TaxTMI 
TaxTMI 
2022 (11) TMI 840
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....y the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 ('the Relaxation Act'), clause (ac) was inserted in sub-section (1) of Section 12A of the Act with effect from 1st April, 2021. As per subclause (i) of clause (ac), where a trust was already registered under section 12AA prior to the amendments made by the Relaxation Act, such Trust had to file a fresh application for registration. Accordingly, in terms of the amended law, the assessee filed a fresh application before the Ld. CIT(E) for registration under section 12A(1)(ac)(i) in the Form No. 10A dated 28th August, 2021 and the registration was granted to the assessee vide the impugned order dated 24th September, 2021 in Form No. 10AC notified under section 12AB(1)(a) of the Act. 3. It is noted that the grant of registration was made subject to several conditions imposed at Serial Number 10 of the impugned order. According to the assessee, this action of Ld. CIT(E) imposing conditions while according registration to the application made u/s 12A(1)(ac) of the Act was impermissible and in excess of the jurisdiction vested in him. It is the case of the assessee that the provisions contained in ....
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....n support of his contention, the Ld. Sr. Counsel brought to our notice that this identical issue was adjudicated by this Tribunal in the case of Saifee Burhani Upliftment Trust vs. CIT (2022) (ITA 1305/Mum/21) wherein it was held that Section 12AB of the Act does not authorise the Principal Commissioner or Commissioner to impose any conditions for grant of such registration. 7. Per contra, the Ld. CIT-DR vehemently opposed the submission of the Ld. Sr. Counsel for the assessee. He sought to justify the action of Ld. CIT(E) to have prescribed conditions for grant of registration u/s 12AB of the Act. Drawing our attention to the Form 10AC prescribed by Rule 17A of Income Tax Rule (1962) (hereinafter "the Rules"), the Ld. CIT-DR contended that the Ld. CIT(E) has passed the order in accordance with the prescribed Form 10AC notified by the Rules. Therefore, according to him, the prayer of the assessee seeking deletion of the conditions stipulated by the Ld. CIT in Form 10AC while granting registration u/s 12AB of the Act cannot be allowed by this Tribunal. He submitted that the Tribunal itself is a creature of statute (Income Tax Act, 1961) and therefore it cannot examine the vires o....
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....jection made by the Commissioner of Income-tax and remitted to decide the issue afresh after affording a reasonable opportunity of being heard. We do not find any ground to interfere with the order of the Tribunal." * CIT vs. Mahavir Jain Society (2018) (402 ITR 301) (P&H) "As regards the plea that the assessee had offered no explanation about the registration of the Society twice, it was recorded by the Tribunal that registration of a society was not a pre-condition for granting registration under Section 12AA of the Act. Thus, it was rightly concluded by the Tribunal that the CIT was not justified in rejecting the application for registration of the assessee-Society by insisting on the conditions not contemplated by the statute." * New Life in Christ Evangelistic Association vs. CIT (2000) (246 ITR 532) (Mad) "The language of the section does not show that in order to be able to get registration under section 12A, there is necessity of first establishing as to how the concerned institution or, as the case may be, the society would be able to claim the exemptions under section 11 or 12. There is nothing in the language to suggest that an institu....
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....nted. It is not denied by the assessee that on the date of the application under Section 12AA, it was yet to commence its operation. But nevertheless the genuineness of the objects of the trust were not questioned by the Commissioner. Considering the fact that the continuance of registration is further a subject matter of scrutiny by the Commissioner as contemplated under Section 12AA(3) of the Income Tax Act, we do not think that the Revenue would be justified in refusing the registration at the threshold." 9. Shri Pardiwala further pointed out that, the Commissioner of Income-tax is a quasi-judicial authority and can only exercise those powers which are expressly conferred upon him under the Act. Absent such explicit conferment, the Commissioner cannot be assumed to have any implied powers. In this regard, he placed reliance on the judgment of the Hon'ble Supreme Court in the case of Industrial Infrastructure Development Corporation vs. CIT (2018) (403 ITR 1), wherein the Court held that prior to the amendments made by the Finance (No. 2) Act, 2004 which conferred on the Commissioner the power to cancel registration, no such implied power could be inferred. The relevant extrac....
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....issioner 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, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution after affording a reasonable opportunity of being heard. (5) Without prejudice to the provisions of sub-section (4), where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, it is noticed that- (a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or (b) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality, then, the Princi....
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....ing shall mean "specified violation",- (a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or (b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or (c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or (d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or (e) any activity being carried out by the trust or institution- (i) is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was reg....
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.... accordingly, the provisions must receive a strict interpretation. 18. Countering the submission of the Ld. CIT-DR, that Form 10AC permits the Ld. CIT to prescribe conditions, Shri Pardiwala submitted that, while Form 10AC, as notified by the Central Board of Direct Taxes ('the Board'), does contemplate the imposition of conditions, but even then the said Form cannot override the express provisions of the Act, which as discussed above, set out only four (4) specific conditions, the violation of which can lead to cancellation of registration. In this regard, the Ld. Sr. counsel placed reliance on the following judgments, wherein it has been held that a Form notified by the Board cannot override the Act or have any effect on the operation of the statute:- * CIT vs. Tulsyan NEC Ltd. (2011) (330 ITR 226) (SC) "13. Lastly, it is immaterial that the relevant form prescribed under Income-tax Rules, at the relevant time (i.e., before 1-42007), provided for set off of MAT credit balance against the amount of tax plus interest i.e., after the computation of interest under section 234B. This was directly contrary to a plain reading of section 115JAA(4). Further, a form pr....
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....e clear. They specifically speak of the rules and not the form. In principle also no distinction between the form and the rule can be drawn to judge the extent of delegation under section 11(2)(a) where the language does not permit delegation of power to prescribe limitation to give notice. The conclusion is thus inevitable that the Income-tax Rules could not fix a time-limit for submitting the application in Form No. 10 under rule 17 and, therefore, the Tribunal was correct in its conclusion." * Sales Tax Officer vs. KI Abraham (1967 AIR SC 1823) "The decision of the question at issue therefore depends on the construction of the phrase "in the prescribed manner" in s. 8(4) read with s. 13 of the Act. In our opinion, the phrase "in the prescribed manner" occurring in s. 8(4) of the Act only confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they are sold, and to which authority the form is to be furnished. But the phrase "in the prescribed manner" in s. 8(4) does not take in the time-element. In other words, the sect....
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....bjection Certificate' from the State Government for entertainment of such an application, thereby defeating the very right of seeking recognition at the pleasure of the State Government. 43. Keeping in view the considerations, the National Council, for the purposes of making an application for recognition in terms of Section 14(1) of the Central Act, could have only prescribed the form, the manner and mode in which the application was required to be filed. But, in the guise of the said power it has prescribed the condition precedent for maintainability of such an application in the form of seeking No Objection Certificate from the State Government thereby virtually abdicating its statutory powers in the State Government and that too without there being corresponding obligation on the State Government for grant of such certificate by exercising its discretion within the framework of defined guidelines. Therefore, incorporation of the impugned clause (e) in the Central Regulations is clearly ultra vires the powers of the National Council." 20. In view of the aforesaid judicial precedents, Shri Pardiwala thus submitted that while prescribing a 'Form', the Board could n....
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....consequence, according to the learned counsel, is that the rules have acquired a higher status - almost as good as that of the statute itself. It is not possible to agree. The requirement of laying before the House is one form of Parliamentary control. But by that means the rules do not acquire the status of the statute made by the Parliament....To reiterate, the rules even after they are laid before both Houses of the Parliament for the specified period, yet continue to be delegated legislation. All that may be said is that the Parliament did not find any justification to amend or modify the rules and nothing more." * Kerala State Electricity Board vs. The Indian Aluminium Co. Ltd. (1976 AIR SC 1031) (SC) (Constitution Bench) "In India many statutes both of Parliament and of State Legislatures provide for subordinate legislation made under the provisions of those statutes to be placed on the table of either the Parliament or the State Legislature and to be subject to such modification, amendment or annulment, as the case may be, as may be made by the Parliament or the State Legislature. Even so, we do not think that where an executive authority is given power to ....
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....e before each House of Parliament for a period of thirty days and that the House had power to modify the rules. The submission was that when once the rules had been so made, then they could not be called in question. The Supreme Court has pointed out in Hukam Chand v. Union of India AIR 1972 SC 2427, 2431 as follows. That was also a case where rules could be made to carry out the purposes of that Act. It was further added that the Act of the Central Government in laying the rules before each House of Parliament would not, however, prevent the courts from scrutinising the validity of the rules and holding them to be ultra vires if on such scrutiny the rules are found to be beyond the rule-making power of the Central Government. Thus, section 296 does not add any greater force to the rules than what they ordinarily have as pieces of subordinate legislation." * V. Verghese and Anr. vs. DCIT (1994) (210 ITR 526) (Kar) "The mere fact that the rule had been laid before Parliament in terms of section 296 of the Act would not elevate the rule into legislation enacted by Parliament. We may usefully refer in the context to the decision of the Supreme Court in Kerala State E....
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.... or as derogatory to them and ignoring it, for such reason, for the purposes spoken by it, the Tribunal would in an indirect manner be really striking it down as ultra vires the section and thus exercising the very same powers which in Venkatraman's case (supra) and the other cases that followed and reiterated it the Supreme Court has in unmistakable terms made clear it has not, appears to us to stem from an improper appreciation of the totally divergent legal effects of an order striking down a particular rule as ultra vires and an order passed ignoring that rule as ineffective for its conflict with the parent statute. As pointed out by the Delhi High Court in P.C. Mehtra v. D.R. Khanna AIR 1971 Delhi 1 FB, when a competent court declares a particular provision void and strikes it down, that provision would become non est and be deemed to have never existed in the statute book. There is then no scope for curing the defect which voided it by means of any amendment to that provision. In the eye of the law, it had never been born and is hence not capable of being subjected to any alteration by way of amendment. If in the administration of the statute a particular rule is found ineffe....
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....y. In this regard, reliance is placed on the judgement of the Supreme Court in the case of Bharat Barrell and Drum Mfg. Co. Ltd. vs. The Employees State Insurance Corporation (1972 AIR SC 1935)- "Such a provision affects substantive rights and must therefore be dealt with by the legislature itself and is not to be inferred from the rule making power conferred for regulating the procedure unless that is specifically provided for. It was pointed out that in the Constitution also where the Supreme Court was authorised with the approval of the President to make rules for regulating generally the practice and procedure of the Court a specific power was given to it by Art. 145 (1) (b) to prescribe limitation for entertaining appeals before it. It is therefore apparent that the legislature does not part with the power to prescribe limitation which it jealously retains to itself unless it intends to do so in clear and unambiguous terms or by necessary intendment." 26. Applying the ratio laid down in the aforesaid judgments to the instant case, the Ld. Sr. counsel submitted that the Act did not authorize the Commissioner to prescribe any conditions while granting registration. E....
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....5. The trust or institution established for charitable purpose created or established after the commencement of this Act, shall not apply any part of its income for the benefit of any particular religious community or caste. 6. No non-genuine activity shall be carried out by the trust or institution. 7. No such activity shall be carried on by the trust or institution which is not in accordance with all or any of the conditions subject to which it was registered. 8. The trust or institution shall comply with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1) of section 12AB. 9. The form for registration in Form No 10A has been duly filled in by providing all the information or documents and no false or incorrect information or documents have been provided. 10. Where the trust or institution is required to furnish application for registration under sub-clause (ii) of clause (ac) of sub-section (1) of section 12A the said trust or institution shall furnish such application within the time allowed under that clause. 11. Where the trust or institution has adopted or underta....
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.... that while granting registration u/s 12A of the Act the Ld. PCIT/CIT is empowered to stipulate any conditions subject to which registration shall be granted. We are unable to agree with the Ld. CIT-DR's contention that the Ld. CIT(E) was justified in stipulating these conditions as it was set out in prescribed Form 10AC, which at serial 10 says about "conditions subject to which registration being granted". For the elaborate contentions set out by the Ld. Sr. Counsel, as already discussed above, and the case laws cited according to us, the Form prescribed by the CBDT in terms of Rule 17A cannot over-ride or expand the scope of the statutory provision contained in Section 12AB of the Act, we agree with the Ld. AR that the subordinate/delegated legislation which is placed before the Parliament in terms of section 296 of the Act, does not elevate such subordinate legislation to the level of the law enacted by the Parliament, as held by the Hon'ble Supreme Court in the case of Bharat Hari Singhania Vs CWT (supra) and the Hon'ble Karnataka High Court in the case of V. Verghese and Anr. Vs DCIT (supra). Moreover, as rightly pointed out by the Ld. Sr. counsel, it was the relevant Rule as....
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....t provision. In so far as the second question regarding imposition of conditions was concerned, the Tribunal held that section 12AB of the Act does not authorise the Commissioner to impose any conditions while granting registration. In this regard, the relevant para 11 of the decision is reproduced herein-below- "However, in the present case, the assessee trust was already holding certificate dated 30.10.2009 issued under section 12AA of the Act. We noticed that section 12AB(1)(a) of the Act, which deals with grant of Regular Registration for a period of 5 years does not authorise the Principal Commissioner or Commissioner to impose any conditions for grant of such registration." 35. Similar view expressed by the coordinate Bench of this Tribunal in the case of Bai Hirabai Jamshetji Tata Navsari Charitable Institution Vs CIT (141 taxmann.com 120). The relevant findings of the Tribunal are as follows: "7. As a plain look at the above statutory provision shows, under the scheme of the Act, all that the Commissioner of Income Tax, or the Principal Commissioner of Income Tax- as the case may be, is empowered, in the process of exercising discretion for the registra....
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....nt the law by laying down these conditions either. 9. Learned Commissioner ought to have realized the limitation of the role he plays when the registration of trust, under section 12A, comes up for his consideration. As we have seen earlier, while looking at the scheme of section 12AB, there is a limited role that the learned Commissioner could have played under section 12AB(1). It was open to him to "call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about-(A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects" and then proceed to take a call on whether to grant the registration under section 12A or not "after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i)". As to when and how should cancellation of the registration be made, it is not for the learned Commissioner to....
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....ecisions (supra), we hold that the Ld. CIT(E) could not have stipulated conditions on his own (other than what is stipulated in law) while granting registration under section 12AB of the Act as the scheme of the law does not visualize these conditions being part of granting of registration to charitable trusts. Accordingly, the grounds raised in the appeal by the assessee stands allowed. 37. We may however clarify that our above findings vacating the action of Ld. CIT(E) of stipulation of conditions in the impugned order, will not and cannot have any consequence, in case the assessee is at any time found to be at fault for the violations specified in Section 12AB(4) and (5) of the Act, which implications may lead to cancellation of registration or any other harsher consequences, as may be stipulated in law. 38. Now we take up the appeal in ITA No. 2169/Mum/2021. It is noted that, the assessee trust had submitted an application u/s 80G of the Act and vide order dated 28th May, 2021 in Form No. 10AC, the Ld. CIT(E) granted the registration under clause (iii) of the second proviso to section 80G(5) of the Act. It is noted that the Ld. CIT(E) again imposed conditions while passin....
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....d also cancelling its approval after affording it a reasonable opportunity of being heard; 41. Further, the conditions specified in clauses (i) to (v) read as under- "(i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10 : Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if- (a) the institution or fund maintains separate books of account in respect of such business; (b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and (c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;....
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....l granted under clause (23C) of section 10 has not been cancelled by the Principal Commissioner or Commissioner as authorised by the Board for non-compliance of conditions mentioned in rule 2C or rule 17A of the Incometax Rules, 1962. 4. Where the institution or fund is required to furnish application for approval under clause (ii) of first proviso to sub-section (5) of section 80G, the said institution or fund shall furnish such application within the time allowed under that clause." 44. Correlating the above conditions with the provisions of Section 80G, the Ld. Sr. counsel submitted that only the first condition mentioned in the aforesaid Circular is in accordance with section 80G of the Act. Therefore, without prejudice to any of the aforesaid submissions, even if the Commissioner can be said to have the power to impose conditions, then also it was only the first condition of the aforesaid Circular that could at the most be sustained and under any circumstances, the other conditions ought to be struck down. All other submissions made by the Ld. Sr. counsel on the correctness of the order passed under section 80G was mutatis mutandis to the submissions made in relati....