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2019 (6) TMI 996 - HC - Income TaxRegistration u/s 12A - cancellation of registration with retrospective effect - power of CIT to initiate steps for cancellation of the registration of a Trust - benefit of carry forward of losses for subsequent years as contemplated under section 11 (1) (a) - rectification application filed to Income Tax Settlement Commission - Whether the money invested in acquisition of the TV Channel shall be considered to be in view of the object of the Trust? - Whether disclosure made before the Settlement Commission by the petitioner Trust is full and true? - HELD THAT - Section 12 AA (3) of the Act of 1961, doesn t suggest or in any way contemplate that the registration of the assessee may be cancelled with retrospective effect. And therefore, this court is of the view that the cancellation of registration can only be prospective. As regards the issue of the petitioner Trust s disclosure being full and true or not; this court is of the view that the petitioner Trust s disclosure shall be considered full and true for when it filed the settlement application before the Income Tax Settlement Commission, for it disclosed its undisclosed income in the said application and the same was allowed by the Commission, so also accepted u/s 245D (1), while declaring the said application as not invalid and maintainable u/s 245D (1). The Income Tax Settlement Commission should not have relied upon the arbitrary and illegal order dated 16th Jan, 2018, made by the respondent-department, while considering the rectification applications that were filed regarding the order dated 30th June, 2017. The Commission should have kept in mind, the petitioner Trust s status at the time when the original order dated 30th June, 2017 was made and not the status subsequent to the order dated 16th Jan, 2018, made by the respondent-department. Thus, at the time of the passing of the original order, the petitioner Trust was a registered entity u/s 12A and withdrawal of the approval accorded u/s 10 (23C) (v) 10 (23A) (via), as a consequence of cancellation or withdrawal of the same; cannot have retrospective effect as has been discussed earlier. It is therefore, evident from the factual matrix of the case at hand, that the petitioner Trust, is entitled to all the benefits u/ 11 (1) (a) of the Act of 1959, including set off or carry forward of losses to the subsequent year(s) and depreciation, in respect to expenses incurred for construction of educational buildings in terms and tune with the objects of the Trust. The exclusion of the investment made by the petitioner Trust in the TV Channel appears to be one such perversity. On a glance of the facts and materials available on record of the case at hand, it is evident that the said TV Channel was acquired by the petitioner Trust for educational training in 'Journalism' and 'Mass Communication', as it was offering courses for graduation and post-graduation in 'Mass Communication' and 'Journalism'. Applying principle of MAHARSHI MAHESH YOGI VEDIC VISHWAVIDYALAYA VERSUS STATE OF M.P. ORS. 2013 (7) TMI 1044 - SUPREME COURT it is evident that education cannot be confined to the meaning of one subject only and keeping this precedent in mind, it is concluded that the said investment in TV Channel shall be considered to be in consonance with the objectives and in the purview of the objects of the Trust. In the result, the petitioner-Trust is entitled to the benefit of Section 11(1) (a) of the Rajasthan Public Trust Act, 1959 and for carry forward of unabsorbed losses as well as benefit of amount spent on construction of new educational buildings. The petitioner-Trust is also entitled for benefit of amount incurred in acquisition of TV Channels and quashment of telescoped benefit of cash expenses. - Decided in favour of assessee.
Issues Involved:
1. Benefit of carry forward of losses for subsequent years under Section 11(1)(a) of the Rajasthan Public Trust Act, 1959. 2. Entitlement to benefits for amounts spent on construction of educational buildings and depreciation under Section 11(1)(a) of the Rajasthan Public Trust Act, 1959. 3. Consideration of money invested in acquisition of a TV Channel as in line with the objectives of the Trust. 4. Power of the Commissioner of the Income Tax Department to cancel or withdraw registration under Section 12A of the Income Tax Act, 1961, with retrospective effect. 5. Full and true disclosure by the petitioner Trust before the Income Tax Settlement Commission. Issue-Wise Detailed Analysis: I. Benefit of Carry Forward of Losses: The court concluded that the petitioner Trust is entitled to the benefit of carry forward of losses for subsequent years under Section 11(1)(a) of the Rajasthan Public Trust Act, 1959. The court emphasized that the cancellation of the Trust's registration under Section 12A with retrospective effect was arbitrary and contrary to the provisions of the Income Tax Act, 1961. The court cited the case of Oxford Academy for Career Development Vs. Commissioner of Income Tax, which held that the cancellation of registration could only be prospective, not retrospective. The court also referenced the case of Assistant Commissioner of Income Tax Vs. Agra Development Authority, which supported the prospective application of Section 12AA(3). II. Entitlement to Benefits for Construction and Depreciation: The court held that the petitioner Trust is entitled to benefits for amounts spent on construction of educational buildings and depreciation in respect to such expenses under Section 11(1)(a) of the Rajasthan Public Trust Act, 1959. The court noted that the Income Tax Settlement Commission failed to account for depreciation for the expenses incurred for the construction of educational buildings, contrary to the provisions of the Act. The court referenced the case of CIT V. Institute of Banking Personnel Selection (IBPS), which supported the allowance of depreciation as a legitimate deduction in computing the real income of the Trust. III. Investment in TV Channel: The court found that the investment in the TV Channel by the petitioner Trust should be considered in line with the objectives of the Trust. The court noted that the TV Channel was acquired for educational purposes, specifically for conducting courses in 'Journalism' and 'Mass Communication.' The court cited the case of Maharishi Mahesh Yogi Vedic Vishwavidyalaya Vs. State of Madhya Pradesh, which supported a broad interpretation of educational activities. IV. Power to Cancel Registration with Retrospective Effect: The court held that the Commissioner of Income Tax does not have the power to cancel or withdraw registration under Section 12A of the Income Tax Act, 1961, with retrospective effect. The court emphasized that the legislation did not intend for Section 12AA(3) to have retrospective application, as supported by the cases of Oxford Academy for Career Development and Assistant Commissioner of Income Tax Vs. Agra Development Authority. The court concluded that the cancellation of the Trust's registration with retrospective effect was arbitrary and contrary to the provisions of the Act. V. Full and True Disclosure: The court concluded that the petitioner Trust's disclosure before the Income Tax Settlement Commission should be considered full and true. The court noted that the Trust disclosed its undisclosed income in the settlement application, which was accepted by the Commission. The court referenced the case of Jyotendrasinhji Vs. S.I. Tripathi, which supported the view that the Settlement Commission's orders should be considered final unless they are contrary to the provisions of the Act. The court also cited the case of The Commissioner of Income Tax Vs. Settlement Commission, which emphasized the limited scope of judicial review in such matters. Conclusion: The court allowed the writ petition of the petitioner Trust, granting them the benefits under Section 11(1)(a) of the Rajasthan Public Trust Act, 1959, including the carry forward of unabsorbed losses, benefits for amounts spent on construction of educational buildings, and the investment in the TV Channel. The court directed the respondents to re-compute the total income of the petitioner Trust in compliance with the court's directions within two months. Consequently, the writ petition filed by the respondent-Department was dismissed.
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