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TMI Blog2021 (3) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(15) of the Act. Thus, the cancellation of registration is not mandatory as envisaged in Circular No.21/2016. Thus we hold that cancellation of registration u/s 12AA(3) by the Ld,CIT is bad in law, hence, we set aside the order of the Ld.CIT and restore the registration already granted to the assessee - Appeal filed by the assessee is allowed. - I.T.A. No. 418/Viz/2012 - - - Dated:- 12-3-2021 - SHRI N.K.CHOUDHRY, HON BLE JUDICIAL MEMBER SHRI D.S. SUNDER SINGH, HON BLE ACCOUNTANT MEMBER Appellant by : Shri G.V.N.Hari, AR Respondent by : Shri T.S.N.Murthy, CIT(DR) ORDER Per D.S.Sunder Singh, Accountant Member : This appeal is filed by the assessee against the order of the Commissioner of Income Tax [CIT]-1,Visakhapatnam in F.No.CIT-1/VSP/12AA/VPT/12-13 dated11.09.2012. 2. The assessee is a Port Trust, granted registration u/s 12A of the Income Tax Act, 1961 (in short Act ) w.e.f. 01.04.2002 i.e. from the Assessment Year (A.Y.) 2003-04 onwards, pursuant to the order of the ITAT, Visakhapatnam wherein the ITAT viewed that the assessee is entitled to registration u/s 12A of the Act, as the assessee was pursuing the objects of general public u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amended provisions of the Act. The Ld.CIT further observed that assessee is doing full-fledged business activity, therefore, held that it is a commercial enterprise. The Ld.CIT further viewed that if the objects of the institution are no longer charitable such institution cannot be said to be exist genuinely for charitable purposes and registration u/s 12A is available only to the charitable institutions. The Ld.CIT relied on the decision of ITAT Chandigarh Bench (103 ITA 988) in the case of Punjab Urban Planning Development Authority and held that the assessee is no longer charitable institution and accordingly cancelled the registration granted to it w.e.f.01.04.2009. For the sake of clarity and convenience, we extract relevant part of the order of the Ld.CIT in para No.8.6 to 9 which reads as under : 8.6. I have given my anxious consideration to the above contention. The Hon ble ITAT has directed for granting of registration u/s 12AA of the Act since it took the view that the assessee s objects are charitable in nature. However, in the changed position of law in terms of amendment to Section 2(15) of the Act with effect from 1.4.2009 the definition of charitable purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Ld.CIT, the assessee filed appeal before this Tribunal and raised the following grounds : 1. Appellant submits that the Commissioner of Income Tax is not justified in cancelling the registration granted under section 12AA of the Income Tax act, 1961 with effect from 01.04.2009 under the provisions of sub section (3) of the said section. 2. Appellant submits that the Commissioner of Income Tax is not justified in cancelling the registration granted under section 12AA of the Income Tax Act, 1961 with effect from 01.04.2009 under the provisions of sub-section (3) of the said section on the ground of modification of the definition of charitable purpose vide amendment to section 2(15) of the Income Tax Act, 1961, whereas, as per the provisions of sub section (3) of section 12AA, registration granted under that section can be cancelled only when there is satisfaction that the activities of the Trust are not genuine or are not being carried out in accordance with the objects of the Trust, but not in any other case and accordingly appellant submits that the action of Commissioner of Income Tax not falling within the purview of sub-section (3) of section 12AA is invalid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the case of Cochin Port Trust relied upon by the Ld.AR stating that the issue before the Hon ble High Court was the delay in making application for registration u/s 12AA, but not the cancellation of registration u/s 12AA(3). Thus, argued that the decision of Hon ble Kerala High Court has no application in the assessee s case. Accordingly submitted that the Ld.CIT has rightly cancelled the registration, hence, requested to uphold the order of the Ld.CIT and dismiss the appeal of the assessee. 5. We have heard both the parties and perused the material placed on record. The grounds / issues raised by the assessee in this case relates to the question as to whether the Ld.CIT is under mandatory obligation to cancel the registration u/s 12AA to the Trust which was already granted earlier, consequent upon amendment to the Act or not. The answer to this question is found in clarificatory circular issued by CBDT in Circular No.21/2016 dated 27.05.2016, wherein CBDT has clarified that it is not mandatory to cancel the registration already granted u/s 12AA to a charitable institution merely on the ground that the cut-off specified in the proviso to section 2(15) of the Act is exceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of the two conditions stated above, The Tribunal while deciding the matter has rightly recorded a finding that a perusal of impugned order shows that Director of Income Tax (Exemptions) has not arrived at any such finding. The fact that the receipts from commercial activities are more compared to the overall receipts of the charitable organization can neither lead to the conclusion that the activities of the trust or institution are not genuine nor it can be said that the activities of the trust or institution are not being carried out in accordance with the objects of the trust or institution and therefore the two conditions stipulated under the provisions of Sub-section (3) of Section 12AA of the Act, which empowers the authority to cancel the registration, do not exist in the present case. The registration granted is cancelled in view of the amendment of first proviso to Section 2(15) of the Act. That is not a ground specified in the statute for cancellation of the registration. In fact, Sub-section (8) of Section 13 of the Act which is Introduced by Financial Act, 2012 which came into effect from 1.4.2009 categorically provides that, nothing contained in Section 11 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clarificatory circular which has retrospective effect. In the circular, itself, it is mentioned that it has retrospective effect. By Finance Act, 2012, by inserting new sub section 8 in section 13, it has provided sufficient care not to get benefit of exemption in such year in which its receipts or commercial activities exceeds the threshold limit. Though the assessee continued to have the registration, the AO is not barred in examining the benefits of exemption claimed by the assessee u/s 11 and 12 as provided to u/s 13(8) or section 2(15) of the Act. Thus, the cancellation of registration is not mandatory as envisaged in Circular No.21/2016. The decision of Hon ble Karnataka High Court and the decision of this Tribunal in the case of VMRDA and the decision of Kandla Port Trust which was discussed supra support our view. Therefore, taking into consideration all the above facts, case laws, judicial precedents and the circular of CBDT, we hold that cancellation of registration u/s 12AA(3) by the Ld,CIT is bad in law, hence, we set aside the order of the Ld.CIT and restore the registration already granted to the assessee. Accordingly, the appeal of the assessee is allowed. 6. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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