Tribunal Rules Amended Tax Provision Prospective but Retrospective; Trust's Registration Cancellation Overturned.

The Tribunal held that the amended 15th proviso to section 10(23C) of the Income-tax Act, 1961, is prospective in application but retrospective in effect, allowing the Pr. CIT to proceed under it for cancellation proceedings initiated from 01-04-2022. However, the Tribunal found no evidence of specified violations by the trust, such as misapplication of income or non-genuine activities. The trustee's statement lacked evidentiary value. Consequently, the Tribunal overturned the cancellation of the trust's registration under section 10(23C)(vi), allowing the appeals and setting aside the cancellation order. The order was pronounced on 4th August 2023.

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Issues Involved:
1. Applicability of the amended 15th proviso to section 10(23C) of the Income-tax Act, 1961.
2. Validity of the cancellation of registration under section 10(23C)(vi) based on survey findings and the statement of the trustee.

Summary:

Issue 1: Applicability of the Amended 15th Proviso to Section 10(23C)
The Tribunal examined whether the amended 15th proviso to section 10(23C), effective from 01-04-2022, could be applied retrospectively to assessment years 2009-10 to 2019-20. The Tribunal held that the provision is prospective in application but retrospective in effect, governing cancellation proceedings initiated from the cut-off date of 01-04-2022. Therefore, the Principal Commissioner of Income Tax (Pr. CIT) was justified in proceeding under the amended proviso.

Issue 2: Validity of Cancellation of Registration
The cancellation of the registration was based on three specified violations under Explanation 2 to section 10(23C):
1. Income applied for objects other than for which the trust was established.
2. Income from profits and gains of business not incidental to the attainment of its objectives.
3. Activities not genuine or not in accordance with the conditions of approval.

Findings on Specified Violations:
- Income Application: The Tribunal found no evidence that the trust applied income for objects other than educational purposes. The deficient vouchers pertained to salaries, perquisites, and bonuses, which were not disproved by the survey team.
- Income from Business: There was no indication that the trust earned income from profits and gains of business unrelated to its objectives.
- Genuineness of Activities: The trust's activities of imparting education were genuine and in accordance with the conditions of approval.

Statement of the Trustee:
The Tribunal noted that the trustee's statement, recorded under section 131 during the survey, lacked evidentiary value as it was not under oath. The statement alone, without corroborative evidence of undisclosed income, could not justify the cancellation of registration.

Conclusion:
The Tribunal concluded that the trust did not commit any specified violation warranting cancellation of registration under section 10(23C)(vi). The cancellation order was overturned, and the appeals were allowed.

Order Pronouncement:
The order was pronounced in the Open Court on 4th August 2023, allowing both appeals and setting aside the cancellation of registration.

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