TaxTMI 
TaxTMI 
2016 (6) TMI 489
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....acts and in the circumstance of the case and in law, the Tribunal was right in law in holding that the assessee is entitled for continued registration u/s. 12A of the I. T. Act, 1961 without appreciating the fact that in view of the Amendment to Section 2(15), the activities carried by the assessee were commercial in nature and therefore, cannot be considered as for a "charitable purpose" under Section 2(15) of Income Tax Act, 1961? (b) Whether on the facts and in the circumstance of the case and in law, the Tribunal was right in law in holding that the assessee is entitled for continued registration u/s. 12A of the IT Act, 1961 brushing aside the nature of activities of the assessee viz. Sale of liquor, canteen compensation, guest....
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....ut set, the learned Counsel for the Respondent Assessee submitted that in view of the Central Board of Direct Taxes Circular having Circular No. 21 of 2016 dated 27th May, 2016, the Revenue cannot press this appeal. This submission is without prejudice to its submission that it is not carrying on any trade, commerce or business. For the present, it is submitted that even if it is assumed to be carrying on trade, commerce or business, the appeal cannot be pressed by the Revenue in view of the binding Circular No.21 of 2016. 7 It would be appropriate to reproduce the above Circular No.21 of 2016 in its entirety as under: "(1) Sections 11 and 12 of the Income Tax Act, 1961 ('Act') exempt income of charitable trusts or insti....
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....position remains similar when the first and second provisos of section 2(15) get substituted by the new proviso introduced w.e.f. 01042016 vide Finance Act, 2015, changing the cutoff benchmark as 20% of the total receipts instead of the fixed limit of Rs. 25,00,000/as it existed earlier. (3) Temporary excess of receipts beyond the specified cutoff in one year may not necessarily be the outcome of alteration in the very nature of the activities of the trust or institution. Hence, section 13 of the Act has been amended vide Finance Act, 2012 by inserting a new subsection (8) therein to provide that such organization would not get benefit of tax exemption in the particular year in which its receipts from commercial activities....
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.... of a charitable institution granted u/s. 12AA just because the proviso to section 2(15) comes into play. The process for cancellation of registration is to be initiated strictly in accordance with section 12AA(3) and 12AA(4) after carefully examining the applicability of these provisions." (emphasis supplied) It is evident from the aforesaid Circular No.21 of 2016 that the amendment to the definition of charitable purpose by adding of the proviso, would not ipso facto give jurisdiction to the Commissioner of Income Tax to cancel the Registration under Section 12AA (3) of the Act. 8 The jurisdiction to cancel the Registration would only arise if there is any change in the nature of activities of the institution. The above Cir....
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....) of the Act. 10 We find that the Circular No.21 of 2016 when read as a whole, specifically lists out in paragraphs 4 and 5 reproduced herein above that the Registration granted under Section 12AA could not be cancelled, only when the receipts on account of business exceeded the cutoff, specified in the proviso to section 2(15) of the Act. The jurisdiction to cancel the Registration only arises if there is change in the nature of activities of the institution or the activities of the institution, are not genuine. The aforesaid Circular by placing reliance upon 13(8) of the Act inter alia provides that the Registration granted to the Trust would continue even when the receipts on account of business is in excess of Rs. 25 lakhs. In such c....
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....by proviso to Section 2(15) of the Act, is in fact, negatived by Circular No.21 of 2016. In fact, the above Circular No.21 of 2016 clearly provides that mere receipts on account of business being in excess of the limits in the proviso would not result in cancellation of Registration granted under Section 12AA of the Act unless there is a change in nature of activities of the institution. Admittedly, there is no change in nature of activities of the institution during the subject Assessment Year. The further submission on behalf of the Revenue that looking at the quantum of receipts on account of commercial activities, it is unlikely/ improbable that in the subsequent Assessment Years, the receipts would fall below Rs. 25 lakhs and therefore....