TaxTMI 
TaxTMI 
2016 (5) TMI 218
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....Educational Society was earlier granted registration u/s. 12AA of the Income Tax Act [Act] vide proceedings of CIT, AP-II dt. 18-12-2000 w.e.f. 01-04-2000. The said registration was cancelled by the CIT(Central), Hyderabad dt. 29-03-2012 for the detailed reasons discussed therein. This cancellation was upheld by the ITAT in ITA No.586/Hyd/2012 dated 31-08-2012. Assessee vide application dt. 21-03-2014 sought fresh registration which Ld. DIT(E) did not admit the application itself, by stating as under: "4. A search and seizure operation u/s 132 of the Act, was carried out in the case of the assessee society on 10-09-2009, during which various incriminating documents were found and the same have been seized from the assessee society's premises, Such seized material, indicated that the assessee society has collected substantial donations/capitation fees in cash, over and above the fee prescribed by the Government, from students seeking admission under management quota to various professional courses and engineering courses in the colleges run by the society, As noted in that order of the CIT (Central), the evidences relating to collection of donations/capitation fee are availabl....
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....(3) of the Act, it is not permissible on the part of the same assessee institution to file application again for registration u/s 12AA of the Act. Therefore, and when in the case of the applicant society, registration granted earlier u/s 12AA of the Act, has been cancelled vide that order of the CIT(Central), Hyderabad, in F.No. CIT(Central)/H/12AA/JBES/2011-12 dated 29-03-2012 and the same has been later confirmed by the Hon'ble ITAT vide their order in ITA No.586/Hyd/2012 dated 31-08-2012, the present application filed by the applicant society in Form No.10A on 21-03-2014, again seeking registration u/s 12A of the Act, is not entertainable. Hence, the same is rejected, without admitting the same". 2.1. Aggrieved, assessee has raised the following grounds: "1. The Learned Director of Income Tax (Exemptions) erred in rejecting the Application Form 10A for Registration u/s. 12AA of the Income Tax Act, 1961, by not admitting the same. 2. The Learned Director of Income Tax (Exemptions) erred in holding that the assessee is not permitted to file application once again seeking Registration u/s. 12A & 12AA, without compiling the requirements of section 12AA(1)(a)(b) of the Incom....
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....& Technology 2. Bhaskar Engg. College 3. Bhaskar Pharmacy College 4. Bhaskar Law College No other activity is carried on by the Society. Therefore, the assessee is carrying on the activities as per the objects. The assessee did not collect any donation/capitation fee after the financial year 2009-10. The returns of income for the assessment years 2011-12 and onwards are filed before the authorities. The authorities did not find any infirmity with the returns of incomes filed or found that there is any unaccounted for receipt. Therefore, there is marked change in collecting fee by the assessee from the period 2010-11 and onwards, as the assessee was not collecting any donations. As the method of collection of fees and as the activities are charitable in nature, the assessee is eligible for exemption u/s 11 and sought registration u/s 12AA. 3.3. Ld. Counsel further submitted that there is no provision either in Sec.12A or in Sec. 12AA prohibiting the assessee from making an application for registration for the second time. The Ld. DIT(E) mentioned that it is one time affair; but the provisions of the Income Tax Act do not mention that it is one time affair. There is also no p....
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....on 12AA". The CBDT issued instructions explaining the provisos of Finance Act (No.2) 2014. The explanatory notes with regard to the provisos to Sec.12AA are extracted hereunder: "8. Applicability of the registration granted to a trust or institution to earlier Years 8.1 The provisions of section 12A of the Income-tax Act, before amendment by the Act, provided that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA of the said Act has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively. 8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organizations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfill other substantive conditions. However, the power of condonation of delay in seeking registration was not available. 8.3 In order to provide relief to such trusts and remove hardship in genuine cases, section 12A of the Income-tax Act has been amended to provide that in ....
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....istration was cancelled. 3.7. Ld. Counsel referred to the decision of the Hon'ble ITAT, Cochin Bench in the case of Kadakkal Education Trust vs. ITO in Appeal Nos. 75, 348 of 2013 and 221 (COCH.) of 2014 dated 21-09-2014. A reading of the facts of the said case would indicate that the assessee filed more than one application before the CIT and the said applications were dealt in by the CIT as mentioned hereunder: "e) The first application was filed on 30.05.2007 before the CIT, Trivandrum. The said application was rejected. f) The assessee filed another application on 30.07.2007 and he same was withdrawn. g) The assessee filed another application on 31.03.2010. This application was rejected on 30.09.2010. h) The assessee filed another application on 01.12.2010. The CIT granted registration u/s 12AA vide order dated 20.01.2011. The assessee may also refer to the decision of the High Court of Gauhati in the case of CIT vs. Shrimanta Sankar Academy reported in 325 ITR 261. In the said case - d) The CIT rejected the claim for registration vide order dated 01.10.2004. This order was passed based on an application filed for registration on 30.03.2004 e) The assessee ....
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....the assessment year 2014-15 and onwards. The DIT(E) did not find any violation. Further, the assessments for the assessment years 2011-12 and 2012-13 are completed accepting the excess of income over expenditure admitted in the Income and Expenditure statement. Therefore, it was submitted that the DIT(E) is not justified in rejecting the application for registration based on the findings during the course of search and seizure operations conducted earlier which are not relevant for the year under consideration. 4. In reply, Ld. CIT-DR made detailed submissions. On the question whether the registration, having been cancelled, can be granted again it was submitted that Sec.12AA provides for a procedure to be followed by the Commissioner for the grant of registration to a trust or an institution. According to this procedure, the Commissioner shall call for documents and information and conduct enquiries to satisfy about the genuineness of the activities of the trust or institution. It is on the basis of this satisfaction that the Commissioner is required to grant registration. The phraseology of Sec.12AA of the Act prescribes the scope and ambit of the enquiry that the Commissioner i....
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....l of the years preceding the grant of registration. Similarly, for cancelling the registration, the Commissioner must be satisfied that the activities of the assessee have not been genuine for any or all of the years. If it were not so, the Act would have provided for an annual registration/cancellation on the basis of the genuineness of the activities for that particular year. Therefore, having held in the order dated 29-03-2012 that the activities of the assessee were not in accordance with its objects during the period relating to A Ys 2006-07 to 2010-11 and having cancelled the assessee's registration on that basis, this conclusion cannot be subsequently ignored while considering a fresh application for registration by the same assessee. 4.3. Clarifying the arguments of Ld. AR that the third proviso to Sec.12A(2) support assessee's claim, it was submitted that Sec.12A(2) provides that for applications for registration made after 01-06-2007, the benefit of Sec.l1 and 12 shall apply prospectively. The first proviso extends this benefit to the preceding assessment years for which assessment proceedings may be pending before the Assessing officer. The second proviso furthe....
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....emy, the assessee had filed an application for registration on 30-05-2007 which was rejected by an order dated 26-09-2007. The assessee filed subsequent applications which were also rejected. The assessee was eventually granted registration on 20-01-2011 on an application dated 01-12-2010. The ITAT noted that the Commissioner rejected the application dated 30-05-2007 on the failure of the assessee to produce certain material which was called for by letter dated 10-07-2007. The ITAT also took note of the fact that the assessee apparently complied with the requirement of the Commissioner and registration was also granted from financial year 2010-11. Under these circumstances, the ITAT set aside the order dated 26-09-2007 for reconsideration and with a direction that another opportunity be given to the assessee to produce all the details that may be required by the Commissioner. As is clear, the facts and issue in appeal in the case of Kadakkal Educational Academy are very different from those of the assessee. The appeal had been filed against the rejection of the first application for registration. There was no cancellation of registration in the cited case, merely a refusal to grant....
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....tion again once it is cancelled. Therefore, it is to be examined in the context of the existing provisions and law on the subject. Section 12AA provides for a procedure to be followed by the Commissioner for the grant of registration to a trust or an institution. According to this procedure, the Commissioner shall call for documents and information and conduct enquiries to satisfy about the genuineness of the activities of the trust or institution. It is on the basis of this satisfaction that the Commissioner is required to grant registration. The phraseology of Section 12AA of the Act prescribes the scope and ambit of the enquiry that the Commissioner is authorized to carry out at the time of grant of registration to a trust or institution, The scope and ambit of the enquiry revolves around the nature of the objects being charitable or religious, and the genuineness of the activities of the trust or institution. On the other hand, cancellation of registration u/s 12AA(3) follows the satisfaction of the Commissioner that the activities of the trust are not genuine or not in accordance with its objects. The satisfaction of the Commissioner regarding the genuineness of the activities....
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....sing the appeal which arose out of this very same order. Taking support from the principles laid down by the Hon'ble High Court in the above said case, we are of the opinion that DIT/CIT cannot take a decision against its own decision cancelling the registration earlier, now registering the trust again so as to confer certain benefits which assessee trust was not found entitled earlier. In view of that, we are of the opinion that re-registration on the same trust deed cannot be considered by the authorities which may amount to review of earlier decision cancelling the registration. 6. Ld. Counsel in his arguments relied on the provisions of Section 12A(2) particularly on the third proviso to state that it confers power to apply for re-registration after cancellation of the same. On examination of provisions we are not in agreement with the inferences drawn by the Ld. Counsel. As rightly submitted by the Ld. DR, first and second proviso to Section 12A(2) provide certain exceptions when application for registration was made. Provisions of Section 12A(2) are as under: "12A. XXXXXXXXXXX [(2) Where an application has been made on or after the 1st day of June, 2007, the provisi....
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....u/s. 12AA. The third proviso must be read in the context in which it appears in the statute. The third proviso only provides exception to the application of first and second proviso in case the registration was not granted or registration already granted was cancelled. In assessee's case, the registration was cancelled. Therefore, there is no application of first and second provisos in case the assessments were pending at the time of cancellation. Subsequently by making an application again without any change in objects assessee, in a way is trying to overcome the provisions of the Act. To examine, we will consider a hypothetical situation that registration was granted to assessee on the revised application made after the same was validly cancelled. In that case, the first and second provisos will apply to assessee for previous years which are pending which may also cover years of cancellation of registration. Thus, in a way, the provisions become otiose, if assessee's request for registration was allowed. This is not the intention of the Legislature. Only when registration was properly granted, the provisos one and two can be applied but not otherwise. Assessee is trying to overco....
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....tered was the society along with its memorandum and bye-laws. If there were significant or material changes in the objects or bye-laws, it could not be said that the registration under section 12A, could be extended to those amended objects and bye-laws. Any other view would defeat the very purpose of registration. The assessee had made various amendments to the memorandum of association as well as in the rules and regulations. The benefits that flowed from registration of an assessee under section 12A, could not be extended to the amended clauses of the memorandum and rules and regulations. The changes in the rules and regulations were also material and had to be intimated to the Revenue Department for examination. The Assessing Officer was not bound by the registration granted under section 12A, to the extent the memorandum and rules and regulations had been amended. The assessee-society should approach the registering authority with the changes and amendments so that the authorities could examine as to whether the amendments in question met the requirement of law". Thus, even when a registration is validly held by a trust or institution, if there are changes to the by-laws or o....
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....ere is no specific right provided in the Act for re-registration of the trust, assessee cannot seek such registration. It may be different scenario/case if assessee has modified its objects, or changed its committee who were governing the trust or handed over the 'property of the trust' to another trust for its proper maintenance, then, fresh registration of the new trust could be examined by the DIT/CIT as per the law. At present there is no provision either in Sec.12A or in Sec. 12AA allowing the assessee registration for the second time. Ld. Counsel relied on certain cases in support of contentions The issue in appeal in those cited cases arose from the refusal of the CIT to condone the delay in filing the application or refusal to revise his own order granting registration. There was no cancellation of registration nor a finding that the activities of the assessee were not genuine or not in accordance with the objects. Therefore, these decisions cannot be considered as precedent in the present appeal. Ld CIT-DR rightly distinguished the cases with which we agree. 9. In the given facts, we are of the opinion that assessee cannot apply for re-registration, once the registration ....
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....ing but a price for selling education, the CIT(Central), in that order, noted that when the assessee society admits students under management quota in consideration of an amount, which is over and above the prescribed fee by the Government, it clearly establishes the intention of the assessee society to earn profit, It was further noted in that order, that the society has directly or indirectly collected substantial amounts which have not been recorded in the books of account of the assessee, It was further noted that the money has been utilized by the persons having interest in the society and therefore, it is a clear case of misuse of funds of the institution. Lastly, stating that the assessee society has violated the provisions of Sec, 11 and 13 of the Act, and has not conducted itself, in accordance with the objects of the society, for which it was established, the CIT (Central) vide that order dated 29-03-2012 passed u/s 12AA(3) of the Act, has cancelled the registration granted earlier to the assessee u/s 12AA of the Act. It may be further mentioned here that, the said order of the CIT(Central) has been confirmed by the Hon'ble Income Tax Appellate Tribunal ('ITAT' in....