2019 (3) TMI 2027 - HC - Income Tax

Interpretation of Income Tax Act Section 12AA on trust registration cancellation

The court analyzed the interpretation of Section 12AA of the Income Tax Act, focusing on the cancellation of trust registration for non-genuine ... Prosecution of appeal in High Court - scope of Section 12AA after its amendment with effect from 1st June, 2010 - HELD THAT:- This sub-section has retrospective effect and covers activities of the trust right from the time of insertion of 12A of the said Act till the date of the said amendments and thereafter. Circular No.1 of 2011 of the Central Board of Direct Taxes in paragraph 7.4 thereof states with regard to the said amendment as follows this amendment has been made applicable with effect from 1st June, 2010 and shall accordingly apply for assessment year 2011-12 and subsequent assessment years. The subject assessment year is 2010-11. Revenue is bound by its circular, in our opinion, and cannot prosecute the appeal for this period. This appeal under Section 260A of the Income Tax Act, 1961 and the connected application are dismissed. Issues:- Interpretation of Section 12AA of the Income Tax Act, 1961- Retrospective effect of the amendment to Section 12AA- Applicability of circular No.1 of 2011 by the Central Board of Direct Taxes- Prosecution of appeal by the Revenue for the assessment year 2010-11Interpretation of Section 12AA:The judgment dealt with the interpretation of Section 12AA of the Income Tax Act, 1961, specifically focusing on the cancellation of registration of a trust or institution if its activities are not genuine or not in accordance with its objects. The court analyzed the language of the section and discussed the retrospective effect of the provision, covering activities of the trust from the time of insertion of Section 12A till the date of the amendments and thereafter. The argument put forth by Mr. Dutta, the learned Advocate for the Revenue, regarding the retrospective effect of the sub-section was acknowledged by the court.Retrospective Effect of Amendment:The court examined the retrospective effect of the amendment to Section 12AA and considered the implications of the circular issued by the Central Board of Direct Taxes. The circular, specifically paragraph 7.4, clarified that the amendment was made applicable from 1st June 2010, affecting assessment year 2011-12 and subsequent years. Given that the subject assessment year in question was 2010-11, the court emphasized that the Revenue is bound by the circular and cannot prosecute the appeal for this period. This analysis highlights the importance of adhering to circulars issued by relevant authorities in interpreting tax laws.Applicability of Circular No.1 of 2011:The judgment delved into the applicability of circular No.1 of 2011 issued by the Central Board of Direct Taxes in relation to the amendment to Section 12AA. The court emphasized the significance of the circular, particularly paragraph 7.4, which clarified the effective date of the amendment and its applicability to certain assessment years. By referencing the circular, the court established a framework for determining the timeline and scope of the legislative changes, providing clarity on the application of the law in the context of the case at hand.Prosecution of Appeal for Assessment Year 2010-11:In concluding the judgment, the court dismissed the appeal under Section 260A of the Income Tax Act, 1961 for the assessment year 2010-11. The decision was based on the court's interpretation of the retrospective effect of the amendment to Section 12AA, the applicability of the circular issued by the Central Board of Direct Taxes, and the specific circumstances surrounding the case. By dismissing the appeal, the court upheld the principles of legal interpretation and application of tax laws, ensuring compliance with relevant circulars and statutory provisions.