TaxTMI 
TaxTMI 
2019 (11) TMI 996
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....e not genuine and are not in accordance with the objects of the assessee. 2. On the facts and circumstances of the case and in law, the CIT (E) erred in not appreciating that the Assessee had suo moto surrendered its registration u/s. 12A in March 2016 and that once the registration u/s. 12A is surrendered in March 2016, nothing survives to be cancelled subsequently. 3. The Appellant craves leave to add, to amend, to alter and/or to delete all or any of the above grounds of appeal." 03 Before us, during the course of marathon hearing, four volumes of paper books on behalf of the appellant-assessee have been filed, along with two separate sets of paper books of additional evidences, one filed during the course of arguments and other during the course of rejoinder submissions. On behalf of the department, two sets of paper books have been filed along with a statement giving dates and evident of various stages. Besides this, various documents and judgments were also filed from both the sides. All the submissions and relevant documents that are germane to the issue involved shall be discussed hereinafter. Brief facts and background of the case: 04 The appellant, Young Indian was....
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....res. Thus, almost entire shareholding of AJL went to YI. Certain additional shares of AJL were also purchased by Mrs. Sonia Gandhi, Mr. Rahul Gandhi and Mrs. Priyanka Gandhi to gain full control of AJL. At the time of making an application for registration u/s. 12AA, the assessee company disclosed the list of shareholders and directors of Young Indian during the assessment year 2011-12 as under: Name Position in YI & No. of shares held Mrs. Sonia Gandhi Director since 22.01.2011 - 1900 shares (36%) Shri Rahul Gandhi Director since 22.01.2011 - 1900 shares (36%) Shri Moti Lal Vora Director since 22.01.2011 - 600 shares Shri Oscar Fernandes Director since 22.01.2011 - 600 shares Shri Satyan Gangaram Pitroda (Sam Pitroda) Director since 23.11.2010 - Held 550 shares but transferred it to Shri Oscar Fernandes Shri Suman Dubey Director since 23.01.2010 - Held 550 shares but transferred it to Mrs. Sonia Gandhi. 06 The Chronology of events right from the date of inception of Young Indian u/s. 25 of the Companies Act till the date of application of registration u/s. 12AA as available from record can be summarized in the following manner: - Dates Documents Particul....
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....Y 2011-12 List of shareholders and directors * Mr. Suman Dubey and Mr. Sam Pitroda - Founder Members with 550 Shares each * Rs. 53,21,290 spent towards objects including Rs. 50 lakhs paid to AICC towards acquisition of loan of Rs. 90 Crores and only Rs. 200 as income from subscription 21.01.2011 EGM of AJL * Approving fresh issue of 9.021 crore shares 22.01.2011 Commencement of directorship of Mrs. Sonia Gandhi * Holds 1900 shares 36% stake in YI 22.01.2011 Commencement of directorship of Mr. Moti Lal Vora Held 600 shares in YI * Chairman and MD of AJL since 22.03.2001 22.01.2011 Commencement of directorship of Mr. Oscar Fernandes Held 600 shares held in YI * Director in AJL since 17.06.2010 14.02.2011 Bank Account of YI opened * After issue of PAN by IT authorities 15.02.2011 Loan from Dotex Merchandise (P) Ltd., Kolkata Loan of Rs. 1 crore was taken from this company to pay AICC Rs. 50 Lakhs for assignment of loan in AJL * Confirmation letter dated 24.12.2010 26.02.2011 Allotments of shares in AJL to YI * 9,02,16,898 shares issued in lieu of assignment of loan of Rs. 90 Crore by increasing its authorized share capital to 10 crores from 1....
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....of the trust will be used only for the objectives of the Trust/Society. 6. Please insert a provision relating to the dissolution of the Trust/Society providing inter alia that in the event of dissolution of funds/ assets will be transferred only to some other trust having similar objectives. 7. A note on activities carried out since inception/last 1/2/3/4 years with supporting documentary evidence. 8. Please justify your claim for registration u/s. 12AA & 80G. 9. Please explain the change in fact & circumstances of the case since the last rejection order. 10. Please furnish the details of donation including corpus donations received & made giving Name, Address, PAN of donors. 11. Please furnish contact No & E-mail Address of the Applicant & its members. 12. Justify with the bill/vouchers of the income applied for charitable activities along with proof of beneficiaries. 13. Please file the undertaking that there shall be no infringement to the proviso to the section 2(15) of the IT Act." 10 In response, the assessee had filed certain documents including 'Note on activities' which were as under: "Young Indian ("YI") is a Company registered u/s. 25 of the Companies ....
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.... Permanent Account Number and shall communicate the PAN to this office. * The Trust/ Society/ Non Profit Company shall maintain accounts regularly and shall get these audited in accordance with the provisions of section 12A(b) of the Income Tax Act, 1961. Separate accounts in respect of each activity and specified in memorandum shall be maintained. A copy of such account shall be submitted to the Assessing Officer. A public notice of the activities carried on/ to be submitted to the Assessing Officer. A public notice of the activities carried on/ to be carried on and the target group(s) (intended beneficiaries) shall be duly displayed at the Registered/ Designated Office to the organization. * Separate books of accounts in respect of profits and gains of business incidental to, attainment of objects shall be maintained in compliance to section 11(44) of the Income Tax Act 1964. * All the Public Money so received including for Corpus or any contribution shall be communicated to this office. * No change in the Trust Deed/ Memorandum of Association/ instrument shall be effected without the approval of the jurisdictional High Court/ Appropriate Authority and it shall continue t....
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....under Section 12AA virtually academic in nature. After considering all aspects we have decided to surrender our registration u/s 12A read with Section 12AA with immediate effect. The original Registration Certificate issued u/s 12AA bearing no. 2011-12/100 DEL-YR21296 dated 9/5/2011 is surrendered herewith. This is to call upon you to note that the registration stands cancelled with immediate effect. Thank you. Yours faithfully, Motilal Vora Director DIN: 00628348 Encl: Original Registration Certificate bearing no. 2011- 12/100 DEL-YR21296 dated 9/5/2011" FINDING GIVEN IN THE IMPUGNED ORDER OF CIT (E) 14 In the impugned order, the ld. CIT(E) in para 3 has noted that an intimation was received from ACIT(E), Cir 1(1) vide letter dated 16.08.2017 regarding contravention of conditions subject to which the assessee was granted registration u/s. 12A r/w section 12AA. In the said communication, following facts were stated: "In this case, this office has been conducting certain inquiries with regard to take over of M/s. Associated Journals Ltd. (AJL) by the YI since July 2015 and subsequent to these inquiries the following important findings are observed:- * YI has been....
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....2 AY 2016-17. * It is evident from the records that the only substantial activity undertaken by M/s. Young Indian during P.Y. 2010- 11 was to acquire M/s Associated Journals Ltd. by acquiring its 99.99% shares. It is important to mention here that M/s AJL has been engaged in the business of real estate and the source of its income was rental income as well as other business income from construction and development of commercial complexes since FY 2008-09. Please explain whether earning of income from real estate business through M/s AJL is covered within the aims and objects of M/s Young Indian and whether these activities are in conformity with the terms and conditions subject to which registration u/s 12A of the was granted to M/s Young Indian. * You are requested to furnish complete details of source of fund/income, of M/S Young Indian and its application during Assessment Year 2011-12 to 2016-17." 16 In response to the show cause notice, the assessee had submitted a reply, the extract of which has been incorporated in para 5 of the impugned order. In sum and substance, the assessee's submissions were: - * That the findings of the Assessing Officer are merely based on the....
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.... of an assessee whether it would like to avail any benefit of exemption provided under law and it is well-settled law that if the assessee does not desire to avail benefit provided in law, then he may chose not to avail the same. Reliance is placed on the judgment of Hon'ble Supreme Court in the case of CIT vs. Mahindra Mills (2000) 243 ITR 56 (SC). Thus, after having surrendered its registration certificate w.e.f. 21.03.2016, it ceases to enjoy the benefit of the provisions of exemption of income, if any, accruing to it from and after the said date. Accordingly, the question of cancelling the registration does not arise. * Regarding proposal to cancel the registration w.e.f. assessment year 2011-12, it was stated that, firstly, the payments towards acquisition of shares of AJL does not amount to investment because the term investment pre-supposes a return and holding these shares does not envisage any dividend whether at present or expected. In fact, payment towards shares of AJL amounts to utilization of funds towards objects of Young Indian; and secondly, such surrender cannot be construed as admission that any of its activities were not in conformity with the terms of registr....
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....9 After incorporating aforesaid details, the ld. CIT (E) proceeded to analyze the Income & Expenditure Accounts for the assessment years 2012-13 to 2014-15 and from the perusal of the same, he observed that the assessee had not incurred any expenditure on its objects except for creating provision for interest payment for loans of Rs. 1.00 crore taken to acquire AJL, which, according to him, was a Real Estate Company. He also incorporated the expenditure incurred by the assessee for the assessment year 2012-13 to 2014-15 which were as under: (In Rupees) AY 2012-13 AY 2013-14 AY 2014-15 Expenditure on object - - - Interest on loan 14,00,000 14,00,000 14,00,000 Other expenses 2,57,000 2,50,000 2,57,468 Total 16,57,000 16,50,000 16,57,468 From the above details, he concluded that the assessee had not incurred any expenditure on activities in accordance with its objects except for acquiring the Real Estate Company, which was not in conformity with the main objects of the assessee company. Hence, the assessee had not carried out any genuine activities in accordance with its objects and therefore, the contention of the assessee that it had carrie....
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....s" respectively. During the year Company paid Rs. 2,22,17,743/- for buy-back of shops at Lucknow the amount paid has been shown as development expenditure. 4. (a) Freehold land includes 2 plots of Land allotted to the Company in 1983 by Government of Maharashtra at Bandra, Mumbai for Rs. 31,23,054/- on deferred payment basis. However, in 1991 the Govt. of Maharashtra on representation by the company had agreed to convert the said land from free hold to lease hold. Fresh representation has been made to Govt. of Maharashtra for reversing this decision, converting this land to Freehold, which is pending. (b) The payment made up to 31.03.2009 to Govt. of Maharashtra on account of annual lease rent etc. has been shown under the head "capital work in progress". (c) The Title Deed in respect of land allotted in Mumbai, Patna and Panchkula is yet to be registered/ executed. 5. (a) Advances/ Security Deposits received from the parties in earlier years relating to construction activity on company's land at Lucknow and Mumbai has been grouped under "Other Liabilities" and "Unsecured Loans" and no provision of interest has been made thereon. (b) No provision has been made of intere....
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....m the financial records of the assessee company, as summarized above that during assessment year 2011-12 to 2014-15, the assessee had not carried out any activities in accordance with its object except for acquisition of AJL, a company solely engaged in profit making business from real estate. * Since, the assessee had full control over AJL by acquiring its 99% of total shareholding, some of the directors/ share holders of the assessee company namely Shri Moti Lal Vora, Sh. Oscar Fernandes, Sh. Sam Pitroda and Sh. Suman Dubey were Chairman and Managing Director of AJL since 22.03.2002, Director since 17.06.2010, Director since 21.12.2010 and Director since 21.12.2010 of the AJL respectively during AY 2011-12 to 2014-15 and the only activities carried on by the assessee was to manage and run business of the AJL by engaging in the real estate business with the help of its directors and shareholders. In these circumstances, it would be reasonable and logical to infer that the only activities carried on by the assessee during AY 2011-12 to 2014-15 was to control, manage and run the real estate business of AJL. These facts clearly prove that the assessee had in fact was engaged in the....
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....ssessee by way of issue of summons u/s. 131 and proceedings u/s. 133(6) in the year 2015. Because of this enquiry, the Assessing Officer had issued notice u/s. 148 in January 2017 for reopening the assessment for A.Y. 2011-12. Thus, the surrender was made by the assessee as a sequel to the investigation against the assessee and it was not suo moto action by the assessee. He further held that there was no provision for surrendering of certification of registration u/s. 12A by the assessee under the Act and the assessee had made the surrender after having claimed the benefit of exemption on the income of Rs. 2 crores received by it as contribution during the A.Y. 2016-17 in its return of income and suo moto surrendering registration will not lead to automatic cancellation of registration. He also distinguished the judgment of Hon'ble Supreme Court in CIT vs. Mahindra Mills (supra) as relied upon by the assessee. 26 Another important fact noted by the ld. CIT (E) was that the assessee was asked to submit the details and evidences to show that it has actually carried out any activities during the assessment years 2011-12 to 2016-17 in accordance with the stated objects. In all the wri....
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....om the discussion and findings as recorded in preceding paragraphs 8 to 11 of this order, accordingly, the contention of the assessee was found factually incorrect. * The claim of the assessee that activity of AJL could not be held as activity of assessee has been examined in detail in paragraph 9 to 12 of this order and the claim was found both factually and legally untenable for the reason that only activity carried on by the assessee was to manage, control and engage in the real estate business or the AJL after acquiring all the properties of the AJL through Directors and shareholders of the assessee company as discussed earlier. In this context, the disclosure made by the assessee in the annual report ending 31.03.2011 as examined in detail above may also be referred to. The case law as cited by the assessee is not applicable to the peculiar facts of the case of the assessee where direct evidences are available to prove that the assessee was engaged in carrying out commercial business of real estate in contravention to stated object of the company through its directors/ shareholders. * The contention of the assessee that it had suo moto surrendered the registration u/s 12A ....
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....siness, copy of Form No. 23 submitted before the ROC with amended MOA to show that the amended objects of the AJL were in consonance with the objects of Young Indian are placed in the additional evidence paper book. Besides this, various presentations, photographs showing operation of Young Indian were also filed. 31 The reason stated for filing all these additional evidences was that these are filed to counter various statements made by the CIT(E) which are mainly based on conjectures and surmises and the ld. CIT(E) without giving any proper opportunity have stated several incorrect facts. It was pointed out that the ld. CIT (E) observed that the object of AJL was never re-casted to match with the objects of the appellant-assessee. However, there was an amended MOA of AJL filed before the Registrar of companies [ROC] that these objects were re-casted in the year 2011 to align with the objects of the assessee. Secondly, relevant observation of the ld. CIT (E) that business of publication of Newspaper of AJL ceased to exist w.e.f. 02.04.2008 is also incorrect. In fact, there was no such closure of business, rather it was a suspension of publication of newspapers for temporary perio....
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....sfaction cannot be a borrowed satisfaction based on the finding of another officer without application of mind independently. In support, reliance was placed on the following two decisions: (i) PCIT v. Meenakshi Overseas (P) Ltd., 395 ITR 677 (ii) CIT v. SPL's Siddhartha Ltd., 345 ITR 223. 34 With regard to various observations and allegations of the ld. CIT (E), the Ld. Counsel tried to give his point-wise rebuttal on various issues raised in the impugned order. First of all, with regard to the allegation that the MOA of AJL was never re-casted to align with the objects of the assessee company during the period relevant to assessment years 2011-12 to 2014-15, he submitted that the same is not correct because the MOA of AJL was recasted on 13.09.2011 whereby new clause "(u)" was inserted to align with the objects of the assessee company. In support, amended MOA as passed by the shareholders of the company on 13.09.2011, placed on the additional paper book page 68 to 80, was referred to and relied upon. The new amended objects, Clause "(u)" placed at paper book page 224 in additional evidence, read as under: "(u) To inculcate in the mind of India's youth commitment to....
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.... not, except payment of out-of-pocket expenses, reasonable and proper interest on money lent, or reasonable and proper rent on premises let to the Company." 36 Further clause (x) of the MOA provided that on winding up or dissolution of AJL, the surplus, if any, shall not be distributed among the members of the company but shall be given or transferred to such other section 8 company having objects similar to the objects of AJL. Thus, it was submitted that the observations of the ld. CIT (E) that the objects of the AJL were not re-casted during the years 2011-12 to 2014-15 is completely baseless and incorrect. 37 Another contention raised to rebut the finding of the ld. CIT (E) was that, the publication business was only temporarily suspended in the year 2008 and there was no closure of the business. It was submitted that publication business of the AJL had never ceased to exist and reference to Notes to accounts of AJL is not properly appreciated, because it nowhere states that the business of publication had been suspended. Nowhere, the note speaks about the intention to close the publication business. The ld. counsel submitted that the AJL is a very old company incorporated in ....
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....rald Website. Please see pages 204 to 213 of the AB - PB I; - On 15/11/2016, an agreement was entered between AJL and Press Trust of India for Wire News Services. Please see pages 245-249 of the AB - PB I; - On 12/06/2017, AJL launched the Commemorative Edition of National Herald (Publication) in print in Bangalore. Please see pages 133-153 of the AB - PB I for the copies of various reports and photographs of said launch; - On 23/06/2017, AJL obtained Registration Certificate for National Herald Newspaper from the Registrar Office of Newspapers for India, Ministry of Information and Broadcasting. Please see pages 239-240 of the AB - PB I; - On 01/07/2017, AJL launched Commemorative Edition of National Herald (Publication) in print in New Delhi. Please see pages 154-185 of the AB - PB I for the copies of various reports and photographs of said launch; - On 12/08/2017, AJL launched Qaumi Awaz Website in Urdu. Please see pages 215- 229 of the AB - PB I; - On 29/08/2017, AJL launched Navjivan Website in Hindi. Please see pages 230-238 of the AB - PB I; - On 24/11/2017, AJL obtained revised Registration Certificate for National Herald Newspaper from Registrar Office of New....
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.... renting out the properties by newspaper business is permissible in standard newspaper leases and allotments of immovable property for newspaper user. The aforesaid facts are matter of public knowledge and policy. In support, reliance was placed on the judgment of Hon'ble Supreme Court in the case of Govt. of AP v. Maharshi Publishers Pvt. Ltd.(Civil appeal 7152-7157 of 2002), wherein Hon'ble Supreme Court has observed as under: "Another contention urged before the Division Bench of the High Court and reiterated before us, is that there were no contracts signed by complying with the formalities under Article 299 of the Constitution and therefore, the Government was not obliged to honour its commitments. This contention has rightly been repelled by the Division Bench of the High Court by pointing out that the sale of the land was not a result of any commercial transaction by the State Government, but pursuant to its declared socio-economic policy reflected in the scheme of allotment of land to give incentives to Newspaper Concerns and Educational Institutions. The High Court rightly held that this was an executive act falling within the province of Article 162 and not within the ....
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....was allowed to let out part of the building to be constructed on the same. In the year 1983, Government of Maharashtra allotted a property to AJL in Mumbai for the purpose of carrying out publication of daily newspapers and establishing a Nehru Library cum Research Institute. Similarly, allotment was made by the Government of Bihar in Patna and Government of Haryana in Panchkula. Apart from that, AJL also owns freehold land in Lucknow purchased in the year 1975. Thus, allotment of land by the Government for publication business cannot be held that AJL had acquired the properties for any kind of Real Estate Business. Certain Annexure were filed by the assessee to show that the construction of the Delhi property was completed in the year 1967 and the same has been given on rent since year 1990. It was pointed out the Patna property is an encroached land on which no construction activity has been undertaken ever. Property in Lucknow is a freehold land comprising of two parts, Nehru Bhawan and Nehru Manzil. Construction of Nehru Bhawan was completed in the year 1984 and newspaper activity was conducted there from. However, a fire broke out in the year 2002 destroying the printing press....
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....ers in Lucknow and has paid amount for buy-back of shops. Ld. Counsel submitted that the word "buy-back" has been loosely used in the said note because it represents repayment of the booking amount taken from the intended purchasers. In order to construct Nehru Manzil property at Lucknow, in the year 1988, AJL had raised fund by taking amounts in the form of booking amount towards shops that would have been sold in the constructed property. However, since AJL was unable to complete the construction due to financial constraints, it suspended the construction and gradually refunded the booking amount to the parties. Not a single property has been sold and all the properties remain in dilapidated conditions even today. In any case, the transaction, which has taken place in the year 1988, for which the booking amount was received, has no relevance for the period when the publication business was temporarily suspended. The fact that Lucknow property was never sold is also evident from the accounts of AJL for various years. Thus, when the assessee has not earned income from any sale of property then it can never be treated as Real Estate Company since 2011-12. AJL never stated in its a....
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....see. The objects of both the companies was to reach out to the youth of India in pursuance to its charitable objects and accordingly in order to promote its objects through the platform of AJL, the assessee company approached AJL, whose objects were germane to those of the assessee and with infrastructure to publish newspapers. Thus, through AJL and its platform, the assessee wanted to reach Youth of India and spread message of morals as laid down in its objects. Since AJL was facing financial and operational troubles due to which it had to temporarily suspend its operation in 2008, therefore, as a part of its effort to revive AJL with an object to creating platform to achieve its objects, the assessee company took over loan which AJL was not in a position to repay from AICC for a sum of Rs. 50 lakhs. Accordingly, the loan was assigned by AICC to the assessee for consideration of Rs. 50 lakhs. After assigning of said loan, AJL step into the shoes of AICC and AJL converted the said loan into the equity shares by issuing 9.021 crore equity shares to the assessee company to discharge its liability. As a result, the assessee became 99% shareholder in AJL. This transaction was duly dis....
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....therefore, the assessee would not have any earned income due to the said fact. It was for this reason, the registration u/s. 12AA had virtually become academic and accordingly, the same was surrendered with immediate effect. Once, on the date of issuance of show cause notice, the assessee had also surrendered the registration u/s. 12AA, and then notice itself is bad in law and without jurisdiction. 46 As far as the allegation of the ld. CIT (E) that the assessee had surrendered its registration as a sequel of investigation against the assessee, Ld. Counsel submitted that firstly, the entire premise was based on the ground that AJL was in Real Estate business, which it was incorrect as per the detailed submissions made by him. He pointed out that the investigation had started in July 2014 and the assessee had replied in August 2015 and thereafter, the assessee was never provided any report or order in respect of all these investigations and therefore, no adverse allegation could have been envisaged against the assessee. Even after surrendering of registration on 21.03.2016, no communication was received by the assessee from the department and it was only in January 2017, the assess....
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....BI Education Trust (2018) 96 taxmann.com 356 (Kerala) (iii) State of Punjab v. Bhatinda District Coop. Mill (11 SCC 363)(SC) (iv) CIT vs. NHK Japan Broadcasting Corp (305 ITR 137 (Del) (v) Amalner Cooperative Bank Ltd. v. Commissioner of Central Excise (2012) 21 taxmann.com 433 (Mum. CESTAT) 49 Without prejudice, the Ld. Counsel submitted that registration cannot be cancelled retrospectively without giving specific opportunity to the assessee and further, registration cannot be cancelled with retrospective date. Reliance in this regard was placed on the judgment of Allahabad High Court in the case of Agra Development Authority (2018) 90 taxmann.com 282 and of Madras High Court in the case of Auro Lab v. ITO (2019) 102 taxmann.com 225 (Madras). 50 Again, without prejudice, Ld. Counsel submitted that even if it is held that the assessee had acquired shares of a commercial entity, it could not be a basis for denial of registration. He submitted that till insertion of sub-sec. (4) in section 12AA w.e.f. 01.10.2014, the registration could be cancelled only if CIT finds that the activities of the trust is not genuine or is not in accordance with the objects of the trust. Any oth....
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....o submitted a chart of dates and events which gives details of: i) events prior to the year 2008; ii) events from 2008 till incorporation of Young Indian; iii) dates and evident from incorporation of Young Indian till filing of application for registration; iii) events and facts disclosed during the registration process; and v) lastly, the dates and events post registration and before cancellation. From these charts, he tried to highlight the facts and background of the entire case, which has been summarized by him in the following manner: a. The company in the name of M/s. Associated Journals Limited ("AJL") was incorporated on 20.11.1937 with the object of publishing newspapers having a policy, which would be in tune with the principles of Indian National Congress. The business of AJL was suspended on various occasions due to financial difficulties or actions of the then government, labour problems, etc. AJL is in possession of land at various places in the country and deriving income from letting out of such properties. It was in the year 2008 that the AJL stopped the publication of newspapers and accordingly all the employees were given VRS w.e.f. 02.04. 2008. b. The regist....
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....ation, Articles of Association, Certificate of Incorporation, License u/s. 25 of the Companies Act, 1956. All these documents form part of the Paper Book-1 filed by the Revenue and appear on pages 9 to 58. Therefore, it needs to be highlighted that though the Assessee Company had borrowed Rs. 1 crore from Dotex and had also invested in the acquisition of AJL through allotment of 99.999% shares, the statement in 'Annexure - 5B' stated that there are no assets and liabilities 7 days prior to the date of filing of application. This statement is claimed to have been signed on 14.10.2010 and the explanation offered by the assessee was that these documents were filed before Ministry of Corporate Affairs ("MCA") for obtaining license under Section 25 and these documents, though not required to be filed under the Rules, slipped into the application. He pointed out that these Annexures (5(a) and 5(b)) were filed in response to point no. 2, which called for copies of accounts for the latest one year. If the document is filed on 31s' March 2011, it follows that the facts have not undergone any change on the date of filing of the document. Revenue's case is that there was a deliberate atte....
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....tion. After the inquiries by the Investigation Wing, the AO sought various information from YI and also from AICC to reach to the correct state of affairs. He had also placed the entire correspondence that the AO had with YI and AICC and also the manner in which submission of information to the AO was resisted on various grounds like lack of authority to conduct the inquiries, making available the copy of the approval of Commissioner for calling information u/s 133(6), seeking inspection of the tile, etc. No worthwhile information was given to the AO. The letters in correspondence form part of the paper hook tiled by the Revenue. The vital pieces of information called for by the AO were not submitted and a general statement was made that it is available in accounts or in public domain. k. The Assessee Company, faced with the questionnaire of the AO and the reopening of assessment for A.Y. 2011-12, chose to surrender the registration u/s 12A on 21.03.2016. The AO reported to the CIT (E) how the activities of the Assessee Company were neither genuine nor carried out in furtherance of the stated objects. Based on the report of the AO and on perusal of the relevant records, the CIT (....
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....s. 55 Further, by way of counter submissions in response to the arguments and submissions made by the ld. counsel for the assessee, Mr. Srivastava submitted that one of the core issues, on which the registration has been cancelled by the ld. CIT (A), is that the activities of the assessee company were not in accordance with its objects. The main thrust by the ld. counsel for the assessee was that the ld. CIT (E) was not justified in holding that AJL is Real Estate Company and since this is the core reason for cancellation of registration, therefore, the order of the ld. CIT (E) cannot be sustained. The case of the Revenue for cancellation of registration is not only confined to the fact that the AJL is a Real Estate company, albeit the assessee company has not carried out any activity, whatsoever, in furtherance of the stated objects and the only activity carried out in this regard was acquisition of AJL which was not in conformity with the objects, on the basis of which the registration was granted to the assessee. He drew our attention to the finding given by the ld. CIT (E) in para 15 and his observations summarized in para 17 of the impugned order. He further submitted that, f....
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....ring the course of marathon arguments placed before this Tribunal. The contention raised by the assessee that acquisition of AJL was in furtherance of the objects of the assessee company is patently false as submitted in earlier part. Even from the Income-tax Returns, Ld. Spl. Counsel pointed out that, it can be seen that no expenditure has been made in any of the assessment years in furtherance of any of the objects till the cancellation of registration. It is an admitted fact that AJL was not publishing any newspaper either in print or digital form during the entire period. Hence, it can be easily deduced that the only reason to take over AJL was to commercially exploit its immovable asset. It cannot be held that by taking over the said company, the assessee would have been fulfilling its objects. Even after take over, no activity was done by the AJL to revive the newspaper business for a period of five years, it was only after the enquiry by the Revenue, and the proceedings for eviction initiated from the Land and Development Officers that the steps were taken for revival of business. The commencement of resuming the newspaper business in September 2016 was done much after the ....
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....er to cancel the registration u/s. 12A from the year 2004 and the same can be cancelled u/s. 12AA (3) where the Commissioner finds reason to believe that either the activities of the assessee are not in line with its objects or activities carried out by the assessee are not genuine. Knowledge of breach of conditions laid down in section 12AA (3) would only come to the notice of CIT after the breach had been committed and if such a breach is existing from day one then cancellation would always follow from the date of breach. The provision of section 12AA(3) cannot be read to mean that CIT has to disregard the period during which the breach occurs and he has the power to cancel the registration only from the future years. Such an argument is untenable and in support, strong reliance was placed by him on the principle elucidated by Hon'ble Madras High Court in the case of Prathyusha Educational Trust vs. Pr. CIT (Tax Case appeal No. 366 to 368 of 2019 and CMP Nos. 12438, 12446, 12447, 12450 and 12452 of 2019 vide judgment dated 27.06.2019, where their Lordships in para 22 of the judgment has made the following observations: "At the first blush, the Court assumed that the argument ....
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....at is important is that whether AJL was still in the business of print media during the relevant time and was not mainly reaping the rental income from its properties. Furthermore, it is not the object or goal of the assessee company to run a newspaper company or a Real Estate company enjoying rental income. Even in the tax audit report for the assessment year 2012- 13 onwards, the AJL has shown business of newspaper publication and business of renting and leasing of properties. Accordingly, the entire thrust of the ld. counsel that it is not Real Estate Company will not make any difference because no publication of newspaper was done during the period nor it can be said that the publication of newspaper was in furtherance of the objects of the assessee company. 61 Another key contention raised by the ld. counsel was that Young Indian and AJL are two separate and independent companies having a separate legal character from that the shareholders. It was contended that the share holders have no right in the property vested with the company and can only seek dividend and bonus on the shares and therefore, change in the ownership of the AJL would not make them owners of the said prop....
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.... has to be followed in accordance with the statute. In so far as reliance placed by the ld. counsel on the decision in the case of CIT vs. Mahindra Mills (supra), he submitted that is completely ill founded for the reason that the decision was rendered in the context of section 32. Later on, Hon'ble Supreme Court in the case of Plastiblends India Ltd. vs. ACIT, 398 ITR 568, have clearly held that the decision in the case of Mahindra Mills (supra) would not apply in the case of section 80IA, which was a provision in Chapter VIA and constituted a code by itself. The decision of Mahindra Mills (supra) would not have any applicability in these circumstances. The provisions contained in section 11 to 13, governing charity are equally a code itself and therefore, the decision rendered u/s. 32 would not have any applicability under such circumstances. Even otherwise also, the case of the Revenue is that the act of surrender was not bona fide as it was post enquiries conducted by the Revenue and the materials found which clearly showed that the assessee was not entitled for registration at all. Further, there was clear-cut breach of conditions of investment as provided u/s. 13(1) (d). Afte....
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....eme Court vide order dated 05.04.2019 in SLP to Appeal (C) No. 7345/2019 and the matter is presently pending for disposal before the Hon'ble Supreme Court. Thus, the said order cannot be considered for the purpose of deciding the present appeal. Once the Apex Court has stayed the operation of Delhi High court order, the same became inoperative and therefore, inadmissible as on date. In view of such submissions, the ld. counsel prayed that this Tribunal firstly should not allow the Revenue to place reliance on the aforesaid orders and should not take into cognizance the points of law applied/ propounded on the said order; and secondly, without prejudice in case the judgments are to be considered, then it amounts to pre-judge the issue which is presently subjudice and therefore, the matter should be adjourned till the matter is decided by Hon'ble Apex Court. 66 Reacting strongly to the said request made by the ld. counsel for the assessee, Mr. G.C. Srivastava submitted that it is completely erroneous to say that the operation of order has been stayed, albeit what has been stayed is, the further proceedings pursuant to the High Court order, i.e., direction for eviction proceedings o....
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....o save the lease of the properties from being cancelled by the Government. In this regard, he submitted that way back on 23.01.2014; AJL had filed a letter to Registrar for News Papers of India, copy of which has been placed at page 267 of the paper book-1 filed by the assessee, which clearly indicated the intention to resume the newspaper activities. Such an allegation made by the ld. Special Counsel that the decision of printing was an afterthought gets demolished for the reason that this inspection of LDO had occurred only in September 2016. He also pointed out following dates and events occurred prior to first notice of inspection by the LDO: * On 15.10.2012, AJL applied for registration of establishment employing Contractor labour for construction of building for newspaper/press in Panchkula. See copy of the same at Page 523 to 525 of AE-PB II. * On 31.10.2012, Registration Certificate issued by Dy. Labour Commissioner, Ambala in respect of construction of building for newspaper/press in Panchkula. See copy of the same at Page 526 to 528 of AE-PBII. * AJL has sanctioned plans for construction of printing press at Panchkula property dated 26.11.2012 is at Page 529 to 532....
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.... at all. Please see the copy of the said "Breach Notice" dated 10.10.2016 at page 547 to 548 of AE - PB II (4) In reply to the said Breach Notice, a reply was sent vide letter dated 19.11.2016. (5) The company received another inspection notice dated 05.04.2018 for constituting a committee to again visit the premises. A letter dated 07.04.2018 was addressed by the company to inform that the breaches mentioned in 10.10.2016 breach notice were rectified. Along with that letter, the copies of news papers published between September 2017 till that date were handed over to the concerned officer. (See page 549 to 565 of AE-PB II). (6) The second inspection took place on 09.04.2018. (7) The company received "Show Cause Notice" dated June 18, 2018 referring to the 09.04.2018 inspection and alleging for the first time that no printing activity was being carrying out in that premises. (Please note that the said show cause notice acknowledges that the company's news paper printing activity is being carried out elsewhere). A copy is enclosed at page 566 to 567 of AE-PBII. (8) There was a subsequent notice from LDO dated 24 September 2018. It relies on the order passed by the Ld A....
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....has been obtained by suppressing the material facts, the ld. counsel submitted that Rule 17A, as it then stood, required submission of accounts relating to prior years in cases where the company has been in existence during any year or years, prior to the financial year in which the application for registration is made. Since the Appellant was incorporated on November 23, 2010, and the application was dated March 29, 2011, this requirement was "not applicable". Form 10A, being the application for registration requires, at item no. 2 to provide copies of accounts for latest 1/2/3 years. Since the application dated 29.03.2011 was filed on 31.03.2011, the accounts for the first financial year were not prepared. The Appellant could have very well mentioned "Not Applicable" against item no. 2. However, out of good governance, the Appellant submitted the same documents that were submitted to the ROC on October 15, 2010 for the purposes of section 25 license. Requirement of filing "Future annual income and expenditure estimates" and "Assets and Liabilities Statement with their estimated values as on seven days before making the estimate" are the requirements under the Companies Act, 1956 ....
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....he relied upon judgment of Rajasthan High Court in Indian Medical Trust v. PCIT (414 ITR 296) wherein it was held that where the acquisition of shares is in furtherance of its objects then the same could not be regarded as a non- genuine activity. In said case, investment made by the assessee in a TV channel was held to be in a genuine activity as it was in accordance with the objects of the assessee since it furthered it objects. Thus, in view of the above, there is no substance in the contention of the Id. DR that the note did not talk about the activity of acquiring shares in AJL in February 2011. The said argument of the Ld. DR is not even alleged by the Ld. CIT in his cancellation order and it is not the basis of cancellation. How can the Id DR be permitted to say this at this stage? In support of such a contention, reliance was placed on the decision in the case of Welham Boys' School Society v. CBDT [2006] 285 ITR 74 (Uttaranchal), wherein it is held that where in the show cause notice or in the impugned order, the Commissioner had not alleged that the assessee had obtained the registration by practicing fraud or forgery, said ground cannot survive before the Court. 73 ....
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....s of cancellation is the second leg, namely, the Appellant's investment in shares of AJL, which, according to the Id. CIT, is a real estate company. It is submitted that the Hon'ble Tribunal cannot draw any adverse inference from the Assignment Agreement since the CIT has not drawn, nor has the Id. CIT required the Appellant, before passing the cancellation order, to show cause why adverse inference should not be drawn from the said agreement. 75 Regarding the allegation of ld. representative of the department that the assignment of loan converted into shares of AJL is only activity and besides this, no activity was carried out, he clarified that acquisition of shares in AJL is a preparatory activity in pursuance of the objective of the Appellant. This fact has been disclosed in the notes to Audited Accounts of March 31, 2011 in the following manner:- * The revival of AJL and resuming its newspaper activity was a tall task in view of huge losses and inability to raise funds due to huge debt. Ultimately, it succeeded. This helped YI achieve its objective of getting a ready platform for reaching out to the youth of the country. It was further stated that YI directly als....
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....2 to the year 2011 aggregated to Rs. 90,21,68,980/-.It is further pertinent to point out that Rs. 90,20,22,785/- of the amount advanced to AJL were by way of cheques. AJL utilized the amounts advanced by AICC inter olio for meeting its expenses of running the publications including paying employees' salaries, VRS, PF, ESI, statutory dues and taxes and building and maintaining its newspaper offices. * In the year 2012, in respect of loan given by AICC to AJL, a petition was filed before the Election Commission of India by a political rival of AICC seeking de-recognition of AICC under section 16A of Election Symbols (Reservation and Allotment Order), 1968 on the ground that the party loaned more than Rs. 90 crores to AJL in violation of the guidelines and rules for registration as well as recognition of political parties. The Election Commission of India dismissed said petition holding that there is no direction or instruction of the Election Commission regulating the manner in which the party may spend the funds raised by them and that section 29B/C of the Representation of People Act, 1951 provide for the manner in which the political parties may raise funds and that there is....
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....for intelligence purposes only and should not be used or disseminated for evidential or judicial purposes. Further, this document cannot be taken into account as evidence in any proceedings. In any case, the loan taken by the assessee is part of the objects (clause 18 of its MoA), hence, there is no merit that the loan does not appear to be in line with the stated objects of the entity. The payment of Rs. 50 lakhs for consideration of assigning of loan was duly disclosed in the audited accounts for the year ending 31.03.2011 by disclosing the conversion of shares of AJL and this exercise is in pursuance to the main objects of Young Indian. The STR report is dated 07.02.2011 and the assessee has disclosed the transaction in its audited account for the financial year 2010-11 filed along with the Income Tax Return on 11.10.2011 and the Assessing Officer had initiated enquiry only in July, 2015, i.e., after more than four years. Further, this action was not the basis for impugned cancellation order. 80 He further submitted that the loan was obtained from "R.P. Goenka Group Co.", which has listed companies. Further, while the loan would have been repaid from year to year and TDS has be....
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....ing of corporate veil would not have arisen even before the Hon'ble High Court. The issue in the present case is under the provisions of Income tax Act, 1961 and there is no similar language in the Act as in the lease deed interpreted by the Hon'ble High Court. Accordingly, in the present appeal, reliance on the Delhi HC order for arguing lifting of corporate veil is completely misplaced. 83 Ld. Counsel submitted that what is to be considered is: * as to who is being taxed under the provisions of the Income tax Act, 1961 on the rental income, AJL or the Appellant; * as to who is being granted depreciation on the buildings in computation of income under the provisions of Income tax Act, 1961, AJL or the Appellant; * As to who could be charged to tax on capital gains if the property is sold (though it is not permissible under the provisions of the lease); AJL or the Appellant? The answer to all these questions he submitted is obvious, viz. "AJL" and not the Appellant. Under such circumstances, the proposition argued by the Ld DR that Appellant and AJL are one and the same and that by acquiring the shares of AJL, the Appellant has acquired the properties of AJL is uns....
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....his is not in dispute, whether or not it has section 12AA registration. It is not uncommon for such organizations to receive donations. When receipt of donations by charitable organizations are not considered to be wrong, how receiving something at an alleged discounted value be considered to be so wrong so as to lift the corporate veil of the company or to state that the activity of Appellant is not genuine? He thus submitted that there is no logic in such allegation. 84 During the course of hearing, the ld. DR has also relied on various proceedings in respect of notice issued u/s. 133(6) to the assessee to argue that the assessee had not submitted information called for and tried to evade the proceedings. He submitted that first of all such argument has no relevance to the issue in hand because whether the assessee had complied with the notice issued u/s. 133(6) or not in past was not the subject matter of consideration in the show cause notice issued by the ld. CIT (E) for cancellation of registration and has no relevance for determining whether the registration can be cancelled. They have no connections, whatsoever. What is relevant is that the cancellation proceedings of reg....
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....ent based on 'process of law' is unsustainable as the law does not prohibit the voluntary surrender. In any case, the decisions on surrender of Excise registration cited by the Appellant in its earlier arguments lay down the 'process of law' that the surrender should be acted upon by the department in a reasonable period or else such surrender is deemed effective after such reasonable period. As submitted earlier, in the present case the reasonable period could only be six months whereas the Ld. CIT (E) initiated the process after about 17 months. 88 As regards reliance placed on the judgment of Madras High Court in the case of Prathyusha Educational Trust (supra) on retrospective cancellation of registration u/s. 12A/12AA, the ld. counsel submitted Hon'ble Allahabad High Court in the case of Agra Development Authority (supra) has clearly held that CIT (Exemption) is not empowered to cancel registration with retrospective effect, i.e., prior to the date of issuance of order/notice. To the same effect, there is another judgment of Hon'ble Rajasthan High Court in the case of Indian Medical Trust vs. PCIT, 414 ITR 296. Therefore, if there are to views, then the view f....
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....e properties which is not the object of the assessee. Such proposition is not correct on the facts and material on record because AJL did not stop the business, but there was a temporary suspension. Even otherwise, also, any person who acquires the share of a company whose predominant assets are immovable properties, then such shareholder does not acquire the property himself. The assessee's submission throughout has been that the rental income was incidental to the newspaper business and every license allowed for newspaper business require that certain portion of the properties ought to be used for printing press and balance can rented out. Every newspaper company has significant rental income. 92 Coming to the question raised by the ld. DR that how the publication furthers the objects of Young Indian, he submitted that assessee has already argued at length that the newspapers activity of AJL furthers the objects of the assessee and in support he also submitted at page 18 to 34 of the paper book the data compiled from Google Analytics till date to show that there are almost 62% of the users of online news portal of AJL. Therefore, by this platform, the assessee has achieved succe....
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....aw. In this regard, reliance is placed on the decision of the Mumbai Tribunal in Lilavati Kirtilal Mehta Medical Trust v. CIT [2019] 108 taxmann.com 272 (Mumbai - Trib.) wherein it is held that violation of provisions of section 13 can be a ground for cancellation of registration only under section 12AA (4) and not 12AA (3) and that section 12AA (4) would take effect only from 1.10.2014. There cannot be retrospective cancellation u/s. 12AA (4) prior to 1.10.2014. Case law for this proposition have been cited in the initial submissions. * News papers are considered as the "fourth estate" of the country, ranking fourth after the first three being: Legislature, Executive and the Judiciary. The role of press is, as recognized by the Supreme Court in several cases to which references were made in the initial part of Appellant's submissions, is to further the constitutional values of democracy, secularism, freedom of speech etc. This indeed is the objective of the Appellant. Then how is acquisition of shares of AJL not in accordance with the object of the Appellant? 94 Lastly, the ld. counsel very strongly contended ld. Special Counsel for the Revenue has tried to make out new cas....
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....and the assessee's main objection is that, the registration could not have been cancelled prior to 21.03.2016 w.e.f. 2011-12. Succinctly put, the entire wrangling of the assessee company is that retroactive cancellation is not justified, that is, between the periods 09.05.2011 to 21.03.2016. Cancellation post facto is not disputed rather assessee has acquiesced to such cancellation, albeit from 21 March 2016. 97 The statute provides that if a trust or institution has been constituted to carry out the activities which are of charitable nature as defined in section 2(15) of the Act, then it can apply for registration through an application in prescribed form before the Pr. CIT or CIT u/s 12A/12AA on or before the expiry of period of one year from the date of creation of the Trust or establishment of the Institution. Upon such application, the Pr. CIT or CIT calls for such documents or information from the Trust or institution, as he thinks necessary in order to satisfy himself about the genuineness of the activities and may make such enquiry, as he deems necessary in this regard. On his being satisfied about the genuineness of the Trust or Institution and the genuineness of the a....
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.... about acquisition of AJL or activities carried out by AJL or objects of the AJL or the purpose for acquisition of AJL that it was in furtherance of the objects of the assessee company, Young Indian. Since the ld. DIT(E), based on the material facts placed before him, found that the assessee's objects are charitable in nature, he accordingly granted registration u/s. 12A r.w.s. 12AA(3) of the Act vide certificate dated 09.05.2011. As pointed out by the ld. Special Counsel, Shri G.C. Srivastava, on behalf of the Revenue, such a certificate/order granting registration was subject to various conditions and one very important condition was mentioned, which provided that, "If later on, it is found that the registration has been obtained fraudulently by misrepresentation or suppression of any fact, the Registration so granted is liable to be cancelled as per provisions u/s 12AA (3) of the Act." 99 From the detailed discussion, made here in this order as well as chronology of events as discussed in the foregoing paras 5 & 6, it is fairly evident that the following material fact and information were not placed before the DIT(E) at the time of seeking registration: * Firstly, the factu....
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.... clear-cut breach on part of the assessee company. If there was concealment and suppression of material facts, then such a registration granted is always open for cancellation or revocation at any time by the ld. DIT (E)/CIT (E) when it comes to his notice. In fact, this was one of the conditions mentioned while granting registration and such condition, in our opinion, has been clearly violated. 101 From the perusal of the impugned order of cancellation of registration and the replies submitted by the assessee before the ld. CIT(E), it is seen that nowhere the assessee has even mentioned or brought on record that the purpose for acquiring AJL was in furtherance of any of its objects which has been vociferously argued before us that, since AJL was into the business of publication of newspapers and the purpose of acquiring the AJL was to use the print media and digital media to promote the objects of Young Indian. We have gone through the replies filed by the assessee company before the ld. CIT (E) in the course of cancellation proceedings and we find that the assessee has nowhere stated that either the objects of the AJL were aligned with that of the assessee company and by acquiri....
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....om March 2016. This is evident from the perusal of the additional evidence paper book; whereby following documents have been furnished:- Sr. No. Description of document Page Nos. 1. The masthead of National Herald Newspapers published by the AJL from 24 September 2017 to 28 July 2019 1-92 2. The masthead of Sunday Navjivan Newspapers published by the AJL from 14 October 2018 to 28 July 2019 93-132 3. Copies of various reports, photographs of: a. Launch of Commemorative Edition of National Herald (Publication) in Bangalore on 12 June 2017 133 b. The Hindu 134-135 c. NDTV 136-137 d. Chronicle 138-140 e. Star of Mysore 141-143 f. Copy of National Herald Commemorative Edition 144-153 4. Copies of various reports, photographs of: a. Launch of Commemorative Edition of National Herald (Publication) in New Delhi on 1 July 2017 154-156 b. ABP 157-158 c. DNA 159-162 d. Dainik Bhaskar 163 e. Financial Express 164-165 f. Hindustan Times 166-168 g- Mint 169-172 h. Copy of National Herald Commemorative Edition 173-185 5. Copies of various reports, photographs of : a. Launch of....
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....it is quite evident these are post surrender letter of the assessee filed in March 2016 and some are even after the date of passing of the impugned cancellation order. All these documents merely go to show that AJL had recommenced or endeavored to re-start the publication activity from the year 2016- 2017 onwards. As opined above, these documents even if we admit, are not of much significance for the reason that all these activities of printing and publication of articles had started when the assessee itself had given up its registration in March 2016. Prior to this date, it is an admitted fact that publication of newspaper business of AJL was suspended or as stated by the ld. counsel for the assessee, there was temporary lull in the business for the period 2008 to 2016. Neither between the periods 2011 to 2016, any such publication business had started nor has it been brought on record before the ld. DIT (E) either at the time of grant of registration or at the time of its cancellation. As far as the documents, like resolution passed by the board of directors of AJL on 26.09.2016; letter written to Registrar, Newspapers of India dated 23.01.2014; Form No. 23 submitted by AJL to RO....
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....as been stated to be for fulfillment of youth commitment for ideals of democratic and secular society, in fact, was payment for repaying back the loan amount on behalf of the AJL to AICC and acquisition of shares of AJL, and interest payment on loan of Rs. 1 crores. Thirdly, publication of newspapers of AJL had ceased to exist, etc. and the activities of AJL were into the Real Estate business and by acquiring AJL, the assessee is trying to manage, control and engage in Real Estate business of AJL. Lastly, the factum of suo moto surrender of registration u/s. 12A has also been found to be incorrect, as it was sequel to investigation by Investigation Wing since 2014 and based on these findings and detailed discussion, he has held that he is not satisfied that the activities of the assessee are genuine or not carried out in accordance with its objects. 105 One of the key contentions raised and harped upon at length on behalf of the assessee, supported with catena of documents that AJL was never into Real Estate business, for which we have already discussed in detail the relevant arguments placed by the ld. counsel. Even if we agree, with the ld. counsel that AJL was not carrying out ....
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....ration u/s. 12AA, but also at the time of cancellation. The events clearly pointed out that even before incorporation of Young Indian, the registered office was shifted to Delhi and the Directors managing the affairs of the assessee company were taken on Board of AJL. Not only that, Young Indian was permitted to use the property of AJL as its registered office. Further, the manner, in which loan of Rs. 90 crores was assigned by AICC to Young Indian for paltry consideration of Rs. 50 lakhs does not reflect the real intent of the transaction. Not all these facts indicate that the assessee company had any clear conscience or intent for acquiring the AJL to carry out the charitable activities. Not a single such instance have been demonstrated that it had carried out any activity in furtherance of its objects, nor any such thing has been placed before us that it had carried any activity between the years 2011 to 2016 or up to the date of cancellation of registration. Even as noted by the ld. CIT (E) that the Income-tax returns do not indicate that any expenditure has been incurred in furtherance of the objects except for payment of interest on loan borrowed from a Kolkata based company....
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.... way back on 23.01.2014, AJL had filed letter to Registrar for Newspapers of India, which indicates the assessee's intention to resume the publication activities. However, as we have held earlier, such an intention was never brought on record before the departmental authorities or even before the ld. CIT (E) during cancellation proceedings. Even filing of letter to Registrar for Newspaper of India to start the publication business, does not carry much weight, because admittedly, such an intention remained on paper and nothing had started prior to the year 2016-17 by that time the assessee had already forgone its claim for registration u/s. 12AA. Acquiring and construction of various buildings of AJL at Panchkula, Mumbai etc. does not prove that the publication activities were carried out and even if there was some kind of future intent to do so, then also, it does not make AJL a newspaper publication company between 2008 to 2016, because not a single activity was carried out through which it can be inferred that AJL was acquired by YI to use the platform of newspaper publication, albeit entire conduct of the assessee company shows that AJL has been acquired for such nominal amount ....
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....of Young India and various other issues connected thereto are concerned, they are based on certain facts stated in the show cause notice issued by the Income Tax authorities on 15th June, 2018 and even if show cause notice is ignored, they do form part of the facts stated by co-ordinate Bench of this Court while deciding three writ petitions decided on 10th September, 2019, that is, W.P.(C) No.8482/2018 and other connected matters which were filed by the shareholders of Young India while challenging the action taken by the Income Tax authorities. There is no whisper or serious challenge to these factual aspects by the appellant. They do not say, even orally, that these facts stated and relied upon by the respondents are false, incorrect, fabricated, untrue etc. They only say that certain facts have been stated without filing a counter affidavit. If the facts so stated, cognizance of which have been taken by the writ Court, are based on materials available in proceedings held before the L&DO and by a coordinate Bench of this Court in a writ petition, we see no reason as to why we cannot take cognizance or judicial notice of these facts and proceed to consider them for deciding the l....
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.... publication of the newspaper in the current financial year 2016-17. Referring to this letter, the learned Solicitor General had argued that this letter was written only for pre-empting the authorities so that they are not surprised if no printing activities are found in the premises. In fact, Sh.Tushar Mehta is right in contending that this was an attempt by the appellants and, in fact, an admission by them that no printing activity was being carried out in the premises at that point of time. That apart, when we go through the four show cause notices available on record issued on 10th October, 2016, 5th April, 2018, 18th June, 2018 and 24th September, 2018 and the reply filed thereto, we find that various breaches were pointed out in all these show cause notices and they were replied to by the appellant company and the cumulative admitted position that can be made out from the reading of these documents are as under. Xxxxxxxxxxxxxxxx 50. When the premises was inspected on 26th September, 2016, no press activity was being carried out in the area. Press activity and publication of the newspaper was suspended right from the year 2008 and all the employees were granted VRS. After ....
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....f shareholding cannot be a ground for holding that to be change of ownership or transfer of the lease. Placing reliance on the judgment of Bacha F. Guzdar (supra) detailed submissions were made by Dr. Singhvi to emphasize that a shareholder only acquires a right to participate in the profit of the company. He gets no interest in the property of the company and even if the shareholders of the company do have some voice in administering the affairs of the company, but their interest is limited to sharing the profits of the company and the company, a juristic person, which is distinct from the shareholders still owns the property. It is argued that in the backdrop of this legal position even if some of the shares of the company have been transferred that would not mean that the ownership of the leased premises also get transferred to Young India Ltd. It was emphasized that the ownership still remains even on such transfer with AJL and the said transfer would not have any effect on the ownership or transfer of the leased premises. To consider this aspect of the matter, we are required to take note of the shareholding pattern of both the companies and the manner in which the transaction....
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....formal deed of assignment was executed by AICC assigning the loan of Rs. 90 crores in favour of Young India. Immediately thereafter on 21st January, 2011, an EGM of Associated Law Journal was held approving fresh issue of 9.021 crores shares to Young India and on 22nd January, 2011 i.e. on the next day the second Managing Committee of Young India was held in which Smt. Sonia Gandhi, Mr. Motilal Vohra and Mr. Oscar Fernandes were appointed as Directors and the 550 shares of the existing shareholders of Young India - Suman Dubey and Sam Pitroda were transferred to Smt.Sonia Gandhi and Mr.Oscar Fernandes and on the same day fresh allotment of Young India shares were made in the following manner: (a) 1,900 shares having paid up value of Rs. 1,90,000/- to Shri Rahul Gandhi, (b) 1,350 shares with a paid up amount of Rs. 1,35,000/- in the name of Smt. Sonia Gandhi, (c) 600 shares with a paid up value of Rs. 60,000 in the name of Sh. Motilal Vohra and (d) 50 shares with a paid up value of Rs. 5,000 in the name of Sh.Oscar Fernandes and after issuance of PAN by the Income Tax Department a bank account was opened by Young India with Citibank on 14th February, 2011 and the cheque issued by M/....
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....affairs of the company and are entitled to as provided in the Articles of Association to declare the dividends and distribute the profits of the company but their right individually or collectively is nothing more than participating in the profits of the company, it is held that the company is a juristic person and is distinct from the shareholders. In fact, it is the company which owns the property and not the shareholder. The judgment further goes to say that there is nothing in the Indian Law to warrant the assumption that the shareholder who by his share buys any interest in the property of the company which is a juristic person entirely different from the shareholder. This in fact is the law laid down by the Constitution Bench of the Supreme Court in the aforesaid case. 61. It was vehemently argued by Dr. Singhvi that once this is the accepted legal position that is culled out on a perusal of the law laid down by the Constitution Bench, then by no stretch of imagination can it be argued that on transfer of shares of AJL to Young India Ltd., there is transfer of ownership or lease or property as contemplated in clause 13(3) of the lease in question. By referring to the judgme....
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....m of partnership business without any transfer for consideration being involved can be taken as unauthorised transfer of lease which could be declared void." 63. Thereafter, the learned Court proceeds to discuss various issues and takes note of the fact that the transaction in fact technically does not sell the lease right but only shares are transferred and in para 24, it has been held that the principle of lifting of corporate veil as an exception to the distinct corporate personality of a company and its member is recognized not only to unravel tax evasion but also to protect public interest which is of paramount importance and to prevent a corporate entity in attempting to evade legal obligation. It has been held by the Hon'ble Supreme Court after relying upon an earlier judgment in the case of Workmen vs. Associated Rubber Industries, (1985) 4 SCC 114 that this doctrine is employed to prevent device and to avoid welfare legislation. After observing so, various judgments of this Court including Skipper Construction (supra) and the judgment of the House of Lords in the case of Salomon v. Salomon, 1897 AC 22 is taken note of and the cardinal principle laid down in the case of S....
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....of India[Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 : (2012) 3 SCC (Civ) 867] cited by the learned counsel for the respondent have no application to the present case once real transaction is found to be different from the apparent transactions. In fact, the principle of law laid down in Vodafone case [Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 : (2012) 3 SCC (Civ) 867] that the court can look to the real transaction goes against the respondent." 64. Finally in para 31, it is held by the Hon'ble Supreme Court that while discerning the true nature of the entire transaction, the Court is not to merely see the form of the transaction which is of sale of shares but also the substance which is the private sale of a mining right avoiding legal bar against transfer of sale rights. In fact, the learned Court deals with the issue in para 31 in the following manner: "31. ....Thus, while discerning the true nature of the entire transaction, the court has not to merely see the form of the transaction which is of sale of shares but also the substance which is the private sale of mining rights avoiding legal bar against transfer of sale ....
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....crative interest in the premises to Young India. In fact, the contention of Dr. Singhvi has to be rejected and rightly so was rejected by the Single Judge even though without applying the principle of lifting of the corporate veil. In case the theory of lifting of the corporate veil, as discussed hereinabove, is applied and the transaction viewed by analyzing as to what was the purpose for such a transaction, the so called innocent or legal and permissible transaction as canvassed before us, in our considered view, is not so simple or straight forward as put before us, but it only indicates the dishonest and fraudulent design behind such a transaction as laid down in various judgments referred to not only in the case of Gotan Lime Stone Khanij Udyog (P) Ltd. (supra) but also in the case of Union Territory of Estate Officer, UT, Chandigarh vs. S.C. Information Technologies, (2016) 12 SCC 582, Skipper Construction (supra), wherein also the theory has been applied after considering the principle laid down in Salomon (supra) and in para 28, in the case of Skipper Construction (supra), the law has been crystallized in the following manner: "28. The concept of corporate entity was evol....
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.... their Lordships have held that "the transaction viewed by analyzing as to what was the purpose for such a transaction, the so called innocent or legal and permissible transaction as canvassed before us, in our considered view, is not so simple or straight forward as put before us, but it only indicates the dishonest and fraudulent design behind such a transaction......". 113 The sequitur of the findings and observations of Hon'ble High Court in the case of AJL clearly clinches the issue in hand wherein the court has taken note of identical facts as discussed here in this order and have categorically held that; * The share holding pattern of both the companies, i.e., AJL & YI and the manner in which the transaction has taken place, principle of lifting of corporate veil is clearly applicable; * Their Lordships have narrated the entire factum of advancing of loan of Rs. 90 crores by AICC to AJL and the manner in which it has been assigned to YI for a meager sum of Rs. 50 lakhs, brings the entire transaction within the ambit of some kind of colourable device because YI had acquired beneficial interest on AJL's properties which have been valued for more that 400 crores on a meage....
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....ncorporation of YI till the application for registration u/s. 12AA before the DIT (E), was not to carry out any charitable activity, but to acquire huge assets of hundreds crores of Rs for a negligible amount. Seeking a status of charitable institution and to get registered under welfare legislation like section 12A/12AA, with such kind of conduct clearly indicates that it is a misuse of law and some kind of colourable device. This is perpetuated by the fact that all these transactions were completely hidden from the Income-tax Department and DIT (E) while seeking the registration u/s. 12AA. If all these things are put in perspective, then the contention of the ld. Special Counsel and ld. CIT (E) is to be believed that it is only when the Investigation Wing and Income-tax Department started making certain investigation and enquiries and also looking to the fact that no genuine activity was carried out for the period of five years, the assessee may have been prompted to surrender its registration u/s. 12AA. 115 There is another angle which ponders us is that, if no activities were carried out by YI towards charitable activity between the period 2011 to 2016, then why so much of cl....
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....erminated by order of the Board dated April 26, 1990 whereby the Board, upon consideration of the facts and material before it, found that the appellant-company had become economically and commercially non-viable due to its huge accumulated losses and liabilities and should be wound up. The appeal filed by the appellant-company under Section 25 of the Act against said order dated January 7, 1991. As a result of these orders, no proceedings under the Act was pending either before the Board or before the Appellate Authority on February 21, 1991 when the Delhi High Court passed the interim order staying the operation of the Appellate Authority dated January 7, 1991. The said stay order of the High Court cannot have the effect of reviving the proceedings which had been disposed of by the Appellate Authority by its order dated January 7, 1991. While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of oper....
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....he order of the Court does not mean that the said order does not exist in law. Hon'ble Bombay High Court in Nilkamal Limited vs. Union Territory of Dadar & Nagar Haveli, in criminal writ petition No. 3794 of 2014, after referring to various judgments including that of Shree Chamundi Mopeds Ltd. (supra) held that even if a decision of the High Court is stayed by the Apex Court, the subordinate courts are bound by the same unless the decision is set aside by the Apex Court. Accordingly, the High Court directed the Magistrate to follow the judgment of High Court unless and until it is set aside by the Hon'ble Apex Court. 118 In view of the aforesaid law, the contention raised by the ld. counsel is hereby rejected. Even otherwise, also here it is not the case that the order of the Hon'ble High Court has become non-operative, albeit the consequences of eviction pursuant to the directions of Hon'ble High Court, has been stayed and not the order. The ld. counsel has also relied upon the judgment of Delhi High Court in the case of Bhushan Steel (supra) and of Calcutta High Court in the case Exide Industries Ltd. (supra) where the order has been stayed by Hon'ble Supreme Court, and in Subs....
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..... AJL Form - 23 submitted to ROC on 29 September 2011 along with acknowledgement and SRN issued by MCA for amending MOA in 2011 498-502 10. Notice of EGM published in English and Hindi Newspaper for changing MOA for incorporating not for profit clauses in MOA in 2016 503-504 11. AJL Form - MGT 14 submitted to ROC along with amended MOA along with acknowledgement and SRN issued by MCA for amending MOA as passed by Shareholders in 2016 505-510 12. Email dated 25.02.2016 received from MCA after filing the AJL Form - MGT 14 in 2016 511 13. Form - MGT 14 was resubmitted along with response of AJL dated 10.03.2016 to Email dated 25.02.2016 received from MCA 512-519 14. Proof that said response of AJL dated 10.03.2016 also send through courier, registered post and speed post to MCA 520-522 15. Application dated 15.10.2012 for Registration for establishment Employing Contractor Labour for Construction of Panchkula Building 523-525 16. Registration Certificate dated 31.10.2012 issued by Dy. Labour Commissioner, Ambala in respect of Employing Contractor Labour for Construction of Panchkula Building 526-528 17. Relevant Extract of Approved Building pla....
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.... 580-592 34. Classification of AJL as a Newspaper Company by ROC as per its CIN Numbers 593-600 120 Most of these documents, though submitted at the rejoinder stage, are in nature of clarifications to the submissions made by the ld. DR and the letters written to DDIT in 2014 and certain notices issued by LDO, but none of the documents filed impinge upon our finding in any manner as given above, because none of these documents prove that acquisition of AJL by the assessee company was for carrying out any charitable activities in pursuance of its objects nor any such activity was carried during the relevant period. Accordingly, these additional evidences, as filed by the assessee, though are taken on record, but we do not deem fit to adjudicate on each and every document for the reasons given in the foregoing paragraphs. 121 One of the key contentions raised by the ld. counsel before us is that the ld. CIT(E) does not have the power to cancel the registration from retrospective date and any such cancellation can only be prospective, i.e., from the date of passing of the order and in support of which certain decisions have also been relied upon. From a bare reading of Section 1....
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....se. 122 Here, in this case, as we have gathered from the material facts on record and discussed in detail, the assessee at the time of seeking registration itself has concealed the material facts and not disclosed the entire events of transactions which had undergone from the date of inception of assessee company till the grant of registration and one of the conditions on which the registration has been granted stood violated from the day one and therefore, under these circumstances, the ld. CIT(E) was fully justified in law and on facts in cancelling the registration from the date of granting of registration itself, i.e., from the assessment year 2011-12. Secondly, here in this case it has been found that even after grant of registration u/s. 12AA, no genuine activities have been carried out by the assessee either in furtherance of its objects or otherwise, which can be held to be for charitable purpose because one of the so called purpose of acquiring AJL was not carried out at all. Otherwise, also, we have already discussed and given our categorical findings that till the grant of registration and surrender made by the assessee, no worthwhile activities were carried out by AJL.....