AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 781
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....1-02. The appellant has raised multiple Grounds of appeal (revised), which read as under, assailing the impugned action of the Commissioner:- "The Commissioner of Income Tax (Central) - 1 erred:- 1. in cancelling the registration granted u/s 12A of the Income Tax Act, 1961 (the Act) to the appellant Trust vide an order passed on 28th March 2014 2. in not appreciating the activities carried on by the Appellant Trust were not of the nature that would make Section 12AA(3) of the Act applicable. She failed to appreciate that a registration could be cancelled only for the reasons mentioned in Section 12AA(3) of the Act and not for any other reasons. 3. In not correctly appreciating the nature of activities that were carried on by the Appellant Trust which were not found to be not genuine. 4. in holding that there was a diversion of income of the Trust for purposes other than the objects of the Trust and in holding the same tantamount to a violation of Section 11 and Section 13 of the Act. 5. In not appreciating that a violation of Section 13, if at all, was not a valid ground for cancellation of registration u/s 12AA(3) of the Act. ....
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....or administering medical relief upon such terms and conditions and for such period as the Trustees may think fit. (d) Grant of medical help during epidemic, famine, flood or any unforeseen calamity or war or war-like operations or civil commotion or riots e) Establishment and/or acquisition and maintenance of and support of medical schools, medical colleges and other institutions carrying research in medicine and awarding scholarships and scholarship prizes or awards at any such schools, colleges and institutions. (f) To undertake prosecute develop help or carry on all or any kind of basic or fundamental and/ or applied research and scientific work in connection with or relating to medical surgical and sociomedical research problems and to do all things necessary or incidental or conducive to the attainment of the same and to provide funds for research and for scholarships, stipends and/or other payment or aid to any person or persons engaged in research work. (g) establish and maintain and to assist and encourage or promote as and when deemed proper and expedient for the purpose of medical relief in the form of Hospitals or in connection there w....
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....ties in compliance with the intended objects. The activities being carried out, inter alia, involve running of the hospital and research centre in the name of Lilavati Hospital & Research Centre. A brief synopsis has been furnished illustrating the level and quality of activities carried out of the hospital. It is pointed out that there are as many as 225 Doctors, 59 registered Medical Officers, 118 DNB Medical Students carrying on the activities of the hospital. Besides, the hospital is served by almost 700 Staff and 200 technicians as well as managerial and other staff, which numbers around 500. It is also pointed out that considering the number of beds and operation theatres, including ICT, etc., the total patients being treated counts to 17500 approximately. It is also being pointed out that the hospital has a number of specialized departments, including Cardiac, pathology, Radiology, Dental, ENT, Nuclear Medicine Department etc. It is also pointed out that the total amount spent on medical expenditure for F.Y. 2012-13 was approximately Rs. 283 crores. We are only highlighting the aforesaid features, with a view to appreciate the preliminary point of the appellant that having r....
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....s. Sarvodaya llakkiya Pannai [343 ITR 300]. As per the Hon'ble Madras High Court, the Commissioner is empowered to cancel the registration already granted only on fulfilment of the two conditions laid down u/s. 12AA(3) of the Act. To the same effect is also the judgment of Hon'ble Bombay High Court in the case of Director of Income-tax (Exemptions) vs. Khar Gymkhana [385 ITR 162]. Apart there from, even the Circular of the CBDT No. 21 of 2016, dated 27th May 2016, emphasizes that the field authorities are required to initiate the process of cancellation of registration strictly in accordance with the mandate of section 12AA(3) of the Act. Thus, so far as the legal proposition with regard to the scope and ambit of section 12AA(3) is concerned, it would suffice to infer that the power of cancellation can be invoked by the Commissioner only after being satisfied that the activities of the Trust or Institution are not genuine or that the same are not being carried out in accordance with the objects of the Trust or Institution, as the case may be. 7. We may also refer to section 12AA(4) of the Act, which has been inserted by the Finance Act, 2014 w.e.f. 01.10.2014, which reads as und....
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.... or institution are not genuine, or; (b) the activities are not being carried out in accordance with the objects of the trust or institution. Only if either or both the above conditions are met would the Commissioner be empowered to cancel the registration, and not otherwise. Therefore, the powers of Commissioner to cancel registration are severely restricted. There have been cases where trusts, particularly in the year in which they have substantial income claimed to be exempt under other provisions of the Act deliberately violate provisions of section 13 by investing in prohibited mode etc. Similarly, there have been cases where the income is not properly applied for charitable purposes or has been diverted for benefit of Certain Interested persons. Due to restrictive interpretation of the powers or the commissioner under section 12AA, registration of such trusts or institutions continues to be in force and these institutions continue to enjoy the beneficial regime of exemption. Whereas under section 10(23C), which also allows similar benefits of exemption to a fund, Institution, University, etc., the power of withdrawal of approval is vested w....
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....se in as much as the reasons advanced for cancellation of registration are beyond the scope and ambit of section 12AA(3) of the Act. By referring to the discussion made by the Commissioner in the impugned order, it is sought to be pointed out that the reasons advanced are based on the premise that the assessee has violated the provisions of section 13 of the Act or section 11(5) of the Act thereby rendering it ineligible for the claim of exemptions under sections 11 and 12 of the Act. On this basis, it is sought to be canvassed that the case of the assessee does not fall within the prescription of section 12AA(3) of the Act, which enables the Commissioner to cancel the registration only when the two conditions prescribed therein are satisfied. 9. We have carefully perused the impugned order of the Commissioner and have also heard the learned CIT-DR, who has sought to defend the impugned order. As per the CIT-DR, the Commissioner has noted in the opening para itself that the proceedings of cancellation are as a consequence of a Search and Seizure action carried out in the case of the assessee on 11.04.2011. It is pointed out that the manner of investment of Trust funds was in vio....
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.... & 12 of the Act. Ostensibly, the eligibility or otherwise of an assessee for the exemptions contained under sections 11 & 12 of the Act is indeed a subject matter of assessment proceedings carried out at the level of the assessing authority. The grant of registration under section 12A of the Act by Commissioner is only a starting point on the basis of which an assessee stakes his claim for exemptions under sections 11 and 12 of the Act, subject to fulfilments of conditions prescribed therein. Therefore, if in a given situation, section 13 of the Act is triggered the result would be that sections 11 and 12 of the Act would not operate so as to allow exemption to the assessee contained in section 11 and 12 of the Act. Now, we may go back to section 12AA(3) of the Act, which prescribes only two conditions under which the Commissioner is empowered to cancel the registration earlier granted u/s. 12A of the Act. In our view, the points brought out by the Commissioner in the impugned order are not in the context of the conditions prescribed u/s. 12AA(3) of the Act, but are relevant for the purposes of making an assessment of income. 11. In the present case, the case sought to be ma....
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....Now, we may come to the argument set up by the learned CIT-DR. According to him, the activities, which has resulted in violation of section 13 of the Act can be construed as activities carried out by the Trust, which are not in accordance with the objects of the Trust. In our considered opinion the argument set up by the CIT-DR is quite misconceived in as much as the activities that are required to be considered for the present purpose are the activities which are being carried out towards objects of the Trust. In the present case, as we have seen initially, the objects of the Trust are formation of hospital and Institutions for medical relief, etc. In fact, there is no finding by the Commissioner much less any material on record, which would show that the activities of the Trust are dehors its stated objects. The transactions, which are being understood by the CIT-DR as activities, cannot be considered to be the activities that are contemplated for the purposes of section 12AA(3) of the Act. At this stage, we may observe that the insertion of section 12AA(4) of the Act by the Finance Act, 2014 w.e.f. 01.10.2014 also cannot be lost sight of as our subsequent discussion would sho....