Commissioner lacked power to cancel long-standing s.12A registration before 2010 amendment, trust exemptions remain valid

HC held that the power to cancel registration under s.12AA(3), introduced w.e.f. 1.10.2004, was confined only to registrations granted under s.12AA(1)(b). The authority to cancel registrations granted earlier under s.12A (including s.12A(1)(a)) was conferred on the Commissioner only by the Finance Act, 2010, w.e.f. 1.6.2010. Since the assessee trust's registration under s.12A(a) dated back to 1974, the Commissioner had no jurisdiction to cancel or withdraw it for the period prior to that amendment. Consequently, the HC upheld the validity of the trust's registration and the related exemptions, and dismissed the appeal.

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Issues Involved:
1. Whether the ITAT was right in holding that the registration granted under section 12A on 4.12.1974 to the assessee could not be cancelled/withdrawn by the Authorities under section 12AA(3) of the ActRs.

Detailed Analysis:

Background:
The assessee Trust, created based on the will of late Lala Ram Khairati Ram, was registered under section 12A of the Income-tax Act, 1961 in December 1974. This registration allowed the Trust to claim income tax exemptions for several assessment years. However, for the assessment year 2006-2007, the Additional Director of Income-tax (Exemptions) denied the exemption. Subsequently, the Director of Income-tax (Exemptions) issued a show-cause notice under section 12AA(3) and eventually cancelled the registration with effect from AY 2002-03, reasoning that the Trust's activities were not in accordance with its objects.

Tribunal's Decision:
The Tribunal set aside the Director's order, restored the registration, and allowed the assessee's appeal. The Revenue challenged this decision, leading to the present appeal.

Legal Question:
The primary legal question was whether the registration granted under section 12A could be cancelled/withdrawn under section 12AA(3).

Arguments and Legal Provisions:
- The assessee argued that the cancellation of registration under section 12AA(3) was without jurisdiction since the registration was granted under section 12A(a) in 1974.
- The Revenue contended that the Authority had the power to cancel the registration under section 12AA(3), which was introduced by the Finance (No.2) Act, 2004 with effect from 1st October, 2004.

Court's Analysis:
- Section 12A and 12AA: The court noted that section 12A, as it stood, did not provide for the cancellation of registration once granted. The provision for cancellation was introduced in section 12AA(3) with effect from 1st October, 2004.
- Interpretation of 12AA(3): The power to cancel registration under section 12AA(3) was confined to registrations granted under clause (b) of sub-section (1) of section 12AA. The amendment by the Finance Act, 2010, effective from 1st June, 2010, extended this power to include registrations granted under section 12A.
- Precedents: The court referred to similar cases, including CIT v. Manav Vikas Avam Sewa Sansthan and Bharati Vidyapeeth v. ITO (Pune), which held that the Commissioner had no power to cancel registrations granted under section 12A before the amendment in 2010.

Conclusion:
The court concluded that there was no power vested with the Commissioner to cancel or withdraw the registration granted to the assessee under section 12A(a) in 1974, prior to the amendment effective from 1st June, 2010. Therefore, the Tribunal was correct in holding that the registration could not be cancelled under section 12AA(3).

Judgment:
The court answered the question in the affirmative, in favor of the assessee, and dismissed the Revenue's appeal.

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