2009 (10) TMI 907 - AT - Income Tax

Summary

Issues Involved:
Appeals filed by the assessee against the order of Director of Income Tax canceling registration u/s 12A and withdrawal of 80-G exemption.

Issue 1: Registration u/s 12A and withdrawal of 80-G exemption
The assessee, a registered society, was granted registration u/s 12A and exemption u/s 80G. The Director of Income Tax (DIT) canceled the registration u/s 12A and consequently withdrew the exemption u/s 80G. The DIT contended that the registration was erroneously granted to a school, which had no legal existence, instead of the society that owned and operated the school. The DIT held that the school was not entitled to registration u/s 12A and exemption u/s 80G. The assessee challenged this decision before the Appellate Tribunal.

Issue 2: Power of DIT to cancel registration u/s 12A
The Appellate Tribunal considered the power of the DIT to cancel the registration granted u/s 12A. The Tribunal referred to a previous case where it was held that the DIT cannot withdraw or cancel the registration granted under section 12A. The Tribunal analyzed the provisions of sections 12A, 12AA(1), and 12AA(3) of the Income Tax Act. It was observed that the DIT can cancel registration only in cases where it has been granted under section 12AA(1)(b), not under section 12A. The Tribunal emphasized that the law does not empower the DIT to cancel or withdraw the registration granted under section 12A.

Decision:
The Appellate Tribunal, following the precedent and legal analysis, held that the DIT did not have the power to cancel the registration granted under section 12A. Therefore, the order of the DIT canceling the registration u/s 12A and the consequential withdrawal of exemption u/s 80G were deemed invalid. As a result, both appeals of the assessee were allowed, and the registration u/s 12A was restored.

This judgment highlights the importance of correctly interpreting and applying the provisions of the Income Tax Act regarding registration and exemptions for charitable institutions and the limitations on the authority of the Director of Income Tax in canceling such registrations.