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TMI Blog2013 (8) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... en otherwise also, as we notice that registration under section 12A/12AA can be cancelled in the circumstances provided in section 12AA(3) of the Act of which detail has been discussed above in Para no 19 of this order. If we apply the said condition stipulated in section 12AA(3), we find that there is no finding of the CIT that activities of the assessee, Agra Development Authority are non-genuine or not being carried out in accordance with the object of the assessee, Agra Development Authority - In the case under consideration, the condition stipulated in section 12AA(3), that activities of the assessee, Agra Development Authority are non-genuine or not being carried out in accordance with the object of the assessee, Agra Development Author is not satisfied - The CIT by his own motion added one more condition in section 12AA (3) that the object of the assessee, Agra Development Authority is not charitable as per amended provisions of section 2(15) of the Act for which the CIT is not empowered to add such own condition in the statute. - Appeal allowed – Decided in favor of Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ly erred in law and on fats in holding that the appellant is doing the activities for a 'cess' or 'fee'. The findings are patently wrong, expose the gross ignorance, deliberate legal malice and bias against the appellant. 7. Because the Ld. CIT grossly erred in law and on facts in holding that the facts stated by the appellant are inconsistent with the annual statement furnished. The Ld. CIT failed to appreciate that none of the receipts shown in the annual statement is profit or from any activity in the nature of trade or business. 8. Because the Ld. CIT grossly erred in law while applying facts and circumstances of other statutory bodies referred to in para 9 of his order. The Ld. CIT failed to appreciate that order of Hon'ble ITAT, Amritsar Bench, in Jalandhar Development Authority, relied upon by him, relates to grant of registration and not cancellation. The application of the order of Hon'ble ITAT by the Ld. CIT is wholly illegal. 9. Because the order is against law and facts. 10. Because the appellant craves leave to alter/modify grounds of appeal at the time of hearing." 3. The brief facts of the case are that the assessee was granted R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue and rendering it useful for further sale and development by builders, colonizers and common people. The assessee earned ₹ 1,62,31,313/- (schedule 9 of Annual Statement) during the relevant Assessment Year from such activities. C. The assessee owns and regularly gives such properties/public utilities like buildings, community centers, parks, conference halls, auditoria (like Sursadan) etc. on hire for rent, and earns profit. D. The assessee sells its master plan book & tender forms and gives scooter & car stand operating licenses to contractors and earns profit. The assessee earns from additional 2% stamp duty imposed in development areas. E. By approving building plans of builders and common men, the assessee earned income of ₹ 29,42,424/- (schedule 12 of Annual Statement). F. The assessee allots plots/houses to allottees and fixes a schedule of installments for payment. These installments include principal plus interest. The assessee also charges penal interest for any default and earns income by such activity. G. Section 2(ddd) of the UPUPD Act, 1973 defines 'city development charge' as the charge levied on a private developer u/s. 38A for the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case & nature of activities performed by the assessee. The arguments have been advanced without adducing any supporting evidence. As observed above, the assessee is a body corporate (as defined in section 4(2) of UPUPD Act, 1973) which earned an income of ₹ 44.24 crores, as per its books of accounts and it has shown a General Reserve of ₹ 523 crores, accumulated over the yeas. The sources of income and their nature clearly show that the activity is in the nature of trade and business. 9. In addition to above, another noteworthy fact is that statutory bodies with similar objects and activities like Punjab Urban Development Authority, Haryana Urban Development Authority, Indore Development Authority, Jalandhar Development Authority etc. were not provided with exemption u/s. 12AA even when proviso to section 2(15) was not added by the Finance Act, 2008. Even at that time these authorities were held to be not for 'charitable purpose' as per the definition u/s 2(15). Hon'ble ITAT, Amritsar in the case of Jalandhar Development Authority vs. CIT (ITA No.562/Agr/2008) has discussed various case laws and upheld the order of CIT, Jalandhar who had rejected the regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that section 12AA(3) has been further amended by Finance Act 2010 w.e.f. 01.06.2010. Thus, it is clear that cancellation under section 12AA(3) of the Act can be done only w.e.f. 01.06.2010. He further submitted that registration cannot be cancelled prior to 01.06.2010 as the amendment has prospective operation not retrospective. 9. The ld. Authorised Representative without prejudice to the above, submitted that the power of cancellation of registration under section 12AA(3) is based on the satisfaction of CIT when the activities of such trust, or institution are not genuine or are not being carried out in accordance with the objects as were available at the time of grant of registration. He submitted that the assessee is doing the activities in accordance with the objects as were available at the time of constitution of the authority as well as at the time of grant of registration. 10. The ld. Authorised Representative submitted that the proviso to Section 2(15) can be applied by the CIT while granting fresh registration after 01.04.2009 but it does not allow the authority to review/withdraw/cancel the registration u/s 12AA(3) which was granted earlier unless the activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the trust/institution are genuine or not, that can only be examined by considering income and expenditures. The ld. Departmental Representative filed written submission which are as under :- "In support of Id. CIT-I, Agra's order the undersigned avers that the assessee does not qualify to be a charitable organization w.e.f. AY 2009-10 because of following reasons discussed in brief: 1. Finance Act, 2002 deleted section 10(20A) in which specific exemption was provided to the assessee. It also added definition of "local authority" in section 10(20) thereby excluding the assessee for claiming shelter u/s. 10(20) as well. 2. Finance Act, 2008 added proviso to section 2(15) in which it clearly stated that if the objects of the organization falls under the fourth limb i.e. advancement of any other object of general public utility and it carries on any activity in the nature of trade, business or commerce and receives any money in the form of cess, fees or tax or any other consideration, then it shall not be treated as charitable organization. The use of words like cess, fee or tax is unusual and it again shows the intent of the legislature of taxing such bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een passed after 01.06.2010, so the order is correct. This view also finds support from the judgment of Hon'ble Bombay High Court in the case of Sinhagad Technical Education Society wherein the Hon'ble High Court dismissed assessee's writ petition against the fresh show-cause notice issued by the CIT dated 11 March 2011 proposing to invoke the powers under the amended provisions of Section 12AA(3) for cancellation of the registration w.e.f. A.Y. 1999-2000 for the reasons mentioned in the order dated 9 October 2007 and has held: By the Finance Act of 2010, sub-section (3) was amended so as to empower the Commissioner to cancel the registration of a trust or an institution which has obtained registration at any time under Section 12A (as it stood before its amendment by the Finance (No.2) Act, 1996). As a result of the amendment, a regulatory framework is now sought to be put in place so as to cover also a trust or an institution which has obtained registration under Section 12A as it stood prior to its amendment in 1996. Every statutory provision which operates in respect of a trust, which has already been registered in the past does not have a retrospective character. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the activities of the trust or institution whose objects do not run contrary to the public policy and are, in fact, related to charitable purposes, the CIT is empowered to make enquiry as he thinks fit." In the case of Agra Development Authority Id. CIT-I, Agra, made enquiries to consider the genuineness of activities and if the objects are, in fact, related to charitable purposes, with reference to the amendment brought out in section 2(15) by Finance Act 2008 w.e.f. 1.4.2009 and found that the activities of the assessee are not genuine in so far as they are not for charitable purpose as defined in section 2(15) w.e.f. AY 2009-10." 13. The ld. Departmental Representative filed rejoinder in continuation to the above written submission as under :- "Kindly refer to the written submission filed before the Hon'ble Bench dated 21.9.2012, in continuation of the earlier written submission, it is further submitted for your kind consideration that : Finance Act 2012 has inserted clause (8) to section 13 of the Income Tax Act, 1961, with retrospective effect from 1.4.2009. Section 13(8) states as under : (8) Nothing contained in section 11 or section 12 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide order dated 24.09.2003. The said registration under section 12A of the Act has been cancelled by the CIT by the impugned order dated 04.04.2012 w.e.f. 2009-10. Before that, i.e. till 31.03.2003 the assessee was claiming exemption under section 10(20A) of the Act which has been omitted by the Finance Act, 2002 w.e.f. 01.04.2003. 15. Under the facts and circumstances, the issue is to be examined in the case under consideration that the CIT was correct in cancellation of registration already granted under section 12A of the Act. To examine the relevant scheme of the Act, we would like to refer relevant sections of the Act, relevant C.B.D.T. Circulars and relevant judgements which are as under :- "12A. Conditions for applicability of sections 11 and 12. 12A (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely : (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] 16. Section 2(15) has been substituted by the Finance Act, 2008, w.e.f. 01.04.2009 as under :- "2(15) "Charitable purpose" includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:] [Provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2011 [F. No. 142/1/2011-SO(TPL)], dated 6-4-2011 …………………………. …………………………… 7. Cancellation of registration obtained under section 12A 7.1 Section 12AA provides the procedure relating to registration of a trust or institution engaged in charitable activities. Section 12AA(3) previously provided that 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, the registration granted under section 12AA can be cancelled by the Commissioner after providing the trust or institution an opportunity of being heard. 7.2 The power of cancellation of registration is inherent and flows from the authority of granting registration. However, judicial rulings in some cases have held that the Commissioner does not have the power to cancel the registration which was obtained earlier by any trust or institution under provisions of section 12A as it is not specifically mentioned in section 12AA. 7.3 Therefore, section 12AA h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an authority empowers to issue orders including the power to rescind such orders and the Commissioner would not have power to rescind the order passed by the Commissioner earlier granting the registration to a trust or institution." 19. The heading of section 12A 'Conditions for applicability of sections 11 and 12' was substituted with effect from 01.06-2007 in place of previous title 'Conditions as to registration of the Trusts etc. It means that prior to 01.06.2007, this section itself provided conditions regarding registration of trust etc. It is noted here because with the substitution of the present title, this section no longer provides for registration of trust etc. A special provision has been enacted in section 12AA providing for procedure for registration of trust etc., with effect from 01.04.1997. It is also noted that section 12A was inserted in the statute book by the Finance Act, 1972 with effect from 01.04.1973. It was omitted and was again restored with effect from 01.04.1989. Section 12A, as it stood at the time when it provided for registration of trust, nowhere provided for cancellation of the registration once granted. It is also pertinent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistration under section 12A/12AA and under section 12AA(3) of the Act by the CIT only on the following conditions:- (i) That the trust or society has already been granted registration under section 12AA(1)(b) of the Act. Or (ii) W.e .f. 01.06.2010 - registration has been granted at any time under section 12A as stood before its amendment by the (Finance No.2) Act 1996 (iii) The CIT subsequently found and satisfied that :- (a) activities of such trust or institution are not genuine, or (b) are not being carried out in accordance with the objects of the trust or institution. 20. In the light of above discussion, if we consider the facts of the case under consideration as discussed above, we find that the CIT is not correct in cancelling the registration under section 12AA(3) of the Act which has been granted under section 12A of the Act on the following grounds and reasons :- (i) Section 12AA(3) of the Act empowers the CIT to cancel such registration if he satisfy that activities of the trust or institutions are not genuine or are not being carried out in accordance with objects of the trust or institution as the case may be. The combined reading of both the sections ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 12AA (3) is not satisfied, the CIT cannot cancel or withdraw registration granted under section 12A of the Act. In the case under consideration, the condition stipulated in section 12AA(3), that activities of the assessee, Agra Development Authority are non-genuine or not being carried out in accordance with the object of the assessee, Agra Development Author is not satisfied. The CIT by his own motion added one more condition in section 12AA (3) that the object of the assessee, Agra Development Authority is not charitable as per amended provisions of section 2(15) of the Act for which the CIT is not empowered to add such own condition in the statute. Similar view has been taken by the I.T.A.T., Ahmedabad in the case of Ahmadabad Urban Development Authority v. DIT, ITA No.754/Ahd/ 2010, order dated 21.5.2010. 21. Now we come to the judgements relied upon by the Revenue. The CIT & ld. Departmental Representative relied upon a judgement of Hon'ble Bombay High Court in the case of Sinhagad Technical Education Society v. CIT - Writ Petition No.2545 of 2011 judgement dated 01.02.2012.. The CIT was of the view that as per the said judgement, the CIT can cancel registration unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 12A w.e.f. 2009-10 which is the period prior to 01.06.2010. The C.B.D.T. has also clarified that the amendment in section 12AA(3) is applicable from A.Y. 2011-12. 22. In the light of above discussion, the order of CIT is not in accordance with law. We, therefore, set aside the order of CIT and restore the registration under section 12A of the Act which has been cancelled w.e.f. 2009-10. Since the issue raised in grounds number 1, 2 & 4 have been decided in favour of the assessee on the basis and reasons discussed above, so under the facts and circumstances, the grounds on merit raised in grounds number 3, 5, 6, 7 & 8 wherein the CIT held that the activities of the assessee, Agra Development Authority, is not charitable, we are not expressing any opinion on these grounds of appeal. Grounds number 9 & 10 are general in nature, require no independent finding. 23. Before parting from the matter it is stated that the order of cancellation of registration has been signed as Chief Commissioner of Income Tax (OSD), it was clarified that he has been promoted from CIT to CCIT and charge of CIT was with him. 24. The another aspect of the matter is that the CIT while cance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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