2014 (6) TMI 334 - AT - Income Tax

Cancellation of registration u/s 12A of the Act Activity charitable or not Holding of seminars - Held that - Following Agra Development Authority Versus Commissioner of Income-tax-1 2013 (8) TMI 549 - ITAT AGRA because of amendment to section 2(15)w. e. f. 01. 04. 2009 certain changes have been brought about the trusts and in the definition of the phrase charitable activities - certain changes had occurred in the statute when power was given to the departmental authorities to cancel the registration as per the provisions of section 12AA(3)of the Act - DIT(E) can cancel the registration granted to a trust if the activities of the trust or institution are found to be non-genuine or its activities are not in accordance with the objects for which such trust or institution was established. DIT(E) has not given specific finding - Holding of seminars cannot be termed a commercial or business activity, as the trust was established for the specific purpose - DIT(E)has ignored the fact the trust had suffered loss by arranging seminars - Circular issued by the CBDT on 06. 04. 2011 clearly mentions that amendment would be applicable from the AY. 2011-12 and subsequent assessment years - before 01. 06. 2010 registration can be cancelled only on those cases where the registration has been granted under section 12AA(1)(b) of the Act - Before 01. 06. 2010 this section 12AA(3) nowhere empowers the CIT to cancel or withdraw registration u/s 12A of the Act - In absence of such power, the registration granted u/s 12A cannot be withdrawn or cancelled before 1. 6. 2010 - The power of cancellation of registration u/s 12A of the Act came to be incorporated by way of amendment introduced by Finance Act 2010 w. e. f. 01. 06. 2010 - registration was granted in 2004 and was withdrawn for the AY. 2009-10 i. e. before the AY. 2011-12 - as the cancellation is against the provisions of law, it cannot be endorsed Decided in favour of Assessee.

Summary

Issues:
1. Cancellation of registration u/s 12A by DIT (E) based on activities of the trust.
2. Interpretation of section 12AA(3) regarding cancellation of registration.
3. Application of amendments to section 2(15) and section 12AA post-2009.
4. Comparison with similar cases like Agra Development Authority.

Issue 1: Cancellation of registration u/s 12A by DIT (E) based on activities of the trust:
The Appellate Tribunal ITAT Mumbai addressed the challenge to the cancellation of registration u/s 12A by the Director of Income-tax (Exemption) based on the trust's activities. The trust, a public charitable entity, faced cancellation due to allegedly engaging in activities resembling trade, commerce, or business, particularly through income generated from seminars. The DIT (E) contended that the trust's activities did not align with charitable purposes as per section 2(15) of the Act, leading to the cancellation of registration under section 12AA(3).

Issue 2: Interpretation of section 12AA(3) regarding cancellation of registration:
The Authorized Representative argued that the DIT (E) could cancel registration under section 12A only if the trust's activities were not genuine or not in line with its objectives, not solely for engaging in trade or business activities. The Tribunal noted that specific findings were required to cancel registration, as highlighted in judicial precedents. Holding seminars, in this case, was deemed non-commercial as it served the trust's core objectives. The Tribunal also referenced the CBDT circular emphasizing the conditions for cancellation post-amendments.

Issue 3: Application of amendments to section 2(15) and section 12AA post-2009:
The Tribunal analyzed the amendments to section 2(15) and section 12AA post-2009, emphasizing the power granted to authorities to cancel registration if trust activities were non-genuine or deviated from the trust's objectives. Citing the Sarvodaya Ilakkiya Pannaj case, specific findings were deemed necessary for cancellation. The Tribunal highlighted the Agra Development Authority case, where registration cancellation for the AY 2009-10 before AY 2011-12 was deemed unlawful, aligning with the law's provisions.

Issue 4: Comparison with similar cases like Agra Development Authority:
Drawing parallels with the Agra Development Authority case, where registration granted in 2004 was withdrawn for AY 2009-10 pre-2011-12, the Tribunal emphasized that such cancellations against legal provisions could not be upheld. Ultimately, the Tribunal allowed the appeal, ruling in favor of the assessee due to the improper cancellation of registration under section 12A for AY 2009-10.

In conclusion, the Tribunal's detailed analysis focused on the legal aspects of registration cancellation under section 12A, the interpretation of section 12AA(3), the impact of post-2009 amendments, and comparisons with relevant case law like Agra Development Authority to ensure proper application of the law in the judgment.