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 empowering such cancellation was introduced by Finance Act 2010 and was not available on the cancellation date. The ITAT correctly ruled the cancellation order without authority. Following Supreme Court precedents in Industrial Infrastructure Development Corporation and New Noble Educational Society cases, the court determined that factors considered for granting registration under Section 10(23C) must also be examined for cancellation under Section 12AA. The questions were answered in favor of the assessee.

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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 Commissioner

The 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 12A

The 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, 2010

The 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, 2010

The 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.

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