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2018 (3) TMI 64 - AT - Income TaxRegistration u/s 12AA cancelled - appellant is not engaged in activities which are covered within the meaning of charitable purpose appearing in section 2(15) - jurisdiction of DIT(E) for cancellation of registration already granted - Held that - The Circular No.21/2016 issued by CBDT clearly provides that mere receipt on account of business receipt in excess of limit in the proviso would not result in cancellation of registration granted under section 12AA, unless there is change in the nature of activities of the assessee. DIT(E) has not given any finding as to whether there is change in the nature of activities of the assessee during the relevant Assessment Year, except placing reliance on the proposal of ADIT(E). Decision relied by Revenue in DIT(E) vs. North India Association (2017 (3) TMI 37 - BOMBAY HIGH COURT) is in favour of assessee wherein while dismissing the appeal of Revenue, the Hon ble jurisdictional High Court held that merely because in one year income of assessee-trust exceeded prescribed limit provided under section 2(15), by itself could not warrant the cancellation of registration of Trust. The appeal of the assessee is allowed, the ld. DIT(E) is directed to restore the registration certificate granted under section 12AA dated 08.09.2009. - Decided in favour of assessee.
Issues Involved:
1. Cancellation of registration under section 12AA of the Income Tax Act. 2. Applicability of proviso to section 2(15) of the Income Tax Act. 3. Jurisdiction and conditions for cancellation of registration under section 12AA. 4. Interpretation of Circular No. 21/2016 issued by CBDT. 5. Impact of exceeding the monetary limit specified under section 2(15). Detailed Analysis: 1. Cancellation of registration under section 12AA of the Income Tax Act: The primary issue in this case revolves around the cancellation of the registration granted to the assessee under section 12AA of the Income Tax Act. The Director of Income Tax (Exemptions) [DIT(E)] cancelled the registration on the grounds that the assessee's activities were in the nature of trade, commerce, or business, and the gross receipts exceeded ?10 lakh, thus invoking the proviso to section 2(15) of the Act. 2. Applicability of proviso to section 2(15) of the Income Tax Act: The DIT(E) argued that the assessee's activities, such as earning income from cargo handling, storage charges, port and dockyard charges, railway freight, and rental of estate, were commercial in nature and exceeded the prescribed limits under section 2(15). Therefore, the assessee's activities did not qualify as "charitable purposes." The DIT(E) concluded that the assessee-trust was directly hit by the proviso to section 2(15) introduced w.e.f. AY 2009-10, leading to the cancellation of its registration. 3. Jurisdiction and conditions for cancellation of registration under section 12AA: The assessee contended that the jurisdiction of DIT(E) for cancellation of registration under section 12AA is limited and can only be invoked if the activities of the trust are not genuine or not carried out in accordance with its objects. The assessee argued that there was no change in the objects or activities of the trust and relied on various judicial precedents and CBDT Circulars to support its case. 4. Interpretation of Circular No. 21/2016 issued by CBDT: The Tribunal referred to Circular No. 21/2016 issued by the CBDT, which clarifies that temporary excess receipts beyond the specified cut-off in one year may not necessarily indicate a change in the nature of activities of the trust. The Circular states that cancellation of registration under section 12AA should not be mandatory merely because the cut-off specified in the proviso to section 2(15) is exceeded in a particular year. The tax exemption would be denied for that year, but the registration should not be cancelled unless there are grounds prescribed under the Act. 5. Impact of exceeding the monetary limit specified under section 2(15): The Tribunal concluded that the mere fact that the assessee's receipts exceeded the prescribed limit under section 2(15) does not warrant the cancellation of registration under section 12AA. The Tribunal emphasized that the status of registration under section 12AA is not affected by the excess receipts, and the assessee would be disentitled to exemption under section 11 only for the year in which the receipts exceed the limit. The Tribunal directed the DIT(E) to restore the registration certificate granted under section 12AA. Conclusion: The Tribunal allowed the appeal of the assessee, directing the DIT(E) to restore the registration certificate granted under section 12AA. The Tribunal held that the cancellation of registration was not justified merely because the assessee's receipts exceeded the prescribed limit under section 2(15), as there was no change in the nature of the assessee's activities. The Tribunal relied on CBDT Circular No. 21/2016 and judicial precedents to support its decision.
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