2008 (12) TMI 192 - HC - Income Tax

Institution's activities qualify as 'charitable purpose' under section 2(15), so commissioner lacked jurisdiction to rescind 12A registration

OXFORD ACADEMY FOR CAREER DEVELOPMENT Versus CHIEF COMMISSIONER OF INCOME-TAX AND OTHERS

HC held the institution's activities constitute 'charitable purpose' under section 2(15) (education) and thus the Commissioner lacked jurisdiction to ... Cancellation of registration u/s 12A - Charitable Institution - genuineness of the activities - exemption granted under section 80G - expressions 'charity' or 'charitable purposes' - Held that:- The expression 'charitable purpose' is defined in section 2(15) of the Income-tax Act, 1961. It is of inclusive nature as revealed in the language. Earlier the words 'the advancement of any other object of general public utility' in this definition were succeeded by the words 'not involving the carrying on of any activity for profit'. These words were omitted by the Finance Act, 1983, with effect from April 1, 1984. The assessee is preparing students by providing coaching/guidelines to get admissions in professional institutions to pursue their studies. The sense in which the word 'education' has been used in section 2(15) of the Act is the systematic instruction, schooling or training given to the young in preparation for the work of life. Similarly, extending financial assistance/scholarship, etc., to students for their educational purpose would squarely and fairly fall within the connotation of 'education' as per the ratio laid down in the case of CIT v. Saraswath Poor Students Fund [1984 (6) TMI 39 - KARNATAKA HIGH COURT]. Thus, the assessee is engaged in 'educational activities' which falls under charitable purpose. We hold that the order dated March 9, 2004, passed by the Commissioner of Income-tax (annexure No. 15 to the writ petition) as per the then law is without power and jurisdiction and therefore, it is liable to be set quashed. Accordingly, the impugned order dated March 9, 2004, passed by opposite party No. 2 withdrawing/rescinding the order granting registration on April 1, 1999, to the petitioner's society under section 12A of the Act, is quashed. Consequently, the registration granted to the petitioner's society on April 1, 1999, stands restored for the assessment years under consideration. Issues Involved:1. Cancellation of registration under section 12A of the Income-tax Act, 1961.2. Applicability of section 12AA(3) for the assessment years 2000-01 and 2001-02.3. Determination of whether the assessee-society is engaged in charitable activities.4. Jurisdiction and power of the Commissioner to cancel the registration.Issue-wise Detailed Analysis:1. Cancellation of Registration under Section 12A of the Income-tax Act, 1961:The petitioner, a registered society, was granted registration under section 12A on April 1, 1999. A survey conducted on September 20, 2002, led to the cancellation of this registration on March 9, 2004, for the assessment years 2000-01 and 2001-02. The cancellation was based on findings that the society was engaged in profit-making activities, with significant surplus amounts and misuse of funds by the president and his family members.2. Applicability of Section 12AA(3) for the Assessment Years 2000-01 and 2001-02:The petitioner's counsel argued that section 12AA(3), which empowers the Commissioner to cancel registration if the activities are not genuine, came into effect on October 1, 2004, and is not applicable retrospectively. The court agreed, stating that prior to this date, the Commissioner had no inherent power to cancel the registration, and the provision is not clarificatory or explanatory.3. Determination of Whether the Assessee-Society is Engaged in Charitable Activities:The court examined whether the society's activities were charitable. The term 'charitable purpose' includes relief of the poor, education, medical relief, and other public utilities. The petitioner provided educational training to poor students, which falls under charitable purposes. The court emphasized that profit or surplus alone does not disqualify an institution from being charitable, especially if the surplus is used for further charitable purposes.4. Jurisdiction and Power of the Commissioner to Cancel the Registration:The court noted that the Commissioner did not have the power to rescind the registration granted under section 12A before the amendment in section 12AA(3). The order dated March 9, 2004, was deemed without power and jurisdiction, as there was no express provision in section 12A for cancellation of registration at that time. The court also referenced the General Clauses Act, 1897, stating that the power to issue orders does not include the power to rescind quasi-judicial orders like the registration under section 12A.Conclusion:The court quashed the impugned order dated March 9, 2004, and restored the registration granted to the petitioner's society on April 1, 1999, for the assessment years under consideration. The writ petition was allowed, with no order as to costs.