2014 (9) TMI 1102 - AT - Income Tax

Appeal granted for assessee-trust, registration cancellation deemed unlawful. Trust activities, law amendments, and precedent considered.

Chembur Gymkhana Versus DIT (E), Parel, Mumbai

The Tribunal allowed the appeal filed by the assessee-trust, ruling in their favor and deeming the cancellation of registration to be against the ... Cancelling/withdrawing the registration granted to the assessee Trust invoking the provisions of Section 12AA(3) - proof of non charitable activities - Held that:- We are of the opinion that the DIT(E) could cancel the registration granted u/s.12A of the Act by invoking the provisions of section 12AA(3) of the Act only if he was satisfied that the activities of the trust were not genuine or the activities of the trust were not being carried out in accordance with the objects of the trust, that section 12AA(3) of the Act did not authorise the DIT-E to cancel registration u/s.12A, if he was of the opinion that the activities of the assessee trust involved the carrying on of any activity in the nature of trade, commerce or business, that DIT-E had failed to bring out any fact that the activities of the assessee trust were not genuine or were not carried out as per the objects of the trust. Receipt of ₹ 50.12 lakhs from four caterers can be subject matter of the assessment order to be passed by the AO. But, same cannot be, in any condition, the basis for invoking provisions of section 12AA(3). Circular issued by the CBDT on 06.04.2011 clearly mentions that amendment would be applicable from the AY.2011-12 and subsequent assessment years. In this case registration was granted in 1981 and was withdrawn for the AY.2009-10 i.e. before the AY. 2011-12. As the cancellation is against the provisions of law, so same cannot be endorsed. Here, we would also like to mention the case of Maharashtra Housing and Area Development Authority (2013 (11) TMI 516 - ITAT MUMBAI), DIT-E, Mumbai had withdrawn the registration granted to the assessee on the similar grounds. While deciding the appeal in favour of the assessee, Tribunal held that even though the objects of the institutions were no longer towards a charitable purpose in view of the amended law, registration u/s.12A could not be reviewed or withdrawn in absence of stipulation in section 12AA(3)regarding continuing satisfaction. - Decided in favour of the assessee-trust. Issues:Cancellation of registration granted to the assessee Trust under Section 12AA(3) of the Income tax Act.Analysis:The Director of Income-tax-Exemption received a proposal for cancellation of registration due to the trust's activities being considered as trade, commerce, or business, leading to the withdrawal of registration. The DIT-E held that the trust's activities were non-genuine and not for charitable purposes, citing specific earnings from catering services and additional facility charges. The DIT-E invoked the proviso to section 2(15) of the Act, indicating a change in the trust's status, leading to the cancellation of registration from AY 2009-10.The Authorized Representative argued that the trust was not involved in commercial activities, emphasizing services provided to members without commercial intent. The AR referenced relevant cases and provisions to support the trust's position. The Departmental Representative supported the DIT-E's order.The Tribunal found that the DIT-E could only cancel registration if the trust's activities were not genuine or not aligned with its objectives. The Tribunal highlighted the changes introduced in the law, empowering authorities to cancel registrations based on trust activities. The Tribunal referenced judicial rulings and the requirement for specific findings to cancel registration.The Tribunal emphasized that the receipt from caterers could not be the basis for invoking Section 12AA(3) and highlighted the applicability of amendments from AY 2011-12. Referring to the Agra Development Authority case, the Tribunal clarified the conditions for cancellation of registration under Section 12AA(3) and the limitations on the Commissioner's power before June 2010.In line with previous decisions and considering the registration date of the trust, the Tribunal ruled in favor of the assessee-trust, allowing the appeal. The Tribunal cited the Maharashtra Housing and Area Development Authority case to support the decision, emphasizing the need for continuing satisfaction for registration withdrawal.In conclusion, the appeal filed by the assessee was allowed, and the registration cancellation was deemed against the provisions of the law. The Tribunal's decision was based on the trust's activities, the effective date of the law amendments, and consistent decisions from coordinating benches.