Tribunal rules in favor of assessee, directs continuation of registration from AY 1998-99 to 2008-09.

The Tribunal held that the CIT(E)'s decision to refuse registration from AY 2009-10 onwards was unsustainable. It directed the continuation of registration granted from AY 1998-99 to 2008-09, emphasizing that cancellation of registration must follow the prescribed procedure. The appeal of the assessee was allowed.

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Issues Involved:
1. Arbitrary and erroneous order by CIT(E).
2. Refusal of registration from AY 2009-10 onwards.
3. Applicability of proviso to section 2(15) of the Income Tax Act, 1961.
4. Ignorance of Circular No. 21/2016 issued by CBDT.
5. Ignorance of findings of Hon'ble ITAT, Cuttack.
6. Ignorance of previous exemption granted under section 12A of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Arbitrary and Erroneous Order by CIT(E):
The appellant contended that the CIT(E)'s order was arbitrary, erroneous, and lacked proper reasoning. The Tribunal found that the CIT(E) had indeed accepted the charitable nature of the Association's objectives and activities, yet refused registration from AY 2009-10 onwards based on the proviso to section 2(15) of the Income Tax Act, 1961. This was deemed inconsistent and unjustified.

2. Refusal of Registration from AY 2009-10 Onwards:
The CIT(E) had granted registration to the assessee up to AY 2008-09 but refused to continue it from AY 2009-10 onwards, citing the amended proviso to section 2(15) of the Income Tax Act, 1961. The Tribunal observed that the CIT(E) had not provided a proper opportunity for the assessee to be heard regarding the discontinuation of registration, which was against the mandate of sub-section (3) of Section 12AA of the Act.

3. Applicability of Proviso to Section 2(15) of the Income Tax Act, 1961:
The CIT(E) applied the amended proviso to section 2(15), which states that if the aggregate value of receipts from commercial activities exceeds Rs. 25 lakhs, the activities would not be considered charitable. The Tribunal, however, noted that the income from commercial lease rent was applied for charitable purposes and did not alter the charitable nature of the institution. The Tribunal emphasized that the registration under section 12A should be continued until it is canceled following the procedure in sub-section (3) and (4) of Section 12AA.

4. Ignorance of Circular No. 21/2016 Issued by CBDT:
The CIT(E) ignored Circular No. 21/2016, which clarifies that registration already granted under section 12AA should not be canceled merely because the cut-off specified in the proviso to section 2(15) is exceeded, provided there is no change in the nature of activities. The Tribunal upheld this circular and directed the continuation of registration.

5. Ignorance of Findings of Hon'ble ITAT, Cuttack:
The CIT(E) disregarded the ITAT Cuttack's findings, which stated that the proviso to section 2(15) would not apply retrospectively. The Tribunal reiterated that the proviso, inserted w.e.f. 1.4.2009, should not affect the registration granted for activities carried out before this date.

6. Ignorance of Previous Exemption Granted Under Section 12A of the Income Tax Act, 1961:
The CIT(E) ignored the previous exemption granted to the assessee under section 12A, which had not been canceled. The Tribunal noted that the registration should continue based on the charitable nature of the activities, as previously recognized.

Conclusion:
The Tribunal concluded that the CIT(E)'s decision to refuse registration from AY 2009-10 onwards was not sustainable. The Tribunal directed that the registration granted from AY 1998-99 to 2008-09 should continue from AY 2009-10 onwards, emphasizing that any cancellation of registration must follow the procedure outlined in sub-section (3) and (4) of Section 12AA of the Act. The appeal of the assessee was allowed.

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