2015 (2) TMI 1133 - AT - Income Tax

Registration granted to the assessee under Section 12AA - Held that - The assessee is a public undertaking of the State Government of Karnataka. As held by the Hon ble High Court (supra), registration granted under Section 12A of the Act can be cancelled only under the following two circumstances; (i) if the objects of such trust or institution are not genuine; and (ii) the activities of the trust or institution are not being carried out in accordance with the objects of the trust or institution. In the impugned order in the case on hand, there is no finding rendered by the ld. DIT (Exemptions) that there was any violation of the aforesaid two conditions by the assessee, and therefore the grounds which empower the ld. DIT (Exemptions) to cancel the registration under Section 12AA(3) of the Act, are absent. The registration cannot be cancelled in view of the amendment of the first proviso to section 2(15) of the Act, since it is not a ground specified in the statute for cancellation of registration under Section 12AA(3) of the Act. As observed that if the case of an assessee falls within the ambit of the first proviso to section 2(15) of the Act, the benefits which arise from registration under Section 12AA of the Act will not be available to it, and this aspect is to be considered by the Assessing Officer, but this would not be a ground for cancellation of registration. From an appreciation of the facts and circumstances of the case on hand, we find that the facts herein are similar both factually and legally to that of the cited case of DIT(Exemptions) V Karnataka Industrial Area Development Board (2015 (7) TMI 169 - KARNATAKA HIGH COURT ) and therefore respectfully following this decision, we hold that the impugned order of DIT (Exemptions) cancelling the assessee s registration by order under Section 12AA(3) of the Act dt.8.11.2011 is not sustainable and therefore cancel the same. - Decided in favour of assessee

Summary

Issues:
Cancellation of registration under Section 12AA(3) of the Income Tax Act, 1961.

Analysis:
The judgment involves the cancellation of registration granted to the appellant under Section 12AA of the Act by the Director of Income Tax (Exemptions). The grounds for cancellation included the surplus in the financial accounts, provision of buses for casual contracts, chartered services, and permitting commercial advertisements on its fleets. The appellant objected to the cancellation, arguing that it was existing for general public utility and not for trade, commerce, or business purposes. The appellant relied on a decision by the Karnataka High Court in a similar case favoring the appellant.

The Departmental Representative supported the cancellation, citing the dismissal of the appellant's SLP by the Supreme Court in a different case. The Tribunal analyzed the case based on the provisions of Section 12AA(3) of the Act and the relevant judicial pronouncements. It referred to the decision of the Hon'ble High Court of Karnataka, which stated that registration could only be cancelled if the activities were not genuine or not carried out in accordance with the trust's objects. The Tribunal found that in the present case, there was no violation of these conditions. Additionally, the Tribunal observed that the amendment to the first proviso of section 2(15) of the Act was not a ground for cancellation of registration under Section 12AA(3) of the Act.

The Tribunal concluded that the cancellation of the appellant's registration was not sustainable based on the legal provisions and precedents cited. It held that the impugned order of cancellation was not valid and allowed the appellant's appeal. The judgment was pronounced in open court on 20th Feb., 2015.