2012 (2) TMI 160 - HC - Income Tax

Power of Commissioner u/s 12AA(3) to cancel the registration granted u/s 12A Charitable society Tribunal revoked cancellation of Registration by Commissioner Held that - Section 12AA(3) stipulates specific finding by the Commissioner that the activities of the trust or institution are not genuine or not being carried out in accordance with the objects of the trust. In present case, the only reason given by Commissioner is that the activities of the trust were not charitable. Therefore, Tribunal was justified in holding that none of the conditions u/s 12AA(3) were violated and registration granted to the assessee u/s 12A(a) would hold good Decided against the Revenue.

Summary

Issues:
1. Validity of registration granted under section 12A(a) to a society engaged in commercial activities.
2. Consideration of aggregate value of receipts for assessment years exceeding specified limit for exemption under section 11.

Issue 1:
The Tax Case Appeal questioned the validity of the registration granted to a Society under section 12A(a) of the Income Tax Act, which was engaged in the publication, purchase, and sale of books, considered as commercial activities with a profit motive. The Commissioner revoked the registration granted under section 12A(a) on the grounds that the Society's activities were not charitable. However, the Appellate Tribunal found that the Commissioner's order was not justified as the power to cancel registration could only be traced back to section 12AA(3). The Tribunal allowed the appeal filed by the Society, emphasizing that the registration cannot be revoked in the absence of activities contrary to the registered objects. The Tribunal's decision was upheld as the Commissioner's cancellation was not based on the genuineness of activities but on the nature of activities not aligning with the registered objects.

Issue 2:
The Society, registered under section 12A(a), was granted registration for engaging in charitable activities related to the publication and sale of Sarvodaya Literature and Gandhian Ideologies. The Commissioner, after initially granting registration, later revoked it based on the belief that the activities were not charitable in nature. However, the High Court highlighted that the Commissioner's power to cancel registration is limited to cases where the activities are not genuine or not aligned with the registered objects. The Court found that the Commissioner's decision to cancel the registration was not justified as the activities were in accordance with the registered objects. The Tribunal's decision to allow the Society's appeal was upheld, emphasizing that the Commissioner's satisfaction to grant registration cannot be overturned without meeting the conditions specified under section 12AA(3) of the Act.

In conclusion, the High Court dismissed the Tax Case Appeal as lacking merit, affirming the Tribunal's decision in favor of the Society. The judgment clarified the limited scope of the Commissioner's power to cancel registration under section 12AA(3) and emphasized the importance of aligning activities with the registered objects for maintaining tax-exempt status under section 11 of the Income Tax Act.