2024 (5) TMI 708 - HC - Income Tax

Commissioner lacked jurisdiction to cancel Section 12AA registration before Finance Act 2010 amendment took effect

The Punjab and Haryana HC held that the Commissioner lacked jurisdiction to cancel registration under Section 12AA(3) on 02.03.2010, as the amendment ... Power of Commissioner to cancel or withdraw registration invoking Section 12AA (3) - HELD THAT:- ITAT has held the order passed by the CIT cancelling the registration on 02.03.2010 to be without jurisdiction and without authority in law. It has stated so as the amendment was made in Section 12AA (3) by the Finance Act of 2010 empowering the Commissioner to cancel the registration granted u/s 12A where it reaches to a conclusion that the activities of the such trust are not genuine and not being carried out in accordance with the objects of the trust or institution. The power was, therefore, not available as on the day when the CIT cancelled the registration i.e. on 02.03.2010. We find that the facts were almost similar to the facts of the present case as in the aforesaid case Industrial Infrastructure Development Corporation (Gwalior) M.P. Limited’s case [2018 (2) TMI 1220 - SUPREME COURT] the Commission had cancelled the registration u/s 12A dated 13.04.1991 by its order dated 29.04.2002 and on 29.04.2002 the Commissioner was not empowered to cancel such registration. In view thereof, the questions answered in favour of the assessee. Power of cancellation of registration granted u/s 12A is required to be examined in law of the recent judgment in New Noble Educational Society [2022 (10) TMI 855 - SUPREME COURT] After having considered the entire law with reference to Section 10 (23C)(vi) of the Act as well as Section 11 (4A) of the Act and the law as examined in Pinegrove [2010 (1) TMI 49 - HIGH COURT OF PUNJAB AND HARYANA AT] and Queen’s Educational Society’s cases [2015 (3) TMI 619 - SUPREME COURT] - We find that the Commissioner was required to examine the aforesaid factors while granting approval of registration u/s 10(23C) - In the opinion of this Court, the same factors would also be required to be considered for the cancellation of registration already granted to the educational institutions, while examining the case u/s 12AA, of course, taking into consideration the conditions provided therein also. Issues Involved:1. Legality of the cancellation of registration u/s 12A by the Commissioner.2. Whether the ITAT was correct in restoring the registration u/s 12A.3. Interpretation of the power to cancel registration u/s 12AA(3) before the amendment by the Finance Act, 2010.4. Applicability of the amendment to Section 12AA(3) made by the Finance Act, 2010.Summary:Issue 1: Legality of the cancellation of registration u/s 12A by the CommissionerThe Revenue appealed against the ITAT's decision which quashed the Commissioner's order canceling the registration of Baba Banda Singh Bahadur Education Trust and M/s Young Scholars Educational Society u/s 12A of the Income Tax Act, 1961. The Commissioner had canceled the registration based on the trust generating huge surpluses, implying profit-making under the guise of education, and not carrying out charitable activities within the meaning of Section 2(15) of the Act. The ITAT held that the Commissioner was not empowered to cancel or withdraw registration under Section 12AA(3) of the Act before the amendment by the Finance Act, 2010, which came into effect on 01.06.2010.Issue 2: Whether the ITAT was correct in restoring the registration u/s 12AThe ITAT restored the registration granted to the assessee under Section 12A, stating that the Commissioner did not have the authority to cancel the registration on the date the cancellation order was passed (02.03.2010). The Tribunal relied on an earlier order by the Pune Bench in Bharati Vidyapeeth vs ITO, which supported the view that the Commissioner's power to cancel registration was only conferred from 01.06.2010.Issue 3: Interpretation of the power to cancel registration u/s 12AA(3) before the amendment by the Finance Act, 2010The court cited the Supreme Court judgment in Industrial Infrastructure Development Corporation (Gwalior) M.P. Limited vs Commissioner of Income-Tax, which clarified that the Commissioner had no express power of cancellation of the registration certificate once granted under Section 12A until 01.10.2004, and such power was only conferred by the Finance (No. 2) Act 2004, effective from 01.10.2004. The court held that the Commissioner's order dated 02.03.2010 was without jurisdiction and authority in law.Issue 4: Applicability of the amendment to Section 12AA(3) made by the Finance Act, 2010The court answered the questions of law in favor of the assessee, holding that the amendment to Section 12AA(3) by the Finance Act, 2010, which empowered the Commissioner to cancel registration granted under Section 12A, was prospective and not retrospective. Therefore, the Commissioner did not have the power to cancel the registration on 02.03.2010.Conclusion:The appeals by the Revenue were dismissed, and the ITAT's order dated 16.07.2010 was upheld, restoring the registration of the Educational Institution/Trust under Section 12A of the Act. The court emphasized that the power to cancel registration was not available to the Commissioner before the amendment by the Finance Act, 2010. All pending applications were disposed of accordingly, with no costs.