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TMI Blog2015 (2) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12AA(3) and validity of a an order cancelling the registration is to be examined on the touchstone of legal provisions set out therein. While learned Commissioner has, on the basis of elaborate reasoning set out in the impugned order, concluded that, “the objective clauses of the authority….. are in the nature of business with a view to earn profits” and that “the activities of Muzaffarnagar Development Authority are not charitable in nature nor advancement of general public utility within the meanings of Section 2(15) of the Income Tax Act”, none of these reasons, even if correct, can be legally sustainable basis for exercise of powers under section 12AA(3). The only occasion to examine whether or not the objects are charitable is when the registration is granted is when examining the application of registration under section 12AA(1) and once no adverse inference is drawn, vis -à-vis the objects, at that stage, that aspect of the matter cannot be examined again in the course of exercise of powers under section 12AA(3). Mere selling some product at profit (as has been the allegation of the revenue) will not ipso facto hit the assessee by applying proviso to Section 2(15) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appellate Tribunal - Delhi vide its Order dated 20.05.2011 in ITA No.5798/Del/2010. Hence, the rejection of the appellant s Registration under Section 12A of Income Tax Act, 1961 is uncalled for. 3. The Learned Commissioner of Income Tax has grossly erred in law and on facts 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. The Learned Commissioner of Income Tax has failed to appreciate that the appellant authority was constituted by Uttar Pradesh Urban Planning Development Act, 1973 solely for objects of systematic planning and development of the City/areas falling under its jurisdiction and not for any activity in the nature of trade, commerce or business. The receipts from all the sources are utilised exclusively in achieving the objects of the appellant. 4. In any view of the matter and in any case, the impugned Order dated 16.05.2013 is bad in law and is against the facts and circumstances of the case. 5. The assessee prays to be allowed the permission to submit further evidence/judgements/written sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the aforesaid facts and circumstances of the case and in the interest of justice, we remit this issue to the file of the Learned Commissioner, to be decided afresh in accordance with law on considering the bye laws and regulations governing the assessee, a Development Authority, as produced before us. 5. In pursuance of the aforesaid directions, the mater was considered again by the learned Commissioner. Learned Commissioner, however, was of the view that the assessee is only a Uttar Pradesh State Government Authority, that it s activities are also not charitable per se as it sells land on commercial rates to earn profits and that Section 12 AA of the Income Tax Act, 1961 is only for the procedure of registration to trusts, societies, institutions and it is not applicable for state government authorities like the assessee. The assessee was back before the Tribunal but to meet the same fate i.e. being sent back to the Commissioner. Learned Commissioner thus decided the matter again but reached the same conclusion. The assessee was yet again in appeal before this Tribunal. Disposing of the said appeal, vide order dated 1st February 2010, a coordinate bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 01.02.2010 remitted the file to this office to decide registration issue u/s. 12AA of the I.T. Act in accordance with law. The section 12AA (Procedure for registration) of the I.T. Act clearly states that after satisfying himself (Commissioner of Income tax) about the objects of the trust or institution and the genuineness of its activities Commissioner of Income-tax shall pass on order of granting or refusing the registration on as per Law. The assessee (MDA) was given an opportunity vide notice dated 27.04.2010, hearing date fixed on 13.05.2010 (none attended) and subsequent dates i.e. 21.05.2010, 16.06.2010, 05.07.2010 (none attended) and 31.08.2010. However, Muzaffarnagar Development Authority failed to furnish copies of the Bye-Laws as required for establishing charitable activities conducted by the MDA accordance with the bye laws of the Development Authority . xxx xxxx xxxx Due to the reasons, facts reasonable opportunities given to the MDA, the MDA is not found to be fit case for registration u/s.12AA. As I am of the view the MDA is a State Government Authority and it is not a Trust/Society or Institution, the registration already cancelled vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the file of the learned Commissioner the dispute will finally see finality, seems to be, with the benefit of hindsight, clearly misplaced. Yet again, learned Commissioner has reiterated the cancellation of registration under section 12AA(3). While doing so, learned Commissioner observed that, the orders passed by the learned ITAT Lucknow bench in the case of UP Awas Evam Vikas Parishad, Lucknow as also in the case other cases, commonly heard and decided viz. Lucknow Development Authority, Lucknow, Kanpur Development Authority, Kanpur, have not been accepted by the Department and the appeals are pending before Hon ble High Court against the same . He then set out elaborate arguments in support, and finally justified the rejection on the basis of following reasoning: The contentions made by the learned counsel were considered and examined in the light of relevant provisions of the Act and also the judicial pronouncements relied upon by the learned counsel and relevant parts quoted in written submissions as reproduced above. As has been discussed above in detail, the objects of the authority cannot be regarded as charitable. With effect from 1/4/2003 the income of local authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e genuineness of activities as also their charitable nature. It is not in respect of income from any particular activity. If the reasoning as given by the authority is followed, then the income of even private utility companies like BSE, Tata Power and Infrastructure Development, Finance Corporations, like IDFC may also quality for exemption on doing activities of general public utility which is however against the clear provisions of the statute. Reliance is further placed in the case of Safdurjung Enclave Educational Society vs. Municipal Corporation Delhi (9192) 3 SCC 390, wherein the Hon ble Supreme Court has held that activities being run on commercial lines do not fall within the ambit of charitable object. The objective clauses of the authority as discussed above are in the nature of business with a view to earn profits as has been discussed in detail above. The activities of Muzaffarnagar Development Authority are not charitable in nature nor an advancement of General Public Utility within the meaning of section 2(15) of the I.T. Act, 1961 as has elaborately been discussed above. 9. The assessee is not satisfied and is in yet again in appeal before us. 10. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act and the appeal effect proceedings in connection with the same. It is in this backdrop that we have rephrased the issue requiring our adjudication and put it to the parties. 14. Section 12 AA(3), for ready reference, is reproduced below: Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A, and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out 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 15. A plain reading of the above statutory provision makes it clear that it is sine qua non for exercise of powers under section 12AA(3) that either (a) the Commissioner is satisfied that the activities of such trust or institution are not genuine; or (b) the Commissioner is satisfied that the activities of such trust or institution are not being carried out in accordance with the objects of the trust or the institution. Clearly, there cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the objects of the trust or the institution . As a corollary to this legal position, it is not open to the Commissioner to revisit his decision as to whether the objects of the trust of the institution are charitable or not. As long as activities of the trust or the institution are being carried out in accordance with the objects of the trust or the institution, as these objects existed at the point of time when registration granted, it cannot be open to the Commissioner to fault the assessee so far as objects of the trust or the institution are concerned, and, on that basis, cancel the registration granted under section 12 AA(1). The words used in section 12AA(3) are free from any doubt or ambiguity, and, as held by Hon ble Uttarakhand High Court in the case of Welham Boys School Society Vs CBDT [(2006) 285 IR 74], the only power under which a Commissioner can cancel the registration is power under section 12AA(3) and validity of a an order cancelling the registration is to be examined on the touchstone of legal provisions set out therein. 16. Let us now revert to the facts of this case. 17. The order triggering this litigation before us is the order dated 4th June 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not ipso facto hit the assessee by applying proviso to Section 2(15) and deny exemption available under section 11 , that the intention of the trustees and the manner in which activities of the charitable institution are undertaken are highly relevant to decide the issue of applicability of proviso to Section 2(15) , and that the proviso to Section 2(15) is not applicable to the facts of and circumstances of the case . Learned Departmental Representative fairly accepts that the facts and circumstances of these cases are in pari materia with the facts of the case before us and that the only reason for learned Commissioner s withdrawal of registration is his reliance on applicability of proviso to Section 2(15) which has been specifically rejected by Hon ble jurisdictional High Court, even though learned Departmental Representative relies upon the order of the learned Commissioner. We are, therefore, unable to see legally sustainable merits in the objections of the revenue authorities. The objects of the assessee institution, in the light of the law laid down by Hon ble jurisdict ional High Court, are charitable object of general public utility. There is also no dispute about ge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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