TaxTMI 
TaxTMI 
2013 (8) TMI 549
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....gistration u/s. 12AA(3) was brought on the statute w.e.f. 01.06.2010 prospectively. The cancellation made w.e.f. A.Y. 2009-10 is invalid and illegal in the eyes of law. 3. Because the Ld. CIT grossly erred, both in law and on facts while cancelling registration u/s 12AA(3). The Ld. CIT failed to bring an iota of fact leading to establish that the objects of the appellant existing prior to the amendment in sec.2(15) of the I.T. Act have changed that required review of its own order granting registration u/s. 12A. The appellant, not being involved in carrying on any activity in the nature of trade, commerce, business or any activity rendering any service in relation to any trade, commerce or business for a cess, fee or any other consideration, the amendment in section 2(15) has no legal application. 4. Because the impugned order u/s. 12AA(3) passed by the Ld. CIT in the case of appellant is patently invalid, contrary to provision of law, contrary to all canons of natural justice and is void ab-initio. 5. Because the Ld. CIT grossly erred in law and on facts in holding that receipts from various sources referred to in para 5.2 of his order are from activitie....
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....h notice under section 12AA(3). Till 31.03.2003 the assessee had claimed exemption under section 10(20A) of the Act. The CIT noted that the assessee could not claim exemption under section 10(20A) of the Act as the section was deleted by Finance Act 2002. The assessee had been granted registration under section 12A of the Act w.e.f. 01.04.2003 by the then CIT, Agra vide order dated 24.09.2003. The CIT examined objects of the assessee in the light of amended section 2(15) of the Act. The CIT held as under :- (page no.4) "On perusal of the object of the assessee society, it is noticed that the object of the Authority clearly falls in the fourth limb i.e. advancement of any other object of general public utility as I is neither relief to poor, nor education nor health." 5. The second aspect of the matter which has been examined by the CIT is whether the assessee carries on any activity in the nature of trade commerce of business. The CIT held as under :- (page nos.4, 5 & 6) "5.2 The various sources of income of the assessee as given in its Income and Expenditure statement are as under :- A. The assessee derives income from acquiring land from the farmers,....
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....er who has been authorized for assembly and development of land in the development area. The assessee earns profit from such activity. J. Section 15 of UPUPD Act, 1973 provides for imposition of stacking fees from the general public who use the Authority's land for keeping building material. The assessee earns profit from such activity. K. The assessee invests the surplus money available with it in FDRs and other deposits like any regular businessman and earns income of Rs. 25,16,16,113/- (schedule 14 of Annual Statement). From the above it is clear that all the above mentioned activities of the assessee are in the nature of commerce or business or they are rendering any service for trade or commerce and attract proviso to section 2(15) as such. 6. The assessee is carrying on the above activities for a "cess" or "fee" or any other consideration. It is clear from the discussion above and the annual statement of the assessee, where it has earned an income of Rs. 42.24 crores. A brief comment on "cess" is also in order. Cess is defined as a tax or a levy. So, the word "cess" used in proviso to section 2(15) brings into ambit of taxation those bo....
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....its reply dated 23.03.2012, are of no help to it because after amendment to section 2(15) brought by Finance Act, 2008, effective from A.Y. 2009-10, the legal position has changed. 10. From the facts discussed above, I am fully convinced that the activities under consideration of the assessee are covered by the proviso to section 2(15) inserted by Finance Act, 2008, and are not for "charitable purpose." 7. During the hearing before us the Revenue requested for admission of additional evidence in the form of audit report under section 142(A) of the Act dated 18.06.2012 for A.Y. 2009-10. The application under rule 29 filed by the Revenue has been accepted by us as per reasons given in order sheet entry dated 12.09.2012. After hearing the case, the Revenue filed rejoinder dated 29.12.2012, therefore, the appeal was re-fixed for hearing to provide opportunity of hearing to both the sides. 8. The ld. Authorised Representative submitted that objects of assessee were same when registration under section 12A was granted to the assessee on 24.09.2003 w.e.f. 01.04.2003 at that time section 12AA(3) was not in statue. The ld. Authorised Representative submitted that therefore au....
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....004] 88 ITD 125 (Delhi). (7) Bharti Vidyapeeth v. ITO [2008] 14 DTR 454 (Pune) (ITAT). (8) Guru Gobind Singh Educational Society v. CIT [2009] 118 ITD 207 (ASR) (9) Bombay Presidency Golf Club Ltd. vs. DIT (Exemptions) (ITANo.319/Mumbai/2012). (10) Ajit Education Trust v. CIT [2010] 42 SOT 415 (Ahd.) (11) Gujarat Cricket Association v. DIT (Exemption) [ITA No.93/Ahd./2011), dated 31-1-2012]. (12) Rajasthan Housing Board, ITAT "A" Bench, Jaipur(ITANo.100/JP/2012). (13) CIT vs. Sarvodaya Ilakkiya Pannai (Tax Case Appeal No.641 of 2011(High Court, Madras). (14) Jhansi Development Authority v. CIT [ITA No.459/Agra/2007]. (15) Jodhpur Development Authority vs. CIT, 68 DTR (Jd) (Trib.) 84 dt.19.01.2012. (16) Gujarat Industrial Development Corpn. Udyog Bhavan v. CIT [ITA No.175/Ahd/2011 dated 13-1-2012]. (17) Shri N.H. Kapadia vs. DIT (Exemption) (ITA No.1420/Ahd/2011,ITAT Ahmedabad Bench) dated 03.02.2012. (18) Ahmedabad Development Authority v. DIT (Exemption) [ITA No.754/Ahd/2010, dated 21.05.2010]. (19) DIT (Exemption) vs. Mool Chand Khairati Ram Trust, 243 CTR (Del)245, (High Court of Delhi). (20) Hans Raj Smarak Society v. DIT(E) [ITA 104 (D....
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.... - Hon'ble ITAT Amritsar Bench judgment in the case of Jammu Development Authority v. CIT. - Hon'ble ITAT Amritsar Bench judgment in the case of Jalandhar Development Authority v. CIT. - Hon'ble ITAT Indore Bench judgment in the case of Indore Development Authority v. CIT. - Hon'ble ITAT Delhi Bench judgment in the case of Moradabad Development Authority v. ITO. - ITO v. Moradabad Development Authority, 133 ITD 485 (Del). - Malik Hasmullah Islamic Educational v. CIT (ITA No.735/Lkw/2011 dated 03.07.2012) Another question to be considered is regarding the authority of the Commissioner of Income-tax as provided u/s.12AA(3). The order passed by the Id. CIT-I, Agra w.e.f. A.Y. 2009-10 is to be considered in the light of arguments below: 1. Finance Act, 2010 amended section 12AA(3) and explicitly empowered the CIT to withdraw exemption in the case of registration u/s.12A as well w.e.f. 01.06.2010. In the case of DIT (E) v. Mool Chand Khairati Ram Trust, 243 CTR (Del) 245, the question before the Hon'ble High Court was whether the DIT (E) was justified in cancelling the registration under section ....
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....ether the Id. CIT-I, Agra is correct in withdrawing exemption w.e.f. AY 2009-10 and is the order retrospective in character? The amendment by Finance Act, 2008 amended section 2(15) in such a way that the assessee did not qualify as charitable organization w.e.f. AY 2009-10. So, the assessee lost the right of exemption w.e.f. 01.04.2009 itself. What the order of CIT-I, Agra has done is manifest this situation and make it explicit. This order has not taken away any right which the assessee possessed but has only stated and implemented what the legislature has already said through Finance Act 2008. So, order of CIT-I, Agra in not retrospective in character. This view also finds support from the judgement of Mumbai High Court in the case of Sinhagad Technical Education Society. 3. Third question to be considered is that section 12AA (3) only empowers the CIT to withdraw exemption when the activities of the trust are not genuine or that they are not carried on as per the objects of the trust. Now, the question begets a further question: What is 'genuine' as per section 12A/12AA/11/12/13? All these sections deal with exemption for 'charitable purpose' only. So, ....
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....or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Therefore, in view of section 13(8), as soon as the proviso to section 2(15) becomes applicable, as in the case of Agra Development Authority, which falls under the fourth limb of the definition of charitable purpose i.e. advancement of any other object of general public utility, and it involves the carrying on of activities and rendering services in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, as discussed in detail in the order of the Ld. CIT-I, Agra, cancelling the registration granted under section 12A of the Income Ta....
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.... (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. [(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.] (2) Every order granting or re....
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....me-tax Act, exemption from income-tax in respect of the income of a charitable or religious trust or institution is available only if the conditions specified in that section are satisfied. One of these conditions if that the person in receipt of the income shall make an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Chief Commissioner or Commissioner of Income-tax within the specified time. However, there was no provision in the Income-tax for processing of such an application and granting or refusal of registration to the concerned trust or institution. Finance (No. 2), Act, 1996 19.2 Hence the Act now provides for a procedure to be followed for grant of registration to a trust or institution. According to this procedure, the Chief Commissioner or Commissioner shall call for documents and information and conduct enquiries to satisfy about the genuineness of the trust or institution. After he is satisfied about the charitable or religious nature of the objects and genuineness of the activities of the trust or institution, he will pass an order granting registration. If he is not so satisfied, he....
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....herein it was held as under :-(Page No. 390) "Regarding cancellation of registration which was granted on April 1, 1999, under section 12A of the Act, it is true that there was no express pro vision in section 12A of the Act for cancellation of the registration. The applicability of section 21 of the General Clauses Act, 1897, was discussed by the Uttaranchal High Court in the case of Welham Boy's School Society [2006] 285 ITR 74 (Uttaranchal), where it was observed that any order passed by the Commissioner of Income-tax under section 12A is a quasi-judicial order, which does not fall in the category of "orders" mentioned in section 21 of the General Clauses Act, 1897, by relying the ratio laid down in the case of Ghaurul Hasan v. State of Rajasthan, AIR 1967 SC 107. The High Court observed that by virtue of section 21 of the General Clauses Act, the Commissioner of Income-tax had no power to rescind the order passed earlier by the Commissioner granting registration to the petitioner's society. It may be mentioned that section 12AA(3) was incorporated with effect from October 1, 2004, to empower the Commissioner to cancel the registration granted to a trust or inst....
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.... of sub-section (3) with effect from 01.10-2004. There is no dispute with regard to this fact that the provision regarding cancellation of registration came to be introduced for the first time by virtue of sub-section (3) in section 12AA with effect from 1-10-2004. This sub-section (3) provides that when a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. From the conjoint reading of sub-section (1) clause (b) and sub-section (3) of section 12AA, it would be seen that the cancellation of the registration was provided where the registration was granted under clause (b) of sub-section (1). Further cancellation under sub-section (3) was also provided where the registration was obtained at any time under section 12A [may be under clause (a) or clause (aa) of sub-section (1) of section 12A]. But this power of cancellation of registration ob....
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.... Act 2010 w.e.f. 01.06.2010. The C.B.D.T. Circular No.1/2011 dated 06.04.2011 explains that this amendment will apply for A.Y. 2011-12 and subsequent years. Whereas, in the case under consideration, the CIT cancelled registration under section 12A of the Act for A.Y. 2009-10 which is not in accordance with the law. This view is fortified by the judgment of Hon'ble Delhi High Court in the case of DIT(E) v. Mool Chand Khairati Ram Trust (supra) and order of I.T.A.T. in the case of N.H. Kapadia Education Trust (supra) wherein the I.T.A.T., Ahmedabad has followed the judgment of Hon'ble Delhi High Court. (ii) Even otherwise also, as we notice that registration under section 12A/12AA can be cancelled in the circumstances provided in section 12AA(3) of the Act of which detail has been discussed above in Para no 19 of this order. If we apply the said condition stipulated in section 12AA(3), we find that there is no finding of the CIT that activities of the assessee, Agra Development Authority are non-genuine or not being carried out in accordance with the object of the assessee, Agra Development Authority. Even for the sake of argument if we accept the view of CIT, there ....
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....nt does not take away any vested aright nor does it create new obligation in respect of past actions. The Court did not express their opinion on merit of the case. Thus, we find that the CIT wrongly applied the said judgement to the facts of the case under consideration. 21.1 The CIT and ld. Departmental Representative relied upon certain orders of I.T.A.T. where in the issue was different. The issue in those cases were pertaining to grant fresh registration under section 12AA of the Act and not cancellation of registration under section 12A of the Act under section 12AA (3) of the Act. Some of the decisions of I.T.A.T. are contrary to the judgement of Hon'ble Delhi High Court in the case of Mool Chand Khairati Ram Trust (supra). Therefore, those decisions are distinguishable on facts and did not help to revenue. 21.2 The ld. Departmental Representative relied upon the Orders of I.T.A.T. in the cases of Jammu Development Authority v. CIT(ITAT, Amritsar Bench), Jalandhar Development Authority v. CIT (ITAT, Amritsar Bench), Indore Development Authority v. CIT (ITAT, Indore Bench) & Moradabad Development Authority v. ITO (ITAT, Delhi Bench) after amendment in section 2(15), ....
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....her appellate authorities should be religiously followed by the subordinate authorities otherwise; entire judicial system would lead to chaos. In this regard, we would like to refer following observations of Hon'ble Delhi High Court in the case of Nokai Corp. v. DIT (IT) [2007] 162 Taxman 369 (Delhi). "12. The Supreme Court stated, many years ago, in Union of India v. Kamlakshi Finance Corpn. Ltd. [1991] (55) ELT 433 as follows : "...The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities...." (p. 436) It was further observed by the Supreme Court that if the order of an appellate authority is the subject-matter of further appeal, that cannot furnish any ground for not following it, unless its operation has been suspended by a competent Court. The Supreme Court went on to say that if this healthy rule is not followed; the result will not only be undue harassment to assessees but chaos in the administration of tax laws. 13. In CIT v. Ralson Industries Ltd. [2007] 2 SCC 326, the Supreme Court held :- "9. When an order is passed by a ....