2012 (10) TMI 1183 - HC - Income Tax

Summary

Issues involved:
The issues involved in the judgment are:
1. Whether the Tribunal was justified in canceling the registration granted to the assessee u/s 12-AA (3) of the Income-tax Act?
2. Whether the Tribunal was correct in holding that the assessee is eligible for continued registration despite not fulfilling the requirement of being a charitable institution?
3. Whether the Tribunal erred in not considering the decisions relied upon by the CIT while canceling the registration of the assessee society?

Issue 1:
The respondent-assessee was granted registration under Section 12A of the Act as a charitable institution. The Chief Commissioner of Income Tax disallowed the claim of exemption under Section 10(23C)(vi) of the Act, leading to the cancellation of registration under Section 12AA(3) of the Act. The Tribunal, however, allowed the appeal and restored the registration, stating that the cancellation based on Section 10(23C)(vi) was not sufficient grounds for cancellation under Section 12A. The Tribunal also noted that the deduction under Section 11 had been allowed to the assessee for certain assessment years.

Issue 2:
The counsel for the Revenue argued that as the institution was established solely for educational purposes and was profit-earning, exemption under Section 10(23C)(vi) was rightly denied, making it cease to be a charitable institution. However, the Court found that the trust had multiple objects, including educational development, moral education, and promoting Indian culture and arts. The Court held that the assessee could claim exemption under Section 10(23C)(vi) without fulfilling the conditions of Section 11, and since the conditions of Section 11 were not mentioned in the Commissioner's order, the Tribunal was correct in restoring the registration.

Issue 3:
The Court concluded that the Tribunal had rightly restored the registration based on the benefit of exemption/deduction under Section 11 allowed to the assessee in previous assessment years. The Court found no error in the Tribunal's decision and dismissed the appeal.

In summary, the High Court upheld the Tribunal's decision to restore the registration of the assessee, emphasizing that the cancellation based on Section 10(23C)(vi) was not sufficient grounds under Section 12A. The Court also clarified that the assessee could claim exemption under Section 10(23C)(vi) without fulfilling Section 11 conditions, and since the Commissioner's order did not mention Section 11 conditions, the restoration of registration was justified.