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TMI Blog2015 (7) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ovement Trust. The CIT failed to appreciate that the order of the High Court was binding tooth and nail. 4. That the CIT has failed to record his satisfaction on the two conditions prescribed in section 12AA(3) regarding its violation and has clearly exceeded his powers in the cancellation of the registration. 5. That the CIT failed to appreciate the amendment in law in section 13(8) and 143(3) proviso made by the Finance Act 2012 w.e.f. 1.4.2009 and also the Board Circular No. 11 of 2008 dated 19.12.2008 which was binding upon him. 6. That CIT had no power to cancel the registration with retrospective effect of 1.4.2009. 7. That the order of the CIT is against the law and facts of the case." 3. To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is a body set up under the Punjab Towns Improvement Act, 1922. On 22nd September 2005, the assessee filed an application seeking registration under section 12AA of the Act but the same was rejected by the then Commissioner vide order dated 18th May 2007. When the order so declining the registration was carried in appeal before this Tribunal, grievance of the assessee was upheld and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the following decision of Hon'ble Courts/Tribunals :- (i). ITA No. 36(Asr)/2012 dated 18.12.2012 in the case of Improvement Trust, Bathinda vs. CIT, Bathinda. (ii). 103 TTJ-Chd-988 dated 01.06.2006 in the case of Puda vs. CIT (iii). 165 CTR (SC): (2001) 247 ITR 785 (SC) in the case of Asst. CIT vs. Thanthi Trust Aims/objects and activities of your trust are same as are in the case of Improvement Trust, Phagwara. 3. Keeping in view the above facts and amendment made to section 2(15) of the Income Tax Act, 1961 w.e.f. 01.04.2009 it is proposed to review registration granted to the trust u/s 12AA of the I.T. Act. You are therefore, afforded an opportunity to show cause as to why action suggested above may not be taken." 6. So far as the present appeal is concerned, it is sufficient to note that the assessee, inter alia, pointed out that "Section 12AA(3) mandates cancellation of registration on satisfaction of the two conditions i.e. (i) that the activities of the trust are not genuine, and (ii) that the activities of the trust or the institution are not being carried out in accordance with the objects of the trust or the institution" and that "in the present case, none of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) of the Income Tax Act, 1961. It is held in the said order that this issue requires deliberation from a different angle whether the assessee was constituted to provide any charity to the public at large or to satisfy the needs for housing accommodation for the people of Punjab and also planning and development of the cities, towns and villages or whether the development in such a way is of charitable nature. A plea was raised by the learned counsel for the assessee that funds are provided by the Punjab Government or generated by the assessee itself. To generate its funds for carrying out its objects, the assessee is acquiring lands, developing them and selling the plots to the general public who apply for the same. Even the economically weaker strata of the society is generally applying. It is not the case that the assessee is allotting houses to the poor masses free of cost. While delivering the judgment in the case of PUDA, the Hon'ble Chandigarh Bench of Income-tax Appellate Tribunal has also referred to a case adjudicated by Hon'ble apex Court in the case of Asst. CIT v. Thanthi Trust (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC) where the Hon'ble Court has de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade, commerce or business because no plots are reserved for any socio-economically lower society, there is no element of donation or support to any cause, none of the land is earmarked to be sold at no profit, no loss basis to any person whatsoever, which clearly establish that the element of charity is clearly absent from the activities of the trust, which is contrary to the provisions of section 2(15) of the Act amended w.e.f. 01.04.2009 and the Ld. CIT Bathinda has rightly issued show cause notice to the assessee trust for cancelling the registration already granted to the assessee-trust which the ld. CIT, Bathinda has the power under section 12A(3) of the Act. 7.4 After going through the aforesaid, we are of the considered opinion that the ld. CIT(A) has rightly cancelled the registration granted to the assessee trust w.e.f. 12.06.2003 in view of the amended provision of section 12AA(3) of the Act. In the resent case, the ld. CIT, Bathinda is fully satisfied that the activities of the assessee-trust are not genuine and not being carried out in accordance with the objects of the assessee-trust, as discussed above." 12. Further, recently, the Hon'ble ITAT, Amritsar vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther in view of the facts on record, the applicant authority does not qualify to be treated as a charitable institution and registration deemed to have been granted to it is required to be withdrawn in view of the amended provisions of the Income Tax Act, 1961 and in view of the discussion made in the preceding paragraphs. 15. Accordingly, in view of amendment in section 2(15) of Income Tax Act and relying on the decision of ITAT, Amritsar Bench, Amritsar in the case of Improvement Trust Phagwara dated 23.07.2013, the registration of the trust u/s 12AA of Income Tax Act, 1961 is hereby cancelled w.e.f. 01.04.2009." 7. The assessee is aggrieved and is in appeal before us. 8. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 9. We find that, as learned counsel rightly points out, the scope of powers of the Commissioner under section 12AA(3) for cancellation of registration already granted is very limited in scope inasmuch as it can only be invoked only when (i) that the activities of the trust are not genuine, and (ii) that the activities of the trust or the institution are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year; (Emphasis by underlining supplied by us) 12. What is clear from the riders in the above definition of 'chartable purposes' is that rider set out therein, under first proviso to Section 2(15), can only come into play on year to year basis and not in absolute terms. The same activity can be hit by this rider in one year and thus the assessee trust or institution may not qualify to be existing for 'charitable purposes', and that very activity of the assessee trust or institution may remain unaffected by the same disabling provision for another year. The reason is that it is not only the nature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other year depending on the aggregate value of receipts from commercial activities. There is, therefore, need to expressly provide in law that no exemption would be available for a previous year, to a trust or institution to which first proviso of subsection 2(15) become applicable for that particular previous year. However, this temporary excess in one year may not be treated as altering the very nature of the trust or institution so as to lead to cancellation of registration or withdrawal of approval or rescinding of notification issued in respect of trust or institution. Therefore, there is need to ensure that if the purpose of a trust or institution does not remain charitable due to application of first proviso on account of commercial receipt threshold provided in second proviso in a previous year. Then, such trust or institution would not be entitled to get benefit of exemption in respect of its income for that previous year for which such proviso is applicable. Such denial of exemption shall be mandatory by operation of law and would not be dependent on any withdrawal of approval or cancellation of registration or a notification being rescinded. It is, therefore, proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activities being hit by the first proviso to Section 2(15) lies not in grant, decline or withdrawal of registration but in declining the benefits of exemption under section 11 on that count, on year to year basis, notwithstanding the status of registration. 16. The scheme of the Act, in this respect, is thus clear. The status of registration under section 12A or 12AA has no bearing, as recognized in Section 13(8), on the availability of exemption under section 11. To the extent income of the assessee arises from the activities hit by the first proviso to Section 2(15) in any assessment year, the assessee will be disentitled for exemption under section 11 to that extent. It is also important to bear in mind the fact that the disentitlement for exemption under section 11, as a result of the activities of an assessee being held to be not for charitable purposes under section 2(15) read with provisos thereto, is in respect of entire income of the assessee trust or institution but only for the assessment year in respect of which the first proviso to Section 2(15) is triggered. 17. If the status of registration is to be declined to an assessee only on the ground that some of the obj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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