TaxTMI 
TaxTMI 
2017 (9) TMI 721
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....ental Representative represented on behalf of Revenue. 2. All these appeals are heard together and are being disposed off by way of common order for the sake of convenience. Except figures all the grounds of appeals are common, therefore, we are taking the facts of the case for A.Y 2006-07 in ITA No. 285/Kol/2016 as a lead case for the sake of convenience and to pass a consolidated order for all the appeals. 3. Assessee has raised following grounds of appeals :- "1. For that the CIT erred in cancelling the assessee's registration under Section 12A and that too with retrospective effect from April 1, 2005. 2. For that the CIT erred in holding that - i) no charitable activity / real charitable activity was done; ii) activities of the assessee were not genuine; iii) assessee had not performed as per objectives for which it was created; iv) assessee was rotating donations from group trusts to show application of income, and his purported findings in that behalf are arbitrary, unreasonable and perverse. 3. For that further and in any event and without prejudice to the aforesaid, the CIT had no power and/or jurisdiction to cancel the registration with retrospective effect from A....
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....atter was travelled to the Hon'ble ITAT Kolkata Benches which also confirmed the order of Authorities Below in ITA No. 385/Kol/2014 vide order dated 16.9.2016. On the basis of above finding the Ld. CIT(Ex) issued show-cause notice to the assessee u/s. 12AA(3) vide dated 30.10.2014 and proposed the cancellation of registration granted u/s. 12A of the Act. The copy of the show-cause notice is reproduced as under:- "Information is received that during the financial year 2005-06 your organization was involved in circuitous transactions by rotating the same donation through inter trust donation. Money donated by the assessee trust again came back to it in the grab of donations from other trusts registered us/s 12AA of the IT Act, 1961. Therefore, the activity of your organization was neither genuine nor in accordance to the stated objective of your organization. In view of the above facts and discrepancy, the Director of Income Tax (Exemption), Kolkata proposes to cancel the registration u/s 12AA granted to your organization. Should be revoked. You are requested to appear before the Director of Income Tax (Exemption), Kolkata through Authorised Representative on 13.11.2014 at 3.....
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....s every right to wait till the appeal of the assessee is decided by the Hon'ble ITAT. g) The Assessing Officer did not deny the full benefit u/s. 11 as he is not authorized by the Act to do so, as long as, the registration u/s. 12A is not cancelled. h) The cancellation takes effect from the year in which such in-genuine activity takes place. Till such cancellation the Assessing Officer is bound to give benefit u/s. 11. However, once registration u/s. 12AA is cancelled, then the assessment of all the following years has to be revisited. 11. Hence, registration granted u/s. 12A to Krishna Charity Tru9st is cancelled u/s. 12AA(3) of Income Tax w.e.f. 01.04.2005, i.e. FINANCIAL YEAR 2005-06 (Assessment Year 2006-07) i.e. the year in which activities of the trust were found to be in-genuine and not at par with objectives of the trust." Being aggrieved by this order of Ld. CIT(Ex), assessee came in second appeal before us. 8. Ld. AR for the assessee before us submitted as under:- 1) The Assessing Officer, Ld. CIT(Ex) and Hon'ble ITAT for the A.Y 2006-07 have denied the benefit of exemption11 of the Act only on the ground that no charitable activity was carried out by assess....
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....ranting registration. However, judicial rulings in some cases have held that the Commissioner does not have the power to cancel the registration which was obtained earlier by any trust or institution under provisions of section 12A as it is not specifically mentioned in section 12AA. 7.3 Therefore, section 12AA has been amended to provide that the Commissioner can also cancel the registration obtained under section 12A as it stood before amendment by Finance (No.2) Act,1996. 7.4 Applicability- This amendment has been made applicable with effect from 1st June, 2010 and shall accordingly apply for assessment year 2011-12 and subsequent assessment years." Thus, Ld. AR submitted the power was given to the Commissioner for the cancellation with effect from 01.06.2010 and referred on the order of ITAT Delhi Bench in the case of Delhi & District Cricket Association vs. Director of Income-tax (Exemptions) in ITA No. 3095/Del/2012 dated 13.01.2015 reported (2015) 58 taxmann.com 292 (Delhi- Trib.). However, in the instant case, Ld. CIT(Ex) canceled the registration certificate with effect from 01.04.2005 which is ultra vires. 6. The money of the donation is available within the books of ....
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....ard to the facts of the case. Therefore, we are not inclined to repeat the same for the sake of brevity. After considering the totality of facts we observe certain points as detailed under:- a) Indeed there were 10 trusts registered under section 12AA of the Act and all of them were operating from one place. There were common trusty in all the trusts. There was donation of corpus fund from one trust to another trust in the form of corpus. It is also undisputed fact that all the corpus donations were given from one trust to another trust out of current year's income. In none of the case corpus donation received by assessee was given to another trust in the form of corpus donation. There is no provision under the Act which prohibits to forward corpus donation out of the current year's income. Thus corpus donation will amount to application of income. In this regard, we find there was an amendment which was brought by the Finance Bill, 2017 [Bill No 12 of 2017]. Section 11 of the Act which reads as under:- "1... ... 2. .... 8. Amendment of section 11.- In section 11 of the Income-tax Act, in sub-section (1), the Explanation below clause (d) shall be numbered as Explanation 1 thereo....
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....t the activities of assessee is not in accordance to the object of the trust for which it was created. But we find that Ld. CIT(Ex) has not brought any iota of evidence suggesting that assessee's activities are not as per the object of the trust. e) Ld. CIT(Ex) found activities of the trust in-genuine only on the basis of assessment order passed u/s 143(3) for the A.Y. 2006-07 but on perusal of assessment order we find that there is no whisper about the in-genuine activities of assessee-trust. The allegation of Ld. CIT(Ex) that the amount of donation paid by assessee has come back to it in cash, in this regard we find that there is no material available on record suggesting that such money has come back to assessee in cash form. Without prejudice to the above even assuming that the assessee has not carried out any charitable activity then the assessee will not be eligible for exemptions u/s 11 of the Act. Under such circumstances, the registration certificate issued u/s 12A of the Act cannot be cancelled as long as the objects of the trust are within the provisions of law. The ld. CIT (Ex) has not brought anything on record suggesting that objects/ byelaws of the trust are contra....
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....tice. Similarly, we also rely in the judgment of Hon'ble High Court of Karnataka in the case of CIT Vs. Islamic Academy of Education reported in 59 taxmann.com 102 wherein it was held as under:- "If trustees were misappropriating funds and were maintaining false accounts, it was open to authorities to deny benefit under Section 11 of the Income Tax Act, but that could not be ground for cancelation of registration itself." Applying the above ratio laid down by the Hon'ble High Court of Karnataka in the case of Islamic Academy of Education (Supra), it can be concluded that in the given facts & circumstances the benefit of exemptions can be denied. 9.2 The provisions of section 12A of the Act prescribe conditions for registration of trust and make obligatory for the trust or the institution to seek registration under section 12AA of the Act, if such trust or institution intends to have the benefit of the provisions of section 11 and 12 of the Act. These provisions thus make it clear that if the trust or the institution is not registered under section 12AA of the Act, it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, ....
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.... extract of the judgment is extracted below:- "A reading of provisions of sub-cls. (a) and (b) of s. 12AA makes it clear that the CIT has to satisfy himself about the genuineness of the activities of the trust or institution and also about the objects of the trust or the institution. On being satisfied about the genuineness of the activities of the trust or the institution and also about its objects, the CIT would either grant the certificate or would reject the prayer. In order to satisfy himself about the genuineness of the activities of the trust or the institution, he can call for such documents or information from the trust or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. The objects of the trust can be had from the bye-laws or the deed of trust, as the case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they were not the objects of any charitable purpose, registration cannot be refused accordingly on this ground. In regard to the genuineness of the activities of the trust or the institution, whose objec....
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....ablishing and running a school is the object of the society, as given in its bye-laws, it has to be satisfied that the society has established the school, where education is being imparted as per rules and the factum of establishment and running school is a genuine activity. The enquiry regarding genuineness of the activities cannot be stretched beyond this. Sufficient safeguards having been given in ss. 11, 12 and 13 for assessing the income which has not been applied to the purpose of the trust or the institution, the intention of the law maker and the scope and purport of the provision is apparent while considering the question of registration." In view of above precedent, we find that the activities/ objects of the trust have not been doubted and on the basis of same activities/ objects registrations u/s 12AA was awarded to the assessee. Simply the assessee has given corpus donation to a trust cannot be the basis for the denial of the registration certificates as discussed above. 9.3 It is also important to note that the activities of the assessee have not been doubted in all other years as discussed above. As such the activities of the trust were duly accepted by the Revenue....