2015 (5) TMI 859 - AT - Income Tax

Tribunal Upholds Proviso to Section 2(15)

The Tribunal acknowledged a procedural error in not addressing the withdrawal of registration under section 12A first and referred the matter to a larger ... Withdrawal of registration u/s. 12A - legal consequence/s of the applicability of proviso to section 2(15) on the registration of an entity as a charitable institution - Held that:- The language of proviso to section 2(15) extends to any activity that may be in the nature of trade, commerce or business - all terms of wide amplitude, or any activity of rendering any services in relation to the same. We, accordingly, have no hesitation in holding that the assessee’s activities are covered by the proviso to section 2(15); the gross receipt for the current year exceeding the minimum threshold limit which exceeds the application of the first proviso. How to proceed in the matter to decide the present appeal, i.e., given our admission of a mistake apparent from record - the appropriate course under the circumstances, even as indicated during the hearing in the instant proceedings - Held that:- As to no objection by either party, is that the matter be referred to the hon’ble President of the Tribunal for constituting a larger bench of the tribunal to decide the highly contentious issue raised by the assessee’s Ground No.1, decided differently by different coordinate benches of this tribunal, for uniform application across the tribunal, of course after hearing the parties. The larger bench of the tribunal, in the case the reference made hereby is accepted by the hon’ble President, shall, apart from the other arguments and case law as may be canvassed before it by the parties, consider the same. We support our decision for the reference aforesaid, apart from the clear provision of section 255(4) of the Act, on the settled law on precedence as explained by several celebrated decisions in the higher courts of law, as for example in the case of CIT v. B.R. Constructions [1992 (6) TMI 13 - ANDHRA PRADESH High Court]. The matter is accordingly referred to the Hon’ble President for constituting a larger bench to decide the assessee’s Ground I. We decide accordingly. Issues Involved:1. Withdrawal of registration under section 12A.2. Applicability of proviso to section 2(15) of the Income Tax Act.3. Jurisdiction of the Tribunal in directing the Director of Income Tax (Exemptions) [DIT(E)].4. Retrospective effect of the withdrawal of registration.Detailed Analysis:Issue 1: Withdrawal of Registration under Section 12AThe primary contention of the assessee was that the Tribunal erred in not deciding Ground 1 before proceeding to Ground 2. Ground 1 challenged the withdrawal of registration under section 12A, arguing that the DIT(E) could only withdraw registration if the conditions stipulated under section 12AA(3) were violated. The Tribunal, however, did not address this ground and instead focused on Ground 2, which disputed the applicability of the proviso to section 2(15) on factual grounds. The Tribunal's failure to decide Ground 1 first was seen as a procedural error since a decision in favor of the assessee on Ground 1 would render Ground 2 redundant.Issue 2: Applicability of Proviso to Section 2(15)The Tribunal examined whether the assessee's activities fell under the proviso to section 2(15), which excludes entities engaged in trade, commerce, or business from being considered charitable if their activities involve any trade, commerce, or business for a fee. The assessee argued that its activities were in fulfillment of its statutory obligations under the Mumbai Metropolitan Region Development Authority Act, 1974, and should not be considered as business activities. However, the Tribunal held that the assessee's activities were indeed economic activities carried out in an organized manner and generated revenue, thus falling within the scope of the proviso to section 2(15). Consequently, the Tribunal decided against the assessee on Ground 2.Issue 3: Jurisdiction of the TribunalThe assessee contended that the Tribunal exceeded its jurisdiction by directing the DIT(E) to examine the issue of withdrawal of registration with reference to the conditions of section 12AA(3). The Tribunal's power under section 254(1) is broad but not absolute and is confined to the grounds raised in the appeal. The Tribunal's action was challenged as being outside the scope of the appeal and thus without jurisdiction. The Tribunal, however, cited various precedents to assert its power to frame issues and consider aspects of the matter that were part of the tax proceedings. Despite this, the Tribunal acknowledged that the issue of withdrawal under section 12AA(3), independent of section 2(15), was not part of the appeal and thus retracted its directions to the DIT(E).Issue 4: Retrospective Effect of Withdrawal of RegistrationThe assessee's Ground III challenged the retrospective application of the withdrawal of registration from A.Y. 2009-10. The Tribunal had previously addressed this issue, referencing a binding decision by the jurisdictional High Court, and found no merit in the assessee's contention. The Tribunal upheld the retrospective withdrawal of registration, consistent with its earlier decision.Conclusion:The Tribunal allowed the assessee's miscellaneous application, acknowledging the procedural error in not addressing Ground 1 first. It decided to refer the matter to the Hon'ble President for constituting a larger bench to resolve the contentious issue raised in Ground 1. The Tribunal also upheld its decision on the applicability of the proviso to section 2(15) and the retrospective withdrawal of registration. The assessee's appeal was disposed of on these terms.