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TMI Blog2013 (1) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is fulfilling the conditions of sec 11 and 12 of the Act in the assessment proceedings - Decided in favor of assessee - ITA Nos. 1915/Hyd/2011 & 217/Hyd/2012 - - - Dated:- 18-1-2013 - B. Ramakotaiah (Accountant Member) And Saktijit Dey (Judicial Member) For the Petitoner : C. P. Ramaswamy For the Respondent : M. H. Naik ORDER B. Ramakotaiah (Accountant Member) These two appeals are by the assessee against the orders of the Director of Income-tax (Exemption), Hyderabad dated 12.12.2011 and 15.09.2011 cancelling the registration under S. 12AA and rejection of the application for grant of approval under S. 80G(5) of the I.T. Act respectively. 2. In ITA 217/Hyd/2012 Assessee is contesting the action of the Director of Income-tax (Exemption), with regard to cancellation of registration under S. 12AA of the Act, by the following grounds- 1. .. (2) (a) .. Not Pressed. (b) The learned DIT(E) failed to appreciate that the activities of the appellant trust are being genuinely carried out in accordance with the objects of the trust and consequently erred in cancelling the approval. (c) The learned DIT(E) failed to appreciate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd Circular No.11 of 2008 with regard to advancement of any other object of general public utility, he cancelled the exemption granted under S. 12AA of the Act. Assessee is aggrieved. 6. It was the submission of the learned counsel that the reasons stated by the Director of Income-tax (Exemption) are not correct as the assessee has never changed its objects from the time of its inception and as per the guidelines prescribed by the parent body, Pearl City Chamber, Hyderabad Chapter cannot misuse the funds and all the funds received are to be advanced for the objects only. It was further submitted that the assessee is engaged in the advancement of educational activities and support in the field of project management and undertakes training facilities as part of its charitable activities, for which certain expenditure is borne by the person on whose behalf it was conducted and referred to the expenditure statement to submit that the observations of the Director of Income-tax(Exemption) that the amounts spent on 'student leadership competency building' and 'International Student Leadership Day' are not meager as stated by the Director of Income-tax (Exemption), but a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2AA(3), if at any stage, it is found that the activities of the applicant institution are not genuine or are not being carried out in accordance with the objects of the Trust/institution. As seen from the order of the Director of Income-tax (Exemption), there is no mention about violation of these two conditions/ application of these two conditions to the facts of case. Nowhere in the order, the Director of Income-tax (Exemption) specified how the assessee's activities are not genuine or are not being carried out in accordance with the objects. The very same objects which were not amended in the interregnum period were relied upon by the Director of Income-tax (Exemption) to consider that the assessee's activities are commercial in nature. There is no evidence on record to consider that the assessee's activities are commercial in nature. Just because the assessee has entered into agreement for providing services in the field of project management, in which it specialises or collects registration fee and workshop fee, in our view, it does not tantamount to commercial activity as these are spent for the purpose of organizing the workshops in the field of education for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the activity of education, the reliance by the Director of Income-tax (Exemption) on the above amendment brought out by the Finance Act, 2008 does not support the case of the Director of Income-tax (Exemption). 11. In the case of Himachal Pradesh Environment Protection and Pollution Control Board (supra) Chandigarh, the ITAT, Chandigarh Bench 'B considered this issue and held as follows- 11. The other aspect of the matter is the impact of amendment made by the Finance Act 2008, with effect from 1st April,2009, in Section 2(15) which provides that 'advancement of any object of general public utility' cannot be treated as a charitable purpose if 'it involves the carrying out of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to such trade, commerce or business, for a cess or fees or any other consideration, irrespective of nature of use or application of the income from such an activity'. It is thus undisputed position that so far proviso to Section 2 (15) is concerned, it can be applied only to the entities whose purpose is 'advancement of any other object of general public utility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fourth limb of definition of 'charitable purpose' contained in Section 2(15). Hence, such entities will not be eligible for exemption under Section 11 or under Section 10(23C) of the Act, if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 or on the ground that their objects are for charitable purposes as these are covered under the 'any other object of public utility'. Under the principle of mutuality, if trading takes place between the persons who are associated together and contribute to a common fund for the financing of some venture or object, and in this respect have no dealings or relations with any outside body, then the surplus returned to such persons is not chargeable to tax. Therefore, where industry or trade association claims both to be charitable institutions as well as mutual members, these would not fall under the purview of Section 2(15) owing to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to Section 2(15). 15. As CBDT rightly puts it, sweeping 'generalizations are not possible' and 'each case will have to decided on its facts'. The question then arises whether on the present set of facts it can be said that the assessee was engaged in trade, commerce or business or in rendering of a service to trade, commerce or business. As far as assessee being engaged in trade, commerce or business is concerned, it is not even learned Commissioner's case that running a organization, set up under the statute law, for controlling, preventing and abating pollution, is pursuing trade, commerce or business. Obviously, a trade, commerce or business implies an activity with profit motive even though public good may be a secondary benefit from such an activity. That is not the case before us. The legal framework under which the assessee is set up is quite clear and unambiguous and it reflects will of the lawmakers in no uncertain terms, which is to prevent pollution. ** ** ** 19. In any event, as a plain reading of Section 12AA(3) would indicate that a registration granted under Section 12 AA can only be withdrawn when the Commissioner is satisfied t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling of registration under s. 12AA(3), the cit has to satisfy himself about either of the two conditions prescribed therein, namely, that the activities are not genuine or that the activities are not being carried out in accordance with the objects of the trust or institute, as the assessee may be. Pertinently, this satisfaction about objects of the trust or institution being as per s. 2(15), is not a condition mentioned in s. 12AA(3) to cancel the registration already granted under S. 12AA(3). The only ground available with the CIT to cancel the registration is to either establish that the activities of the trust or institution are not genuine or that the same are not being carried out in accordance with the objects of the trust or institution, as the case may be. The CIT is bound to function strictly in accordance with the provisions of the Act. A statutory authority has no power or jurisdiction or discretion to go beyond the statutory provisions. No power can be assumed in the absence of any specific provision. It is quite clear that as per sub-s.(3) of s.12AA, the CIT has power to rescind the registration on being satisfied about either of the two points mentioned therein, an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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