2015 (9) TMI 1502 - AT - Income Tax

Tribunal overturns CIT's cancellation of registration under section 12AA, emphasizing genuine trust activities.

The Improvement Trust, Moga Versus The Commissioner of Income Tax-III, Ludhiana

The Tribunal ruled in favor of the appellant, canceling the CIT(A)'s order to withdraw registration under section 12AA for Assessment Year 2009-10. The ... Registration u/s 12AA cancelled - powers of the Commissioner under section 12AA(3) for cancellation of registration already granted - Held that:- As decided in Kapurthala Improvement Trust Versus Commissioner of Income Tax [2015 (7) TMI 77 - ITAT AMRITSAR] the action of the learned Commissioner, in withdrawing the registration under section 12AA(3), was well beyond the limited scope of the powers conferred on him by the statute. The assessee, therefore, must succeed in the appeal for this short reason alone. There is, however, a much more fundamental reason for the assessee succeeding in this appeal. In our considered view, the considerations with respect to the first proviso to Section2(15) coming into the play and, for that reason, the objectis of an assessee trust or institution being held to be not covered by the definition of ‘charitable purposes’, have no role to play in the matters relating to registration of a trust or institution under section 12A or 12AA-whether in respect of granting or declining of a registration or in respect of cancellation, even if otherwise permissible, of a registration. - Decided in favour of assessee Issues Involved:Cancellation of registration u/s 12AA of the Income Tax Act, 1961 for Assessment Year 2009-10.Analysis:Issue 1: Grounds for Cancellation of RegistrationThe appellant challenged the cancellation of registration u/s 12AA by the CIT(A) for Assessment Year 2009-10, citing the judgment of the ITAT, Amritsar Bench in the case of Jammu. The appellant contended that the CIT's action was illegal, unjustified, and arbitrary. The appellant also argued that the CIT overlooked the detailed written reply and evidence submitted, leading to a lopsided decision.Issue 2: Legal Precedents and Counter-ArgumentsThe registration cancellation was based on the decision of the Amritsar Bench in the case of 'Jammu Development Authority vs. Commissioner of Income Tax, Jammu.' The appellant, however, relied on a subsequent order by the Amritsar Bench in the case of 'Kapurthala Improvement Trust,' which favored the appellant's position. The respondent, represented by the DR, raised objections to the validity of the order relied upon by the appellant, claiming it was a non-speaking order and lacked discussion on the DR's submissions.Issue 3: Scope of Commissioner's PowersIn the 'Kapurthala Improvement Trust' case, the Tribunal highlighted the limited scope of the Commissioner's powers under section 12AA(3) for canceling registration. It emphasized that the cancellation could only occur if the trust's activities were not genuine or not aligned with its objects. The Tribunal found that the CIT's decision to withdraw the registration was beyond the statutory powers conferred, as the trust's activities were genuine and in line with its objects.Issue 4: Decision and RationaleThe Tribunal upheld the appellant's grievance, stating that the CIT's action exceeded the limited scope of powers under section 12AA(3). It further clarified that considerations related to charitable purposes under Section 2(15) did not impact the registration of a trust under section 12A or 12AA. As the Department did not refute the Tribunal's observations, the order cancelling registration was found unjustified, and the appeal filed by the appellant was allowed based on the 'Kapurthala Improvement Trust' case.In conclusion, the Tribunal found in favor of the appellant, canceling the order passed by the CIT(A) and allowing the appeal. The decision was pronounced in the open court on 16th September 2015.