2016 (5) TMI 218 - AT - Income Tax

Eligibility for re-registration after cancellation of registration u/s 12AA cancelled - Held that - There cannot be any second innings by way of registration of the same trust with the same objects. When there is no specific right provided in the Act for re-registration of the trust, assessee cannot seek such registration. It may be different scenario/case if assessee has modified its objects, or changed its committee who were governing the trust or handed over the property of the trust to another trust for its proper maintenance, then, fresh registration of the new trust could be examined by the DIT/CIT as per the law. At present there is no provision either in Sec.12A or in Sec. 12AA allowing the assessee registration for the second time. Ld. Counsel relied on certain cases in support of contentions The issue in appeal in those cited cases arose from the refusal of the CIT to condone the delay in filing the application or refusal to revise his own order granting registration. There was no cancellation of registration nor a finding that the activities of the assessee were not genuine or not in accordance with the objects. Therefore, these decisions cannot be considered as precedent in the present appeal. Ld CIT-DR rightly distinguished the cases with which we agree. In the given facts, we are of the opinion that assessee cannot apply for re-registration, once the registration granted was cancelled validly, having found that that the trust is not genuine and has not been carrying out its activities in accordance with the objects of the trust. We are of the opinion that the CIT was correct in refusing to entertain the application. - Decided against assessee.

Summary

Issues Involved:
1. Rejection of application for registration under Section 12AA of the Income Tax Act.
2. Legality of filing a second application for registration after cancellation.
3. Examination of the genuineness of the activities of the trust.
4. Applicability of the Finance Act (No.2), 2014 amendments.

Issue-wise Detailed Analysis:

1. Rejection of Application for Registration under Section 12AA:
The assessees, part of a group, had their initial registration under Section 12AA canceled following a Search and Seizure operation on 10-09-2009, which revealed the collection of capitation fees and misuse of funds. The application for fresh registration filed on 21-03-2014 was rejected by the Director of Income Tax (Exemptions) [DIT(E)] on 29-09-2014. The primary reason for rejection was the incriminating evidence found during the search, indicating that the society collected substantial donations/capitation fees over and above the prescribed fee, thus violating the provisions of Sections 11 and 13 of the Act.

2. Legality of Filing a Second Application for Registration After Cancellation:
The DIT(E) argued that once registration under Section 12AA is canceled, it is not permissible for the same trust to file another application for registration. The provision does not explicitly allow for re-registration after cancellation. The Tribunal upheld this view, stating that granting registration again on the same trust deed and management would be inconsistent with the earlier cancellation, which was based on findings of non-genuine activities.

3. Examination of the Genuineness of the Activities of the Trust:
The Tribunal emphasized that the genuineness of the trust's activities is crucial for both granting and canceling registration. The earlier cancellation was due to findings that the trust's activities were not in accordance with its objects. The Tribunal noted that the subsequent assessments did not reveal any new violations, but this did not negate the findings from the search operation. The Tribunal concluded that the trust could not be considered genuine based on the same trust deed and management that led to the initial cancellation.

4. Applicability of the Finance Act (No.2), 2014 Amendments:
The Tribunal examined the amendments introduced by the Finance Act (No.2), 2014, particularly the provisos to Section 12AA. The third proviso states that the benefits of the first and second provisos do not apply to trusts whose registration was refused or canceled. The Tribunal interpreted this to mean that a trust whose registration was canceled cannot seek re-registration to gain retrospective benefits. The Tribunal rejected the argument that the third proviso allows for re-registration, stating that it merely excludes certain trusts from the benefits of the first and second provisos.

Conclusion:
The Tribunal upheld the DIT(E)'s decision to reject the fresh application for registration under Section 12AA. It concluded that the trust could not seek re-registration based on the same trust deed and management, as it would contradict the earlier findings of non-genuine activities. The Tribunal also clarified that the Finance Act (No.2), 2014 amendments do not provide for re-registration after cancellation. Both appeals were dismissed, affirming that the trust is not eligible for re-registration following the valid cancellation of its earlier registration.