9911796707
TMI Blog2013 (1) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... d to appreciate that the appellant trust is being run for imparting educational programs in the field of project management as part of service training on a no profit no loss basis and consequently cannot be denied exemption on artificial reasons assumed by the DIT(E). 3. .... 4. ... " 3. Briefly stated, the assessee is registered as a charitable institution by way of Trust Deed and Memorandum & Articles of Association dated 4.8.2001. Vide orders dated 25.9.2006, the Director of Income-tax (Exemption) granted registration under S. 12AA of the Act with effect from 1.4.2005, i.e. from the first day of the financial year in which the application was filed. It was specifically stated in the approval order that the Registration is subject to the fulfilment of the conditions laid down under S. 12AA of the Act and does not ipso facto exempt the income, unless the provisions of S. 11 and 12 of the Income-tax Act are adhered to. It was further stated vide para 6 of the said order that the registration may be cancelled in terms of the provisions of S. 12AA(3), if at any stage it is found that the activities of the applicant trust/institution are not genuine and are not being carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n), but are substantial. He referred to the gross receipts from workshop, Membership Fee and other receipts totaling to Rs. 50.74 lakhs, out of which Rs. 19.20 lakhs was spent on ISLD and Rs. 92,957 was spent on SLCB. It was further submitted that major expenditure was expenses on workshop and only in this year, there was some surplus whereas in all other years, the society was operating on 'no-profit no-loss' basis. He also referred to the Chapter Guidelines and the orders of the Director of Income-tax (Exemption) granting registration to submit that the twin conditions laid down for cancellation of the registration are not followed by the Director of Income-tax (Exemption). It was submitted that provisions of S. 12AA(3) can be invoked only if the activities of the Trust/institution are not genuine or are not carried out in accordance with the objects of the trust/institution. These twin conditions do not apply to the facts of the case as the assessee has carried out its activities in accordance with the objects on the basis of which registration was originally granted, and further the is no whisper in the order of the Director of Income-tax (Exemption) to state that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust/society was incorporated. Moreover, the expenditure on ISLD and SLCB are also not meager when compared to the total receipts. There is also no evidence on record to come to a conclusion that there is no element of charity in the activities conducted by the assessee. The assessee is not providing any consultancy on commercial lines, but is providing workshops to various employees/organizations in the field of project management, for which it was constituted or incorporated and there is no deviation from the objects of the society/trust. In our opinion, since the twin conditions specified in S. 12AA(3) provided for cancellation of registration have not been considered by the Director of Income-tax (Exemption), cancellation of registration on the reason that the assessee's activities are in violation of the objects of the society cannot be considered as a valid ground for cancellation of registration. 10. The learned Director of Income-tax (Exemption) also relied on the amendment brought to the definition of the expression 'charitable purpose' as provided in S. 2(15), and the same reads as under- "S. 2...... (15) "charitable purpose" includes relief of the poor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... til the assessment year 2009-2010, the assessee board was covered only by this residuary clause of definition of 'charitable purposes', but, as a result of the retrospective amendment introduced by the Finance Act, 2009, a new category of activity entitled to be treated as charitable activity under section 2(15) has been introduced which extends the definition of charitable purposes to "preservation of environment (including watershed, forest and wildlife) and preservation of monuments or places of artistic or historic interest)". In our considered view, the assessee is now covered by this specific category set out under section 2(15), and, therefore, residuary clause does not come into play. It is only elementary that a general provision has to give way to the specific provision, as aptly summed up in the maxim 'generalia speialbus non derogant'. In the case of South India Corp Pvt Ltd Vs Secretary, Board of Revenue (1964 SC 205 @ 215), Hon'ble Supreme Court has observed that, "a special provision should be given effect to the extent of its scope, leaving general provisions to cover the cases where specific provisions do not apply". A special provision thus nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such organizations have dealings with the non members, their claim for charitable institution would now be governed by the additional conditions stipulated in proviso to Section 2(15). 3.2 In the final analysis, whether the assessee has for its object' the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes. In such a case, the object of 'general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business. Each case would, therefore, have to be decided on its own facts, and generalizations are not possible. An assessee who claims that their object is 'charitable purpose' within the meaning of section 2(15) would be well advised to eschew any activity which is in the nature of trade, commerce or business or rendering of any service in relation to any trade, commerce or busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution are not 'genuine'; or (b) the activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. There cannot be any other legally sustainable reasons for cancelling or withdrawing the registration granted under Section 12 AA. By no stretch of logic, the activities of the assessee can be said to be not genuine and the assessee is admittedly pursing the objects for which it was established. When the assessee is engaged in bona fide activities, with the framework of law, to pursue its objectives, it cannot be said that the activities of the assessee are not genuine. Learned Commissioner has also not brought on record any material to demonstrate activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. Under these circumstances, the withdrawal of registration granted under section 12 AA cannot be sustained in law. Learned Commissioner has extensively referred to as to why the assessee is not eligible for exemption under section 11 as the activities of the assessee cannot be said to be for 'charitable purposes' defined under Section 2(15), but then th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady granted under s.12AA(1)(v) can be cancelled only on the fulfilment of the conditions mentioned in s.12AA(3) and not for any other reasons. ..... The other objection taken by the CIT that the objects of the society do not qualify to be for 'charitable purpose' as per s.2(15) cannot be a basis to cancel registration in terms of s.12AA(3). Therefore, the action of the CIT on this aspect is beyond jurisdiction in terms of s.12AA(3). It is not the case of the CIT that the registration granted earlier was on the basis of any fraud or misrepresentation on the part of the assessee Therefore, the said objection taken by the CIT is liable to be ignored without going into the merits of the same. In the result, in the absence of any other objection raised by the CIT and in terms of aforesaid discussion, the order of the CIT is unsustainable. The impugned order is set aside and the registration granted to the assessee is hereby restored." In view of the above, respectfully following the same both on facts and as well as on legal principles, the action of the Director of Income-tax (Exemption) in cancelling the registration is not in accordance with law. The activities to provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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