2020 (2) TMI 329

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....lowing two questions stated to be substantial questions of law:- "(I) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in quashing the order passed by the Director of Income Tax (Exemptions) cancelling the registration under Section 12AA(3) of the Income Tax Act, 1961 despite the fact that activities undertaken by the assessee cannot be said to be charitable in nature in view of the proviso to section 2(15) of the said Act inserted w.e.f. 01.04.2009? (II) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in its findings at para 9 of its order in ITA No.625/Mum/2012 dated 05.04.2017 i.e. "Since, the registration is already allowed consequently no disallowance can be made in respect to interest income and leasing activity income i.e. the rent and other fees, because these falls under the objects of the assessee's institution and hence on merits also the assessee has a case" which is not in accordance with the provisions of section 13(8) of the Income Tax Act, 1961?" 4. From the above, what is discernible is that issue involved in this appeal is cancellation of registration of ....

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..... Director of Income Tax, 360 ITR 633 set aside the order passed by the Director of Income Tax (Exemptions) vide the order dated 5th April, 2017. Tribunal held that it did not find anything in the order of the Director which held that respondent was undertaking any activity which was not genuine or that the Trust or Institution was not genuine. It was further held that there were no materials on record to show that the respondent Trust or its affairs were not being carried out in accordance with the objects of the respondent Trust. Accordingly, while setting aside the order of the Director, registration of the respondent was restored. 13. Aggrieved, present appeal has been preferred. 14. Learned counsel for the appellant has referred to the order passed by the Director and submits that the said order clearly indicated as to why registration of the respondent was required to be cancelled. He submits that in so far activity of the respondent is concerned, clearly the proviso to Section 2(15) of the Act was attracted, thereby rendering the respondent noncharitable. He submits that on similar issue, Supreme Court has granted leave to file appeal in Principal Commissioner of Incom....

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.... in the Special Leave Petition filed by the Department, Mr.Dastur submits that issue in the said case is different. Referring to the decision of the Calcutta High Court from where the Department had filed SLP i.e. Principal Commissioner of Income-Tax Vs. JIS Foundation, 2018 (89) taxmann.com 226 (Calcutta), he submits that in the said case Commissioner had cancelled registration of the assessee-Trust on 31st December, 2008 when sub-section (3) of Section 12AA was introduced by the Finance Act, 2010 with effect from 1st June, 2010. Therefore, the question for consideration before the Supreme Court is whether Commissioner could have cancelled the registration on 31st December, 2008, when the power to cancel registration was inserted in the statute book from 1st June, 2010. In other words, Commissioner had exercised a power which was not available to him on the date of exercise of power. That issue is not before the court in the present proceeding. 19. Submissions made by learned counsel for the parties have been considered. 20. At the outset, it would be apposite to advert to the relevant provisions of the Act dealing with Trust. 21. Section 11 provides that income from prop....

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....been granted registration and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such Trust or Institution are not genuine or are not being carried out in accordance with the objects of the Trust or Institution, he shall pass an order in writing cancelling the registration of such Trust or Institution. As per the proviso no order of cancellation of registration shall be passed unless such Trust or Institution has been given a reasonable opportunity of being heard. Therefore, two conditions are required to be satisfied before invocation of section 12AA (3) of the Act. Firstly, the activities of the Trust or Institution are not genuine and secondly, the activities are not being carried out in accordance with the objects of the Trust or Institution. The use of the word "or" between the two conditions is indicative of the disjunctive nature of the two conditions. In other words, it is enough if one of the two conditions are satisfied. The requirement therefore is that the authority competent under Section 12AA(3) to cancel registration must arrive at the satisfaction that one of the two conditions mentioned therein is attracted. 26. Before re....

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....na (supra) this court held that jurisdiction to cancel registration would only arise if there is any change in the nature of activities of the institution. 30. Having noticed the above, objects of the respondent Trust may be adverted to. Objects of the Trust appear in clause 3 of the trust deed dated 5th July, 1978, which read as under:- "(i) Affording medical relief and spread of medical science in such manner as the Trustees may think fit including:- (a) Establishment and maintenance and support of Hospitals Health Centres and Dispensaries with or without Medical Schools and Nursing Institutions or any of them for treatment of patients suffering from diseases or accidents. (b) Establishment acquisition and maintenance and support to Hospitals, Dispensaries, Maternity Homes, Homes Sanatoria, Research Centres, Laboratories. Preventive Health Centres, Hospice's, Diagnostic Centres, Medical Colleges and Medical Schools. (c) Grant of subscription and donation to Hospitals, Dispensaries, Convalescent Homes, Asylums, Hospices, Health Centres, Baby Clinics, Nursing Homes and other Public Institutions for administering medical relief upon such terms ....

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....Trust shall always be a public charitable object excluding (i.e. other than an object of a religious nature and shall be such as may be recognised as a public charitable object as defined in Section 2(15) of the Income Tax Act, 1961 or any statutory modification or reenactment or any other Act governing taxation of income for the time being in force in India. Without prejudice to the generality of the foregoing object or purposes but subject to the limitation and conditions as laid down in this Deed the Trustees may each year spend or apply the residue of the income of the Trust Fund and may at their discretion at any time and from time to time spend or apply also the corpus of the Trust Fund or any part of parts of the trust Fund in or towards any one or more of the objects or purposes (which according to law be public charitable objects or purposes) to the exclusion of the others or other of them and in such proportion and manner in all respects as the Trustees may think fit. " 32. In the instant case Tribunal discussed the objects of the assessee i.e., the respondent and returned a finding of fact that the entire objects are charitable in nature having regard to the meaning o....