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TMI Blog2015 (9) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT has erred in holding that activities of the trust are in the nature of trade, commerce and business. 5. That the facts mentioned for the cancellation have already been considered by ITAT in appeal no.413(ASR) 2009 and hence cancellation of registration is wrong. 6. That the order of granting registration has merged with the order of ITAT and as such order for cancelling registration is wrong, illegal and without jurisdiction. Accordingly it is prayed that the order of the Learned Commissioner of Income Tax cancelling the registration be quashed and registration already granted should be directed to be restored." 2. Before taking up the matter on merits, it is appropriate to point out that originally this appeal was disposed of by the Tribunal vide order dated 18.12.2012 but when the matter was carried in appeal before their Lordships of Hon'ble Punjab & Haryana High Court, their Lordships were pleased to restore the order to the file of Tribunal by observing, inter alia, as follows :- "5. Learned counsel for the appellant submitted that in view of the provisions of 1922 Act, the matter is required to be remanded to the Tribunal to adjudicate whether the activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asr/2013 A.Y. 2009-10 which was heard on 03.06.2015 will apply mutatis mutandis in this case as well. Ld. Departmental Representative, however, vehemently relied upon the stand of the ld. CIT and contended that since the assessee is carrying on the activities which are in the nature of trade, commerce and business, the assessee is not entitled to registration in view of specific provisions of section 2(15) of the Act. 7. We find that in the case of Kapurthala Improvement Trust vs. CIT (supra) vide our order dated 11.06.2015, this issue has been settled in favour of the assessee by, inter alia, observing as follows :- "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 being carried out in accordance with the objects of the trust or the institution. Section 12AA(3) specifically provides that when the CIT "is satisfied that the activities of such trust or institution are not gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 twentyfive 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 'charitable 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 activity but also the level of activity which, taken together, determine whether this disabling clause can come into play. The safeguard against the objects of the trust being vitiated insofar as their character of 'charitable activities' is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst proviso of sub-section 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 to amend ....... section 13........ of the Act to ensure that such organization does not get benefit of tax exemption in the year in which it's receipts from commercial activities exceed the threshold whether or not the registr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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 proviso 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 objects may be hit by the first proviso to Section 2(15) but the assessee's receipts from such activities donot exceed specified threshold in a particular assessment year, the assessee will be subjected to undue hardship in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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