2018 (3) TMI 386 - HC - Income Tax

Cancelling the registration of assessee s Trust u/s 12AA(3) - whether the Tribunal was justified in restoring the registration under section 12A of the Act? - Held that - This issue stand concluded against the Revenue and in favour of the respondent assessee by the order of this Court in Commissioner of Income Tax Vs. The Mumbai Metropolitan Regional Iron and Steel Market Committee (2017 (7) TMI 920 - BOMBAY HIGH COURT) and Director of Income Tax (Exemptions) Vs. Khar Gymkhana 2016 (6) TMI 489 - BOMBAY HIGH COURT as held that the Commissioner, nowhere has given the finding that the activities of the Respondent institution are not genuine one or that the said activity carried out are not in consonance with the object of the institution. The Commissioner has merely relied on proviso to Sub-Section 2 of Section 15 of the Act, as it stood then. The said proviso has subsequently gone amendment. Tribunal justified in restoring the registration under section 12A - Held that - As is evident from the Section 13 of the Act itself, it comes into play while applying Section 11 of the Act. It is in domain of the Assessing Officer during the assessment proceedings and not a basis for cancellation of registration. Besides, the amendment not being in the spirit of Charitable Trust, cannot be the basis of cancellation under Section 12AA(3). This is as vague as vague could be. The term spirit of a Charitable Trust is not defined in the Act nor elaborated in the order of Commissioner of Income Tax. In the above facts, the impugned order of the Tribunal correctly holds that the Commissioner has focused on change in the future management of the Trust rather than the object of the Trust to cancel the Registration. The amendment made in the Trust Deed which the Commissioner relies upon to cancel the Registration does not even remotely suggest any change / addition to the objects of the Trust. It has only to do with the appointment of the Chief Trustee and the manner of managing the Trust. No substantial question of law.

Summary

Issues:
1. Challenge to order under Section 260A of the Income Tax Act, 1961
2. Restoration of registration under Section 12AA(3) of the Act
3. Interpretation of amendments to Trust Deed violating Section 13(1)(c) of the Act

Analysis:

Issue 1: Challenge to order under Section 260A of the Income Tax Act, 1961
The appeal filed under Section 260A challenges the order passed by the Income Tax Appellate Tribunal (the Tribunal) on 16th September, 2014. The Tribunal's decision allowed the respondent assessee's appeal against the Commissioner of Income Tax's order cancelling the registration of the Trust under Section 12AA(3) of the Act.

Issue 2: Restoration of registration under Section 12AA(3) of the Act
Regarding the first reframed question of law, the Court found that the issue had already been decided against the Revenue in previous cases cited by the Counsel for the Revenue. Therefore, this question did not give rise to any substantial question of law and was not entertained.

Issue 3: Interpretation of amendments to Trust Deed violating Section 13(1)(c) of the Act
The Tribunal, in the impugned order, considered the cancellation of registration based on the amendment to the Trust Deed. The Commissioner of Income Tax had cancelled the registration citing a violation of Section 13(1)(c) of the Act, stating that the amendment went against the spirit of a Charitable Trust. However, the Tribunal noted that the amendment dealt with the management powers of the Trust, not its charitable objects, and set aside the Commissioner's order.

The Counsel for the Revenue relied on a separate case where a similar question was admitted for consideration. However, the Court distinguished the issues in that case from the present case, emphasizing that the cancellation of registration should be based on the genuineness of activities or adherence to the Trust's objects, not vague notions like the "spirit of a Charitable Trust." The Court also highlighted the distinction between the Trust's objects and its powers, noting that the amendment in question did not alter the charitable objectives but only concerned the management structure.

In conclusion, the Court dismissed the appeal, emphasizing that the cancellation of registration should be based on specific grounds related to the Trust's activities or objectives, not vague interpretations of the "spirit of a Charitable Trust." No costs were awarded in this matter.