2016 (10) TMI 197 - AT - Income Tax

Registration to the appellant u/s.12AA withdrawn - Held that - The provisions of section 12AA(3) mandates the cancellation of registration on satisfaction of either of twin conditions i.e. activity of the trust are not genuine or are not being carried out in accordance with the objects. When there is no change either in the objects of the assessee trust during the year under consideration or any diversion of the activity from the earlier year. Giving money to another trust would not amount to change of activity of the trust or the activities carried out by the assessee are not in accordance with the objects. However it may be a subject matter of application of money for the purpose of objects of the trust which falls under Section 11 of the Act. Therefore the issue of application of income is a subject matter of allowance of exemption under Section 11 in the assessment and cannot be a ground for cancellation of registration. It is pertinent to note that the Commissioner has accepted this fact that the fund given to other trust namely Malankara Catholic Diocese of Puttur was also granted registration under Section 12AA of the Act and therefore the objects of the said trust was also considered and accepted as charitable in nature. Since this is a subject matter of assessment therefore we do not express any opinion or view on the issue of application of income for the purpose of exemption under Section 11 of the Act in the present proceedings. Thus when there is no change in the activity of the assessee as well as the objects of the assessee then the mere transfer of the fund to the other trusts registration under Section 12AA does not fall in the ambit of provisions of section 12AA(3) of the Act for cancellation of registration. In view of the above facts and circumstances of the case, we hold that the Commissioner was not justified in cancelling the registration and accordingly we set aside the impugned order of cancellation of registration. - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Withdrawal of registration under Section 12AA of the Income Tax Act.
3. Violation of FCRA and cancellation of registration.

Condonation of Delay in Filing the Appeal:
The appellant, a registered organization, filed an appeal against the order of the Commissioner of Income Tax for cancellation of registration under Section 12AA of the Income Tax Act. The delay in filing the appeal was explained by the appellant due to the indisposition of the Secretary of the trust, supported by a medical certificate. The Tribunal, after considering the reasons provided, condoned the delay as it found the cause to be genuine and beyond the appellant's control.

Withdrawal of Registration under Section 12AA:
The Assessing Officer noted that the appellant trust had transferred a sum to another trust, which was considered a violation of FCRA. The Commissioner withdrew the registration granted under Section 12AA, citing that the activities were not in accordance with the trust's objects. However, during the appeal, the appellant's representative argued that the transfer was for a specific purpose and that the recipient trust was also registered under Section 12AA. The Tribunal held that the violation of FCRA did not fall under the Commissioner's jurisdiction for cancellation of registration, especially when there was no change in the trust's activities or objects. The mere transfer of funds to another registered trust did not warrant cancellation of registration under Section 12AA.

Violation of FCRA and Cancellation of Registration:
The Commissioner's decision to cancel the registration was based on the violation of FCRA by transferring foreign contributions to another trust. However, the Tribunal found that the appellant was duly authorized to receive foreign contributions and that the issue of violation of FCRA should be addressed by the competent authority. Since there was no change in the trust's activities or objects, the Tribunal held that the cancellation of registration was not justified. The Tribunal set aside the order of cancellation and allowed the appeal of the assessee.

In conclusion, the Tribunal allowed the appeal, emphasizing that the activities of the trust were genuine and in accordance with its charitable objects. The Tribunal highlighted that the violation of FCRA did not warrant cancellation of registration under Section 12AA, especially when the recipient trust was also registered under the same section.