2021 (11) TMI 508 - HC - Income Tax

Exemption u/s 11 - cancelling the registration granted to the assessee Trust u/s 12A - Whether Tribunal is not correct in opining that the cancellation of the registration of the assessee by the Commissioner of Income Tax (Exemptions) by exercising jurisdiction under sub-section 3 of Section 12AA was not maintainable thereby wrongly set aside the order of the Commissioner of Income Tax (Exemptions) ? - HELD THAT - Commissioner had committed a fundamental error in cancelling the registration granted to the assessee Trust under Section 12A of the Act as far back as during the year 1995 by taking note of the activity of the Trust, which according to the assessee was in consonance with Clause 4(A) of the Deed of Trust. At the time when the registration was granted at the first instance by the then Commissioner on 14th December, 1995, the clauses and covenants as contained in the Deed of Trust were examined and the activities of the trust were found to be genuine and after recording satisfaction, registration has been granted. Therefore, such an issue could not have given rise to a cause of action for cancellation of the registration. The Tribunal had followed the decision of Tamil Nadu Cricket Association 2013 (12) TMI 833 - MADRAS HIGH COURT to hold that the issues relating to how the funds of the Trust were employed is not germane for considering the question as to whether the activities were genuinely carried out or not. The learned Senior Standing Counsel for revenue submitted that revenue has not accepted the decision in the case of Tamil Nadu Cricket Association and a Special Leave Petition has been filed before the Hon ble Supreme Court. We are convinced that the reason cited by the Commissioner for cancellation of the registration could not be a ground to do so as it is admittedly an issue which could be dealt with by the AO, during the course of assessment. That apart we find that the Tribunal, which is the final fact finding authority, had examined the entire facts including the conditions contained in the Deed of Trust and recorded a findings in favour of the Assessee Trust. While we exercise jurisdiction u/s 260A of the Income Tax Act we are required to consider as to whether any substantial question of law arises for consideration and not to re-appreciate the factual position. Thus we find that there is no error in the approach of the Tribunal nor the conclusion arrived at by the Tribunal.

Summary

Issues:
1. Cancellation of registration of the assessee by the Commissioner of Income Tax under Section 12AA of the Income Tax Act.
2. Justification of setting aside the order of the Commissioner by the Income Tax Appellate Tribunal.
3. Acceptance of the decision of the Madras High Court in a similar case by the Tribunal.

Analysis:

1. Cancellation of Registration:
The appeal by the revenue challenged the correctness of the order passed by the Income Tax Appellate Tribunal regarding the cancellation of the registration of the assessee Trust by the Commissioner of Income Tax (Exemptions) under Section 12AA of the Income Tax Act. The Commissioner based the cancellation on the assessee Trust making donations to an organization outside India without prior approval from the CBDT, as required under the Act. The Tribunal found that the Commissioner erred in canceling the registration granted to the assessee Trust back in 1995, as the activities of the Trust were in line with the Deed of Trust at the time of registration. The Tribunal emphasized that the issue raised by the Commissioner could have been addressed during assessment and was not sufficient grounds for cancellation.

2. Setting Aside Commissioner's Order:
The Tribunal, as the final fact-finding authority, examined the facts, including the Trust's Deed conditions, and concluded in favor of the Assessee Trust. The Tribunal's decision was based on the premise that the Commissioner's reasons for cancellation did not justify the action taken. The Tribunal also cited a decision of the Madras High Court to support its position that the utilization of Trust funds does not determine the genuineness of the Trust's activities. The Tribunal's conclusion was that no substantial question of law arose for consideration in the appeal, as it was not within the scope of the Tribunal's jurisdiction to re-evaluate factual findings.

3. Acceptance of Madras High Court Decision:
The Tribunal relied on the decision of the Madras High Court in a similar case to support its reasoning. The revenue contested the acceptance of this decision and had filed a Special Leave Petition before the Supreme Court. Despite this, the High Court found that the Tribunal's reliance on the Madras High Court decision was valid in the context of the present case. The High Court emphasized that its role under Section 260A of the Income Tax Act was to assess the existence of substantial questions of law, not to reassess factual determinations made by the Tribunal.

In conclusion, the High Court dismissed the appeal by the revenue, upholding the Tribunal's decision to set aside the Commissioner's order canceling the registration of the assessee Trust. The Court found no error in the Tribunal's approach or conclusion, stating that no substantial question of law arose for consideration in the appeal.