2013 (10) TMI 1172 - HC - Income Tax

Reasons to be recorded for cancellantion of registration u/s 12AA of the Income tax act, by the Commissioner Held that - Section 12AA(3) of the Act, reveals that a precondition to cancellation of registration are findings that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. Thus, before cancelling registration, a Commissioner is required to record a finding that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. A perusal of the order passed by the Commissioner reveals that he did not record any finding as required by Section 12AA(3) of the Act. The Income Tax Appellate Tribunal, therefore, rightly reversed the order passed by the Commissioner Decided against the Revenue.

Summary

Issues:
Challenge to order passed by Income Tax Appellate Tribunal on substantial questions of law regarding registration under Section 12AA of the Income Tax Act, 1961.

Analysis:
The Revenue challenged the order passed by the Income Tax Appellate Tribunal on substantial questions of law related to the registration granted under Section 12AA of the Income Tax Act. The questions raised included whether the Commissioner of Income Tax should examine the conditions of Sections 11 to 13 of the Act while granting registration, the utilization of trust funds, genuineness of trust activities, and the status of the assessee as a Trust and a Society. The Tribunal had directed the Commissioner to grant registration to the Trust under Section 12AA, which was contested by the Revenue.

The facts leading to the appeal involved the cancellation of registration granted to the assessee-trust under Section 12AA due to the nature of expenses primarily being religious. The Commissioner of Income Tax cancelled the registration, citing that the trust's activities did not fall under "general public utility." However, the Tribunal overturned this decision, stating that as no finding was made regarding the genuineness of the trust's activities, the Commissioner lacked the authority to cancel the registration.

The Court emphasized that registration under Section 12AA is granted after considering the trust's activities, and the Commissioner can cancel registration if activities are not genuine or not in line with the trust's objects. Section 12AA(3) outlines the procedure for cancellation, requiring the Commissioner to record findings before taking such action. In this case, the Commissioner failed to provide the necessary findings as mandated by the Act. Therefore, the Tribunal's decision to reverse the cancellation was deemed appropriate, as there was no valid reason to deviate from this conclusion.

Conclusively, the Court found no merit in the Revenue's appeal and dismissed it, upholding the Tribunal's decision regarding the registration under Section 12AA of the Income Tax Act.