on 16.11.2022. Members: Shri Anikesh Banerjee (Judicial Member) and Dr. M. L. Meena (Accountant Member). The appeal was allowed and the disputed addition deleted.

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M/s. Leh Nutrition Project,, Leh Ladkh v. The Dy. Commissioner of Income-tax, Srinagar

IN THE INCOME TAX APPELLATE TRIBUNAL

AMRITSAR BENCH, AMRITSAR

BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER

AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER

I.T.A. No. 364/Asr/2014

Assessment Year: 2010-11 M/s Leh Nutrition Project, Vs. Dy. Commissioner of Income Khan Manzil Zangsti Leh, Tax, Circle-3, Srinagar J & K

[PAN: AAATL 7606F]

(Appellant) (Respondent)

Appellant by : Sh. Tarun Bansal, Adv. Respondent by: Sh. S. M. Surendranath, Sr. DR Date of Hearing: 13.10.2022

Date of Pronouncement: 16.11.2022

ORDER

Per Dr. M. L. Meena, A.M.:

This appeal has been filed by the assessee against the impugned order dated 26.03.2014 passed by the Ld. Commissioner of Income Tax (Appeals), Jammu in respect of the Assessment Year 2010-11.

2. The assessee has raised the following amended grounds of appeal:

ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT

"1. That the Id AO wrongly made the assessment u/s 143(3), as well as, addition of Rs. 1,13,26,754 under the head income from other sources, without rejecting the books of accounts of the assessee and also treated the appellant as Public Limited Company.

2. That the Id AO wrongly made the addition of Rs. 1,13,26,754 on the basis of Audited Receipts & Payments Account by ignoring that Receipts & Payments A/c does not show any profits & is a summarized Cash and Bank book for a given period.

3. That both the Id A.O & CIT(A) has to make correct assessment and wrongly ignored that appellant is a NGO, maintaining "Receipts & Payment A/c" and working as "Postman" for different projects with specific grants having execution work for many years, to come, hence there is no surplus of Rs.26,75,553 available for taxation and also not creating any assets on its own name or doing any revenue expenditure, hence there is no surplus of Rs.26,75,553 available for Taxation.

4. That the Id. CIT(A) has blown Hot & Cold, as in one hand, he is passing benefit by taxing Receipts, after allowing all Expenditure, On other hand, he is not allowing benefit of specific grants / donations received for work to be executed in many years, to come ahead, as such grants can neither form part of Corpus nor Income of appellant.

5. That the Id CIT(A) has wrongly ignored the following certificates indicating the amount remained unspent in the Receipts & Payments A/c, which will be adjusted towards the grants-in-aid payable in the next A.Y. 2011-12 and shown as Closing Balance of cash-in-hand & Bank and cannot be part of Income of the appellant and is more than the surplus calculated by A.O = Rs.26,75,553 :-

Amt.(Rs.)

(a) Sea Buch Thorn Processing Centre 83,836

(b) Artificial Glacier Technology 17,54,482

(d) PIA Bathc-6 4,97,390

(e) PIA Batch-8 9,29,650

Total — 49,35,623

ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT

6. That Id CIT(A) has wrongly ignored that no addition was ever made in the case of appellant since inception as 'NGO' on this issue, by Income Tax Department.

7. That order of Ld AO & Ld CIT (A) is bad in law, as well as, on facts.

8. That appellant craves to add or amend any ground of appeal before the appeal is finally heard or disposed-off.

9. That the order may kindly be modified or another consequential relief be allowed.

3. Legal grounds for A.Y. 2010-11

"That on the facts and circumstances of the case, the ld. A.O., as well as, CIT(A) has erred in law while passing the order dated 31.-1-13 & 26-3-14 respectively, ignoring that the appellant having been granted registration u/s 12A dated 21.-7- 11, therefore, the benefit of such exemption should be granted for the year under consideration also, in view of the amendment in section 12A(2) vide Finance Act, 2014."

4. The appellant trust has raised legal ground which goes to the root of the matter that the appellant having been granted registration u/s 12A dated 21.-7-11, therefore, the benefit of such exemption should be granted for the year under consideration and it is therefore legal issued admitted to be heard.

5. The Ld. CIT(A) has although admitted the facts that there was no denying of the fact that the appellant was engaged in charitable activities. However, the surplus from such activities is taxable in the hands of the

ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT appellant as the appellant has not been registered u/s 12A of the Act as required by the provisions of the Income Tax Act and as such the income of the appellant is taxable.

6. The Ld. AR has filed a written synopsis which reads as under:

"Legal Ground as additional ground filed on 18/5/19:-

That on the facts and circumstances of the case, the ld. A.O, as well as, CIT(A) has erred in law while passing the order dated 31-1-13 & 26-3-14 respectively, ignoring that the appellant having been granted registration u/s 12A dated 21- 7-11, therefore the benefit of such exemption should be granted for the year under consideration also, in view of the amendmentinsection12A(2)vide financeAct,2014.

Argument:-

i)	Return Filed dtd.24-03-11(As per A.O.’s order –Para1)
ii)	Application for registration u/s12AA(1)filed dtd.18-03-11(ReferPB-498)
iii)	Registration for Financial Year 2010-11 Granted dtd.20-07-11(ReferPB-498)
iv)	Notice u/s143(2)given by A.Odtd.22-09-11 (ReferPara-1ofA.O’sorder)
v)	Date of Assessment Order=31-01-13(as per Point-12,page1ofassessmentorder)

Pleaserefersec.12AProviso1, which is explained as under, which came into effect from01-10-14:-

"Where registration is provided u/s12AA, then the provision of sec.11&12 shall apply in respect of any income held under the trust of any assessment year preceding the aforesaid assessment year, for which assessment proceeding are pending before assessment officer and on the

ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT

date of such registration."

In this case the registration was received on 20-07-11 and date of the order of A.O is 31.01.13. Hence when the A.O issued notice dtd. 22-09-11, the assessee was already having registration. Once the registration is there, then no action can be taken for such trust for any assessment year preceding the aforesaid assessment year, only for non-registration of the trust, even no action can be taken under section 147 or otherwise and the matter was clarified in proviso 2 of the section. Assessment proceedings are pending when the return is filed.

The copy of memorandum explaining the provision of finance no. 2 (Bill), 2014 is enclosed at page 506 to 507 and main provision is enclosed at page 507 and refers Para-3 of the same.

Case Law 1:-

The issue has also been explained in the following case law: - Sansthan Shree Eknath Maharaj Vishwastha Mandal vs. ITO (Exemption)

ITA No. 288/Pun/2020 (AY-2016-17) Refer Para 3,4 & 5 at page 509 to 512

Copy enclosed at page 508 to 512. Facts of this case

i) Return filed dtd. = 17-01-17. (our case is = 24-3-11)

ii) Registration u/s 12AA granted = 16-05-17 (our case = 20-7-11)

iii) Notice u/s 143(2) issued = 20-09-17 (our case = 22-9-11)

iv) At Para-5, the author says since the return was filed on 17-01-17, the assessment proceeding for year under consideration commenced with the filing of return dtd. 17-1-17 and the author also quoted the Supreme Court case law of M/s Auto And Metal Engineers & Ors. Vs. Union of India & Ors (SC) (1998)

229 ITR 399 indicating the process of assessment commences with the filing of return or by issuance by AO of notice to file a return.

Case Law 2 If there is a change in law during the pendency of the appeal, the change in law should be applied to pending appeals also:- Sh. Vishwa Mitter Sekhri vs. ITO (Jurisdictional Bench)

ITA No. 75/asr/2016 (2021) Copy enclosed at page 514 to 525. [Refer Para-4 PB 524]

ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT

In this case, the jurisdictional bench referred the case law of Supreme Court, i.e; Howrah Municipal Corpration & Ors. Vs Gangis Rope Co. Ltd. & Ors (in this case the Honorable SC said, if there is a change in law during the pendency of the appeal, the change in law should be applied to pending appeals also.

Case Law 3

That the Ld. CIT(A) ignored the section 12A(2) before passing the order, hence the order passed by CIT(A) is bad-in-law and the benefit of section 12A(2) should be passed to the appellant, as per the following case laws of Amritsar Bench :-

Saint Jute's Convent School vs. ACIT (ITAT, Asr) ITA NO- 749/Asr/13, A.Y 2010- 11 dated 26-9-16 Copy enclosed at PB- 461 to 486.

[Para 18 to 21, PB- 476 onwards, Para- 39, PB-485]

Baba amaranth educational society vs. ITO (ITAT Asr) ITA NO-1318/12, A.Y 2009- 10 dated 31-3-19 Copy enclosed at PB- 487 to 495.

[Para 4.4= PB=492 Para 4.6, 4.7] Case Law 4

Amendment when curative in nature is required to be given retrospectively :-

CIT vs. Calcutta Exports Company (2018)

404 ITR 654 (SC)

Enclosed at page 526 to 532. [Refer Para 28 & 29 at PB 532] Case Law 5

Even the Honorable Supreme Court has said the circular beneficial to the assessee shall be applicable retrospectively :

Director of Income Tax vs. SRMB Dairy Farming (P)(Ltd.) (2018)

65 IT Reps 1 (SC) (refer Para _23 at page 544 )

Enclosed at page 533 to 544. Distinguishing of the case laws referred by DR during the last hearing dtd. 18-04-22

Case Laws

CIT Exemptions vs. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan ITA No. 11 of 2019 (Allahabad HC)

Copy enclosed at page 545 to 551

ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT

[Refer Para 18 at PB 550]

i) This case law of Lucknow bench has mainly on the issue of when the registration was given on 08-06-15 then benefit of section 11 & 12 would be available for following year, in which application was made. If the assessment proceedings for the relevant Assessment year was pending till the date of registration then it cannot be for assessment year 2011-12 due to the pendency of the appeal before the tribunal. Refer Para-18,19, 20 at PB 550 onwards.

ii) The proviso not only required for registration of the trust but it refers to assessment proceeding before assessment authority not elsewhere.

iii) The assessment proceedings for year 2011-12 was not pending before the A.O but for the tribunal.

iv) As per Para-20 at PB 550 . in this case, tribunal will not be covered.

v) This case law first of all, is on the sec 12A(2) and not the proviso 1 or proviso 2 of sec. 12A(2) . section 12A(2) is relevant where the application is made for registration and Proviso 1 is relevant where registration has already been done.

vi) The above said case law has not discussed :

(i) CIT vs. Calcutta Exports Company (2018)

404 ITR 654 (SC) dtd. 24-04-18 In the above referred Allahabad HC order is dtd. 06-08-19

(ii) Howrah Municipal Corpration & Ors. Vs Gangis Rope Co. Ltd. & Ors.

(2004) 1 SCC 663

(iii) In the above case of Allahabad HC order, the case of Supreme Court, as mentioned above was not discussed, indicating beneficial change in law during the pendency of the appeal, the change in law should be applied to pending appeals also. This case of Supreme Court was discussed by jurisdictional bench in the following case law. Sh. Vishwa Mitter Sekhri vs. ITO ITA No. 75/asr/2016 (2021) (Refer Para 4 at Page 524

ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT Copy enclosed at Pb 514 to 525.

2) Written arguments of Amended Legal Ground No. 1 dtd. 04-07-16 is at PB- 452 onwards.

3) written arguments of Amended Legal Ground No. 2 to 5 dtd. 04-07-16 is at PB-453 onwards.

4) Case Law of

Queen's Educational Society vs. CIT (2015)

372 ITR 699 (sc) (Refer Para 25 at page 569 )

Copy enclosed at page 552 to 570 ." Synopsis dated 13.10.2022 Synopsis on legal ground taken as additional ground filed on 18-05-19

"1. In this case registration was granted for A.Y 2011-12 but the case pending before A.O was AY 2010-11. But the registration was there at the time of reopening of the case by A.O, secondly the assessment proceedings were pending before AO because the return was filed on 24-03-11, order passed on 31-01-13 and registration granted on 20-07-11. In this case, section 12A-Proviso- l, comes into picture, which was inserted to cover the genuine hardship to the trusts for preceding years assessment after receiving the registration. The Proviso said, when the registration is granted and any proceedings pending before A.O relating to the previous/preceding year of the date of registration, the registration will applicable to the preceding year also and this issue was discussed by the Pune Bench under this case law

Sansthan Shree Eknath Maharaj Vishwastha Mandal vs. ITO (Exemption) ITA No. 288/Pun/2020 (AY- 2016-17)

Copy enclosed at page 508 to 512

(Refer Para 3, 4 and 5) and the Pune Bench quoted the case law Auto and Metal Engineers and Others vs. Union of India and Others 229 ITR 399 (SC). Copy on record

The case of CIT (Exemptions) vs. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan (Allahabad High Court) is distinguished at PB- 545 to PB-551 as filed

ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT by DR in the last hearing. Refer Para 18, 19 and 20 at PB-550. In this case, it was held that proceedings before tribunal are not covered u/s 12A-Proviso-l but proceedings before AO are only covered under Proviso- 1. When the matter went to Supreme Court against the decision of Allahabad High Court, the SLP was dismissed on the same issue. Hence this case law helps the appellant as far as the issue of assessment proceedings before AO is concerned. On the other issue, the case law is not applicable to the appellant

2. However, 15% should be allowed to the trust out of the total receipts and this figure will come at a lesser amount, as compared to the addition confirmed by CIT(A).

3. Ground No. 2, 3, 4 and 5 are on merits and merits are narrated at PB-454 to PB-457 and all the required page numbers are also mentioned therein by saying that trust was just a postman and receiving specific donations and was utilizing the same. If any amount remained unspent was either given back to the donor or were carry forwarded to the next year. All the donors were having agreement with the appellant to refund the balance unspent amount and the members of the society were also filing bond on this ground. Even the interest earned on the balance unspent amount was returned, if unspent. All the documents relating to this argument are mentioned in the above pages."

I further relied on the order of ITAT, Amritsar Bench ,on same issue , in the case of Dera Bhai Gurdas Ji Udasin Trust (Regd.) Mansa vs. ITO, Ward- 1(4), ITA No. 228 & 229/Asr/2019, date of pronouncement 22-06-22. The relevant Para (Para-21) is extracted as below :

''In view of the finding given by us herein above with regard to the status of the assessee society and its eligibility to claim exemption u/s 11 of the Act. The assessee is eligible of benefit of Section 12A(2) of the Act for the AY 2014-15 & 2015-16. The copy of order U/s 12AA(1)(b) of the Act is annexed in page no-37 to 38 of Paper Book. Therefore, we direct the Assessing Officer to grant the benefit of Section 11 & 12 for AY 2014-15 & 2015-16. The valuation report of assessee should be accepted for value of cost of acquisition of aforesaid land on dated 01/04/1981.''

7. The Ld. DR stands by the impugned order.

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ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT

8. Heard both the sides on the issue, and perused material documents on record. Admittedly, the appellant Trust is continuing the charitable work in Leh region in India and duly granted registration u/s 12AA(1) of the Act, dated. 18-03-11 (APB, Pg.-498). The Ld. AR argued that that the appellant trust having been granted registration u/s 12A vide order dated 21/07/11, therefore, the benefit of such exemption should be granted for the year under consideration also, in view of the amendment in section 12A(2) vide finance Act, 2014.

9. The ITAT, Pune Bench, in the case of Sansthan Shree Eknath Maharaj Vishwastha Mandal vs. ITO, ITA No. 288/Pun/2020, vide order pronouncement on 03-02-22, vide para 4 and 5, on similar facts observed as under:

4. "I have heard both the sides in Virtual Court and gone through the relevant material on record. There is no dispute on the fact that the assessee filed its return of income on 17.01.2017 for the year under consideration. The approval was granted by the ld. CIT(E) u/s 12AA on 16.05.2017. At this stage, it is relevant to take note of the mandate of sub-section (2) of section 12A granting benefit of exemption to the years prior to the grant of registration, which provides through the second proviso that : `where registration has been granted to the trust or institution under section 12AA or section 12AB, 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 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. A bare perusal of the proviso amply transpires that where the subsequent registration has been granted u/s 12AA, then the benefit of such registration will also be conferred to earlier years for which assessment proceedings are pending before the AO as on the date of such registration. The

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ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT crucial words used in the second proviso are the pendency of assessment proceedings. To put it simply, if the assessment proceedings are pending before the AO when the registration is granted by CIT(E), the registration so granted will also have effect and the AO will be obliged to grant exemption u/s 11 in respect of such assessment year. The authorities below have taken note of the mandate of the second proviso but interpreted the term „assessment proceedings as commencing with the issuance of notice u/s 143(2) of the Act. That is the raison d`etre for denying the benefit of exemption in the extant case on the premise that notice u/s 143(2) was issued on 20.09.2017 and by that time the registration had already been granted by the ld. CIT(E) on 16.5.2017. In my opinion, the connotation of commencement, continuation and termination of `assessment proceedings is fairly settled by authoritative pronouncement from the highest Court of the land in Auto & Metal Engineers And Ors. Vs. Union of India & Ors. (1998) 229 ITR 399 (SC) in which it has been held by the Honble Summit Court that the process of assessment commences with the filing of return or by issuance by the AO of notice to file a return and it culminates with the issuance of notice of demand u/s 156 of the Act. It is thus, manifest that the assessment proceedings commence with the filing of return and not when notice is issued for the first time u/s 143(2). Issuance of such a notice and passing of assessment order are parts of entire assessment proceedings which commences with the filing of return.

5. Adverting to the facts of extant case, I find that the assessee filed its return for the year under consideration on 17.01.2017. The approval was granted by the ld. CIT(E) u/s 12AA on 16.05.2017. It is, ergo, glaringly patent that the assessment proceedings for the year under consideration, which commenced with the filing of return on 17.01.2017, were pending on the date of grant of registration by the ld. CIT(E) on 16.05.2017. I, therefore, hold, in principle, that the assessee is eligible for exemption u/s 11 of the Act."

10. On similar facts, the coordinate Bench in the case of 'Dera Bhai Gurdas Ji Udasin Trust (Regd.) Mansa vs. ITO', (Supra) directed the Assessing Officer to grant the benefit of Section 11 & 12 to the appellant trust.

11. The Judgement of the Honorable Allahabad High Court, in the case of CIT vs. Shiv Kumar Sumitra Shikshan Sansthan, ITA No. 11 of 2019, dated 06/08/2019, relied by the Ld. DR is distinguishable on facts as in that

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ITA No. 364/Asr/2014 Leh Nutrition Project v. DCIT case the proceeding were pending before the Tribunal and not before the AO, whereas in the present case the proceedings were pending before the AO. Further, the Pune Tribunal followed the judgement of the Honorable Supreme Court in the case of 'Auto and Metal Engineers & Others vs. Union of India and Others', (1998) 229 ITR 399 (SC) while granting relief to the assesse under the first proviso of section 12A of the Act.

12. Considering the peculiar facts and the judicial precedents, we hold that the assessee is eligible for deduction u/s 11 and 12 for A.Y. 2010-11 under the first Proviso to section 12A. Accordingly, we delete the disputed addition by granting the benefit of Section 11 & 12 to the appellant trust.

13. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 16.11.2022.

Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member

*GP/Sr/PS* Copy of the order forwarded to:

(1) The Appellant:

(2) The Respondent:

(3) The CIT(Appeals)

(4) The CIT concerned

(5) The Sr. DR, I.T.A.T. True Copy

By Order

M/s. Leh Nutrition Project,, Leh Ladkh v. The Dy. Commissioner of Income-tax, Srinagar

ITAT, Amritsar Bench — Leh Nutrition Project v. DCIT (I.T.A. No. 364/Asr/2014) — Order dated 16.11.2022

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments (as presented in the written synopsis and oral submissions)

Respondent's Arguments (as recorded)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

M/s. Leh Nutrition Project,, Leh Ladkh v. The Dy. Commissioner of Income-tax, Srinagar

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