2013 (2) TMI 29 - AT - Income Tax

Canceling registration granted to the assessee u/s 12AA - the activities of the assessee do not qualify to fall within the meaning of charitable purpose as per proviso to section 2(15) inserted with effect from 1.4.2009 - Held that - Such an objection cannot be the basis of invoke section 12AA(3) so as to cancel the registration already granted to the assessee under section 12A. Registration already granted to the assessee could not have been re-visited by the Commissioner on the basis of the reasoning aforesaid, since his power to cancel registration under section 12AA(3) was confined to the examination as to whether the activities of the assessee society/association are genuine or that the same are not being carried out in accordance with the stated objects. In the light of the discussion emerging form the order of the Commissioner action taken by the Commissioner does not fall within the parameters of section 12AA(3) and, therefore, the impugned order is bad in law - in favour of assessee.

Summary

Issues:
Cancellation of registration granted under section 12AA of the Income Tax Act, 1961 based on amended provisions of Section 2(15) - Whether the cancellation is valid under Section 12AA(3) of the Act.

Analysis:
The appellant's appeal was against the order of DIT(E), Ahmedabad canceling the registration granted earlier under section 12AA of the Income Tax Act, 1961. The main issue raised by the appellant was the cancellation of registration by the Assessing Officer (A.O.) for assessment year 2004-05 and onwards. The appellant argued that the cancellation was not justified, citing a tribunal decision in a similar case. The D.R. of the revenue supported the DIT(E)'s order.

Upon reviewing the submissions and the tribunal decision cited by the appellant, it was observed that the DIT(E) canceled the registration based on the nature of the appellant's income sources, which were deemed to lack a nexus with the education of cricketers, indicating commercial activities. The DIT(E) concluded that the appellant did not qualify for registration under section 12A of the Act due to the amended provisions of Section 2(15) of the Act. The tribunal decision in a similar case highlighted the Commissioner's misapplication of the amended definition of charitable purpose under Section 2(15) and emphasized that such objection could not be the basis for canceling registration under Section 12AA(3).

The tribunal found that the DIT(E)'s action did not fall within the permissible limits of Section 12AA(3) and held that the order was invalid in law. The tribunal clarified that its decision was solely based on the limited powers available to the DIT(E) under Section 12AA(3) and did not comment on the merits of whether the appellant's activities qualified as charitable purposes under Section 2(15) as amended. The tribunal directed that the registration granted to the appellant under section 12A be restored, leaving the other issues raised by the DIT(E) open for examination in appropriate proceedings such as assessment proceedings.

In conclusion, the tribunal allowed the appellant's appeal, setting aside the DIT(E)'s order under Section 12AA(3) and reinstating the registration granted under Section 12A of the Income Tax Act, 1961.