2017 (9) TMI 1706 - HC - Income Tax

Restoring of registration u/s. 12A - assessee contended that the exemption under Section 11 has to be allowed on restoration of such registration - Held that - 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. So long as the law does not oblige entertaining of an Appeal of the Revenue proposing the above question, we do not think we should entertain it. There is a difference and vast as it is, between an order being subjected to challenge and the challenge having succeeded. In the later case, the order is wiped out because then it is quashed and set aside. Today, a challenge is merely pending. That cannot be equated to the challenge succeeding. That hurdle is yet to be crossed. If that is not crossed, the initial order of restoration of registration continues to bind the Revenue. As a result of the above discussion, we do not find that the questions proposed are substantial questions of law

Summary

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

Analysis:

1. The appeal by the Revenue challenged the order passed by the Income Tax Appellate Tribunal dated 21st March, 2014. The Tribunal had allowed the assessee's appeal and canceled the order of the Commissioner of Income Tax, restoring the registration of the assessee as a charitable trust. Subsequently, the Commissioner of Income Tax (Appeals) set aside the Assessing Officer's order, leading to the Revenue challenging this decision before the Tribunal.

2. The Assessing Officer noted during the assessment proceedings that the trust's registration had been canceled under Section 12AA(3) by the Commissioner of Income Tax. This led to the Assessing Officer treating the assessee as an Association of Persons for the assessment year 2008-2009, as the registration had been canceled. However, the Tribunal's decision to restore the registration as a charitable trust had a significant impact on the assessment.

3. The restoration of the registration by the Tribunal was crucial for the assessee to claim exemption under Section 11 of the Income Tax Act. The assessee contended that upon the restoration of registration, the exemption under Section 11 should be allowed. This restoration was central to the dispute between the assessee and the Revenue, as it determined the applicability of tax exemptions under the Act.

4. The questions of law proposed by the Revenue included issues related to the Tribunal's decision on restoration of registration and the applicability of tax exemptions under Section 11. The High Court analyzed these questions and found that the proposed questions did not constitute substantial questions of law. The Court emphasized that the pending appeal by the Revenue did not nullify the Tribunal's order of restoration of registration, which continued to bind the Revenue until challenged successfully.

5. The Court highlighted the distinction between a pending challenge and a successful challenge, noting that until the challenge to the restoration of registration was successful, the initial order stood. Consequently, the Court dismissed the Revenue's appeal, stating that the proposed questions did not meet the criteria of substantial questions of law. The decision reiterated the importance of finality in legal proceedings and the binding nature of existing orders until overturned through due process.