2012 (11) TMI 656 - AT - Income Tax

Tribunal reinstates registration, finding Assessee's activities compliant.

The Tribunal reversed the Commissioner's decision to cancel the registration under section 12AA(3) of the Income Tax Act, holding that the Assessee's ... Cancellation of registration u/s.12AA of the Income Tax Act - Held that:- When under the Act a specific provision for cancellation of registration is prescribed and the cancellation is possible under specific condition then fulfillment of those conditions are necessary for invoking the jurisdiction u/s.12AA(3). - In the present case the reason for cancellation for registration was that the definition of charitable purpose u/s.2(15) has been amended therefore the assessee has not carried out the activity as per the definition of “charitable purposes” – direction not to cancel the registration u/s.12AA(3) of IT Act – In favor of assessee Issues:Cancellation of registration granted under section 12AA of the Income Tax Act, 1961 based on amendments to the definition of charitable purpose under section 2(15) of the Act.Detailed Analysis:Issue 1: Cancellation of Registration under Section 12AA:The appeal arose from the order of the CIT-Gandhinagar under section 12AA(3) of the Income Tax Act, 1961, canceling the registration granted to the Assessee. The main contention was that the Assessee was not a charitable organization due to various income sources and business-like activities. The Commissioner observed that the Assessee derived profits from its operations and did not provide free services to the public, leading to the conclusion that the Assessee did not meet the definition of charitable purpose under section 2(15) of the Act.Issue 2: Impact of Amendments to Section 2(15):The Commissioner highlighted that an amendment to section 2(15) of the Income Tax Act, with retrospective effect from 1/4/2009, impacted the charitable status of the Assessee. The amendment led to a show-cause notice to the Assessee, stating that it no longer qualified as a charitable organization under the revised definition. The Assessee argued that the provisions of section 12AA(3) were procedural and did not apply retroactively, emphasizing that the Commissioner lacked the authority to cancel a registration already granted.Case Law References:The Assessee cited relevant case laws to support its position, including decisions from ITAT Ahmedabad and other jurisdictions. These cases emphasized the importance of compliance with the conditions under section 12AA(3) for canceling registration and the need for fulfilling specific conditions before invoking the jurisdiction under this section.Judgment:After considering the arguments from both sides and analyzing the legal provisions, the Tribunal reversed the Commissioner's decision to cancel the registration under section 12AA(3). The Tribunal held that the Assessee's activities did not violate the conditions laid down in the Act and that the amendments to section 2(15) did not warrant cancellation of registration. The Tribunal relied on precedents to support its decision and allowed the grounds raised by the Assessee, ultimately allowing the appeal.This comprehensive analysis addresses the issues of cancellation of registration under section 12AA and the impact of amendments to the definition of charitable purpose under section 2(15) of the Income Tax Act, providing a detailed overview of the legal judgment.