2017 (3) TMI 48 - HC - Income Tax

Eligibility to registration granted u/s 12AA - revocation/ cancellation of the registration as the Respondent-Institutions do not satisfy the meaning of charitable purpose as given in Section 2(15) - ITAT allowed claim - Held that - Nothing has been shown to us as to how the impugned order of the Tribunal is not in accordance with law. The exercise of power under Section 12AA(3) of the Act can only be done, if atleast one of the two conditions specified therein, are found to be satisfied by the Commissioner of Income Tax. This satisfaction of any of the two conditions, Revenue is not been able to show. On plain reading of Section 12AA(3) of the Act, it is self evident that the power can only be exercised to cancel the registration only for the two breaches which are mentioned therein. This is not so in the present facts. Thus, no fault can be found with the impugned order setting aside the order of the Commissioner of Income Tax, cancelling the registration granted to the Respondent-Assessee. - Decided in favour of assessee

Summary

Issues:
Challenge to common order of the Income Tax Appellate Tribunal setting aside cancellation of trust registration by the Commissioner of Income Tax under Section 12AA(3) of the Income Tax Act, 1961.

Analysis:
The Appeals under Section 260A of the Income Tax Act, 1961, challenged the common order dated 19th September, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order allowed three Appeals filed by different institutions, setting aside the cancellation of their registration as a trust by the Commissioner of Income Tax. The Revenue filed two appeals from the common impugned order, questioning the restoration of registration granted to the assessee under Section 12AA of the Act. The main question raised was whether the Tribunal was justified in setting aside the Commissioner's order under Section 12AA(3) and reinstating the registration.

The Respondent-Institutions were initially granted registration as a trust under Section 12AA(1) of the Act. Subsequently, the Commissioner of Income Tax withdrew/cancelled the registration under Section 12AAA(3) of the Act, citing non-satisfaction of charitable purpose criteria as per Section 2(15) of the Act. The cancellation was based on the grounds that the institutions provided vocational training instead of education. In response, the institutions appealed to the Tribunal.

The Tribunal, in its impugned order, highlighted that the power under Section 12AA(3) of the Act could only be exercised if specific conditions were met, such as the activities not being genuine or not aligning with the trust's objectives. However, the Commissioner failed to demonstrate satisfaction of these conditions in the present case, leading to the cancellation being deemed unjustified. Consequently, the Tribunal set aside the Commissioner's order and restored the registration to the institutions.

The High Court found no legal basis to challenge the Tribunal's decision, emphasizing that the power under Section 12AA(3) can only be invoked upon fulfillment of the specified conditions, which were absent in this scenario. The Court reiterated that the cancellation of registration must be based on the breaches outlined in the Act, which were not evident in the case at hand. Therefore, the Court upheld the Tribunal's decision, dismissing the Appeals and ruling in favor of the Respondent-Institutions.