2012 (6) TMI 448 - AT - Income Tax

Tribunal Upholds DIT Decision on Significant Amendments to Memorandum of Association

The Tribunal upheld the DIT's decision that the amendments to the Memorandum of Association were significant, requiring approval for benefits under ... Amendments to the MOA - non-existence of registration under section 12A - assessee society didn’t intimated to the Income Tax Department amendment brought in its memorandum and rules & regulations for a period of three years – Held that:- The registration granted under section 12A and the benefits flowing therefrom cannot be extended to the amended objects of the society unless the DIT examines the same and comes to a conclusion that the registration under section 12A can be extended to the revised objects, memorandum and by-laws - illogical to hold that once an institution is registered under section 12A, no matter whatever may be the changes in the objects, rules and regulations, for any number of times, the institution should be given the benefit of section 11 to 13, in view of the original registration granted under section 12A - the assessee society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question meet the requirement of law - the letter dated 18th November 2009 is only advisory in nature and is not an exercise of a statutory power withdrawing or cancelling of registration under section 12A – against assessee. Issues Involved:1. Withdrawal of registration under section 12A of the Income Tax Act, 1961.2. Amendments to the Memorandum of Association and their impact on the registration.3. Legal requirement to intimate changes in the Memorandum to the Income Tax Department.4. Authority of the Director of Income Tax (Exemption) to withdraw registration.5. Consequences of non-intimation of amendments to the Income Tax Department.Detailed Analysis:1. Withdrawal of Registration under Section 12A:The primary issue revolves around the withdrawal of the registration granted under section 12A of the Income Tax Act, 1961. The DIT (Exemption), Mumbai, issued a letter on 28th December 2009, stating that the registration granted to the assessee does not survive due to amendments made to the Memorandum of Association. The DIT held that the foundation of the registration was removed by the voluntary act of the assessee in altering its objects.2. Amendments to the Memorandum of Association:The assessee society amended its Memorandum of Association and rules twice, on 1st June 2006 and 21st August 2007, without informing the Income Tax Department for over three years. The DIT emphasized that the registration under section 12A was granted based on the original Memorandum and rules, and the amendments made were significant and material, including the introduction of commercial activities like the Indian Premier League (IPL).3. Legal Requirement to Intimate Changes:The DIT argued that there is a necessity to inform the Department about any amendments to the Memorandum and rules, as these changes could affect the eligibility for the benefits under sections 11 to 13 of the Act. The DIT cited that if the institution does not communicate the changes, the benefit of registration would not be applicable. The Tribunal agreed that while there might not be a statutory requirement to intimate changes, the benefits under section 12A cannot be extended to the amended objects unless vetted by the authorities.4. Authority of the DIT (Exemption) to Withdraw Registration:The assessee argued that the DIT did not have the authority to withdraw the registration under section 12A, as the power to cancel registration was introduced only w.e.f. 1st June 2010. The Tribunal noted that the DIT had not explicitly canceled the registration but had informed the assessee of the consequences of the changes. The Tribunal held that the DIT's letter was advisory and not an exercise of statutory power to withdraw or cancel the registration.5. Consequences of Non-Intimation:The Tribunal concluded that the registration granted under section 12A on 12th February 1996, cannot be extended to the amended objects unless the DIT examines and approves the changes. The Tribunal emphasized that any significant amendments in the Memorandum and rules must be communicated to the authorities to continue claiming benefits under sections 11 to 13 of the Act. The Tribunal dismissed the appeal as not maintainable, reiterating that the DIT's letter was advisory and did not constitute a withdrawal or cancellation of the registration.Conclusion:The Tribunal upheld the DIT's view that the amendments to the Memorandum and rules were substantial and required examination by the authorities. The benefits under section 12A cannot automatically extend to the amended objects. The appeal was dismissed as not maintainable, with the Tribunal clarifying that the DIT's letter was advisory and not a statutory withdrawal of registration.