2012 (3) TMI 262 - HC - Income Tax

Cancellation of the registration granted to the Trust under Section 12AA(3) - assessee contented that Commissioner was not empowered to pass an order canceling registration u/s 12AA(3) which were brought on the statute book with effect from 1 June 2010 and hence could not have retrospective effect - Held that - the Finance Act of 2010, subsection (3) was amended so as to empower the Commissioner to cancel the registration of a trust or an institution which has obtained registration at any time under Section 12A (as it stood before its amendment by the Finance (No.2) Act, 1996 - Every statutory provision which operates in respect of a trust, which has already been registered in the past does not have a retrospective character. A law which operates with respect to an event which has occurred in the past is not necessarily retrospective - This cannot by any stretch of imagination, be regarded as a retrospective alteration of the law

Summary

Issues:
1. Challenge to the cancellation of registration under Section 12AA(3) of the Income Tax Act, 1961.
2. Constitutional validity of the provisions of subsection (3) of Section 12AA as amended by the Finance Act of 2010.
3. Applicability and interpretation of the amendment to sub-section (3) of Section 12AA with effect from 1 June 2010.

Analysis:
1. The case involved a challenge to the cancellation of registration under Section 12AA(3) of the Income Tax Act, 1961. The petitioner's registration was cancelled by the Commissioner of Income Tax based on grounds related to the misuse of funds. However, the Tribunal held that the Commissioner lacked jurisdiction to cancel the registration as it was granted under Section 12A, not 12AA. The Tribunal's decision was based on the provisions of the Act as they stood at that time, prior to subsequent amendments.

2. The constitutional validity of the provisions of subsection (3) of Section 12AA as amended by the Finance Act of 2010 was questioned. The petitioner argued that the 2010 amendment could not override the provisions inserted in 2004. The High Court, however, upheld the validity of the amendment, emphasizing that it was not retrospective in nature. The Court explained that the amendment empowered the Commissioner to cancel registrations obtained under Section 12A, even prior to the 1996 amendment, ensuring a regulatory framework to prevent misuse of benefits granted by the legislature.

3. The interpretation and applicability of the amendment to sub-section (3) of Section 12AA with effect from 1 June 2010 were crucial in this case. The Court clarified that the amendment did not take away any vested rights or create new obligations retrospectively. The amendment aimed to empower the Commissioner to cancel registrations of trusts not genuinely adhering to their objectives. The Court distinguished this case from prior judgments, emphasizing that the amendment was prospective and did not violate constitutional principles. The Court rejected the petitioner's challenge and allowed the Commissioner to proceed with the cancellation based on the amended provisions.

In conclusion, the High Court dismissed the petition challenging the cancellation of registration under Section 12AA(3) and upheld the constitutional validity of the 2010 amendment. The Court clarified the applicability of the amendment, emphasizing its prospective nature and the Commissioner's authority to cancel registrations for non-compliance with trust objectives. The Court declined to intervene in the ongoing proceedings, leaving the determination of the allegations against the petitioner to the Commissioner.