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TMI Blog2020 (2) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... w that such satisfaction may lead to denial of exemption to the respondent in the assessment proceeding for the relevant assessment year but certainly cannot be a ground for cancellation of registration under Section 12AA(3). The competent authority under Section 12AA(3) must be satisfied that the activities of the Trust are not genuine or that the activities are not being carried out in accordance with the objects of the Trust or the Institution. Such satisfaction must be recorded as a matter of fact on the basis of specific materials on record. Merely saying that the activities of the respondent is hit by the proviso to Section 2(15) of the Act, would not lead to automatic cancellation of registration as that is not a ground provided under Section 12AA(3) of the Act for cancellation of registration. A perusal of the order passed by the Director would go to show that no such finding was recorded by the Director that the activities of the respondent Trust are not genuine or that the activities are not being carried out in accordance with the objects of the respondent Trust. What the Director had done was that he took the view that the respondent was hit by the proviso to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is cancellation of registration of the respondent by the Director of Income Tax (Exemptions) under Section 12AA(3) of the Act, which order has been set aside by the Tribunal. 5. Though facts are not in dispute, however, for proper appreciation of the controversy in question it would be apposite to briefly narrate the facts of the case. 6. Respondent is an assessee under the Act. Respondent was granted registration as a Trust under Section 12AA(1) of the Act. 7. A proposal was received by the Director of Income Tax (Exemptions) that registration granted to the respondent under Section 12AA(1) of the Act should be cancelled. 8. Be it stated that, respondent-assessee is Mumbai Metropolitan Region Development Authority. As per the proposal for cancellation of registration, it was mentioned that respondent was carrying on activities in the nature of trade, commerce or business etc. and gross receipts therefrom were in excess of ₹ 10 lakhs. Therefore, proviso to Section 2(15) of the Act was attracted from the assessment year 2009-10. 9. Show cause notice was issued by the office of the Director to the respondent on 13th December, 2011 to show cause as to why regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile appeal in Principal Commissioner of Income-Tax Vs. JIS Foundation, (2018)96 taxmann.com 257(SC). Tribunal was not justified in interfering with the reasoned order passed by the Director. 15. On the other hand, Mr.Dastur, learned senior counsel submits that since the impugned order was passed under Section 12AA(3) of the Act, Director of Income Tax (Exemptions) was required to record his satisfaction that the activities of the Trust were not genuine or that the activities of the Trust are not being carried out in accordance with the objects of the Trust. These two twin conditions would have to be satisfied before passing an order cancelling registration of the Trust under Section 12AA(3). He has taken us to the cancellation order as well as to the order of the Tribunal and submits that Director of Income Tax (Exemptions) was not at all justified in invoking section 12AA(3), in cancelling the registration of the petitioner. Tribunal had rightly interfered with the said order and therefore, no interference is called for. 16. Referring to the order passed by the Director of Income Tax (Exemptions), Mr.Dastur submits that identical grounds were given by the Director of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Trust. 21. Section 11 provides that income from property held for charitable or religious purposes shall not be included in the total income of the previous year of the person in receipt of the income. 22. Section 12 deals with income of Trust or institutions from contributions. Sub-section (1) says that any voluntary contribution received by a Trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes shall for the purposes of Section 11 be deemed to be income derived from property held under the Trust wholly for charitable or religious purposes and thereafter, provisions of Sections 11 and 13 shall apply. 23. Section 12A lays down the conditions for applicability of Sections 11 and 12. Before adverting to Section 12AA, we may mention that Section 13 provides that Section 11 shall not apply in those cases mentioned in that Section. Sub-section (8) of Section 13 says that nothing contained in Sections 11 or 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of Section 2 become applicable in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned therein is attracted. 26. Before referring to the judgments cited at the Bar it would be apposite to advert to Section 2(15) of the Act. As is evident Section 2 is the definition section. Subsection (15) defines Charitable purpose . However, it is the proviso thereto which is relevant which existed as on the date of passing of order by the Director of Income Tax (Exemptions) on 27th December, 2011. At that stage i.e., prior to 1st April, 2016, there were two provisos to Section 2(15) which were as under:- Provided that the advancement of any other object of 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. 27. Thus, as per the first pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medical relief upon such terms and conditions and for such period as the Trustees may think fit. (d) Grant of medical help during epidemic, famine, flood or any unforeseen calamity or war or war-like operations or civil commotion or riots e) Establishment and/or acquisition and maintenance of and support of medical schools, medical colleges and other institutions carrying research in medicine and awarding scholarships and scholarship prizes or awards at any such schools, colleges and institutions. (f) To undertake prosecute develop help or carry on all or any kind of basic or fundamental and/ or applied research and scientific work in connection with or relating to medical surgical and sociomedical research problems and to do all things necessary or incidental or conducive to the attainment of the same and to provide funds for research and for scholarships, stipends and/or other payment or aid to any person or persons engaged in research work. (g) establish and maintain and to assist and encourage or promote as and when deemed proper and expedient for the purpose of medical relief in the form of Hospitals or in connection there with or attached thereto all or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression Charitable purpose as defined in the Act. Tribunal referred to the decision of Madras High Court in Tamilnadu Cricket Association Vs. Director of Income Tax, 260 ITR 633 wherein Madras High Court held that the act of granting registration under Section 12AA(1) is a result of satisfaction recorded by the Commissioner as regards genuineness of the objects as well as activities of the Trust and once such a satisfaction is arrived at by the Commissioner, cancellation could only be in terms of Section 12AA(3) of the Act. Thereafter, Tribunal recorded the finding that order of the Director of Income Tax (Exemptions) did not disclose which activity of the respondent was not genuine or that the respondent was not genuine. Tribunal also recorded that there was no material in the said order explaining that activities of the respondent are not being carried out in accordance with its objects. 33. On careful reading of the order passed by the Director of Income Tax (Exemptions) as well as the order passed by the Tribunal, we do not find any error or infirmity in the view taken by the Tribunal. In so far the view taken by the Director is concerned that respondent is directly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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