2017 (9) TMI 1703 - HC - Income Tax

Registration u/s 12AA cancelled - AO was of the opinion that the assessee is to be treated like any other assessee - whether Hon ble Income Tax Appellate Tribunal was justified in relying on its decision for restoring of registration u/s. 12A - Held that - Merely because the Revenue has challenged the order passed by the Tribunal restoring assessee s registration under Section 12A of the IT Act and that Appeal is admitted and pending means we must, as of right or course, entertain this Appeal, was our specific query. Which principle of law will enable the Revenue to urge that the order of the Tribunal should be interfered with, has not been clarified. The only argument is, namely, if the Revenue succeeds in the Appeal challenging the order of the Tribunal restoring assessee s registration, then it may be open for the Revenue to tax its income and by holding that both Sections 11 and 12 of the IT Act have no application thereto. We do not think that such ifs and buts would permit the Revenue to get over a presently binding order of the Tribunal. That order of restoration of registration binds the Revenue. That order has not been quashed and set aside by this Court. The Appeal is merely admitted. To our mind, the question as proposed in the present matter is not a substantial question of law.

Summary

Issues:
1. Challenge to the order passed by the Income Tax Appellate Tribunal dated 21st August, 2014.
2. Cancellation of registration of a trust under Section 12AA(3) by the Commissioner of Income Tax.
3. Restoration of registration of the assessee as a charitable trust.
4. Exemption under Section 11 of the Income Tax Act.
5. Questions of law proposed by the Revenue for the High Court's consideration.

Issue 1: Challenge to the Tribunal's Order
The Revenue challenged the order passed by the Income Tax Appellate Tribunal dated 21st August, 2014. The Tribunal had allowed the assessee's appeal and canceled the order of the Commissioner of Income Tax, thereby restoring the registration of the assessee as a charitable trust. The Assessing Officer treated the assessee as an Association Of Persons due to the cancellation of registration, leading to the assessment of income. The Tribunal's decision to restore the registration was based on the assessee's contention that exemption under Section 11 should be allowed upon restoration of registration.

Issue 2: Cancellation of Trust's Registration
The Assessing Officer noted that the trust's registration had been canceled by the Commissioner of Income Tax under Section 12AA(3). This led to the Assessing Officer treating the assessee as an Association Of Persons for the assessment year 2010-2011. A showcause notice was issued to the assessee, and upon receiving an explanation, the Assessing Officer finalized the assessment, considering the assessee as an Association Of Persons.

Issue 3: Restoration of Charitable Trust Registration
The assessee approached the Income Tax Appellate Tribunal, which allowed the appeal and canceled the order of the Commissioner of Income Tax, restoring the registration of the assessee as a charitable trust. The assessee contended that upon restoration of registration, the exemption under Section 11 should be allowed. The order of the Commissioner of Income Tax (Appeals) setting aside the Assessing Officer's order was challenged by the Revenue before the Tribunal, which dismissed the appeal.

Issue 4: Exemption under Section 11
The assessee argued that the exemption under Section 11 should be allowed upon the restoration of registration as a charitable trust. The Tribunal's decision to restore the registration was crucial for the assessee to claim the benefit of exemption under Sections 11 and 12 of the Income Tax Act.

Issue 5: Questions of Law Proposed by the Revenue
The Revenue proposed substantial questions of law for the High Court's consideration, including the justification of the Tribunal's decision to restore registration under Section 12A, the adjudication of issues related to revenue receipts, and the apportionment of development fees. The High Court found that the questions proposed were not substantial questions of law and dismissed the appeal without any order as to costs, emphasizing that the order of restoration of registration binds the Revenue until challenged successfully.

This detailed analysis of the judgment covers the issues involved comprehensively, providing insights into the legal arguments and decisions made by the authorities involved in the case.