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TMI Blog2021 (4) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... istration under section 12A not be cancelled, and the assessee formally acquiesced to the said notice 10.03.2015, i.e on 20th March 2015. - ITA No. 7239/Mum/2019 - - - Dated:- 24-3-2021 - Justice P P Bhatt (President) And Pramod Kumar (Vice President) For the Appellant : P J Pardiwala, Sr Advocate, along-with Madhur Agarwal, Sukh Sagar Syal, T P Ostwal and Indira Anand For the Respondent : Anil C Singh, Additional Solicitor General, along with Suresh Kumar, Sr. Standing Counsel ORDER PER BENCH: 1. By way of this appeal, the assessee-appellant has challenged the correctness of the order dated 31st October 2019, passed by the learned Principal Commissioner of Income Tax-17 Mumbai, in the matter of assessment under section 12AA of the Income Tax Act, 1961 for the assessment year 2019-20. Grounds of appeal:- 2. Grounds of appeal, as set out in the memorandum of appeal filed before us, are as follows: 1 a) The impugned order dated 31.10.2019 passed by the Learned Principal Commissioner of Income-Tax-17 ('PCIT') under section 12AA(3)/(4) of the Income-tax Act, 1961 ('ITA') cancelling the registration of the Appellant is without j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention that the Appellant has surrendered its registration, the PCIT grossly erred in holding that Appellants reference to Para 3c of the Income-tax Business Application exemption Instruction No 1 dated 08.07.2016 was misplaced even when the said Instructions of the Director of Income-tax (Systems) on cancellation of registration permitted cancellation at the request of the Appellant which also was undertaken by CIT(E) when he issued SCN dated 10.03.2015. 3. a) The PCIT grossly erred in passing the impugned order cancelling registration with effect from 31.10.2019 with the sole motive of applying the provisions of section 115TD of the ITA introduced from 01.06.2016 and which would not have applied if the surrender of registration was accepted or the impugned order was made effective from the date of the SCN i.e. 10.03.2015. b) The PCIT grossly erred in observing that the provisions of section 115TD of the ITA would apply even if the registration were to be cancelled w.e.f. 26.02.2015 i.e. date of surrender, as according to the PCIT, specified date in section 115TD of the ITA is on date of conversion which in turn has been defined as the date of the order cancelling the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically submitting so at para X of the submissions dated 18.10.2019. b) PCIT erred in drawing conclusions which are factually incorrect on records. c) The learned PCIT exceeded his jurisdiction in observing and giving erroneous findings that the 'Tata Trusts' are controlling 'Tata group of Companies', etc. 5. Without prejudice to the above, a) the PCIT has erred in law and in fact in holding that the provisions of section 13(2)(h) of the ITA are attracted as the Appellant has invested funds in a concern in which a person as per section 13(3) of the ITA has substantial interest even when none of the Trustees held a substantial interest in Tata Sons Limited. He grossly erred in ignoring the definition of the term substantial interest as provided in Explanation 3 to section 13 of the ITA and interpreted the same as an expression of general import. b) the PCIT has erred in law and in fact by incorrectly placing reliance on an extract of trust deed to hold that the Appellant and Trustees have not carried out activities in strict adherence to the object clause in the trust deed. In doing so, the PCIT erred in not appreciating that i) by reinvest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper-book. On 23rd July 1975, the assessee trust made an application under section 12A of the Income Tax Act, for its registration as a charitable institution, to the Commissioner of Income Tax concerned. Vide order dated 15th March 1976, the assessee trust was granted registration under section 12 A. The communication granting the said registration reads as follows: Office of the Commissioner of Income Tax Bombay City-IV, Bombay 15th March, 1976 NAVAJIBAI RATA TATA TRUST (Name of the trust) Bombay House, Homi Mody Street, Fort, Bombay-23 (Full address) as constituted by the trust deed dated 23-12-1974 has filed the registration application under section 12A(a) of the Income Tax Act, 1961, in the prescribed form on 1-8-1975, i.e. within the stipulated time limit. The application has been eneterd at No. TR/10925 in the register of applications under section 12-A(a) maintained in this office. Seal for Commissioner of Income Tax Bombay City- IV, Bombay 6. On 11th March 2015, the assessee trust wrote a letter to the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2015 The Trustee Navajibai Ratan Tata Trust Bombay House, Homi Mody Street Mumbai 400 001 Sir, Sub: Show cause for withdrawal/ cancellation of registration under section 12AA in the case of Navajibai Ratan Tata Trust- reg- Ref: Your letter dated 11.3.2015 received in this office on 12.3.2015 Please refer to the above. 2. In this connection, vide your letter under reference, you have submitted as under: Navajibai Ratan Tata Trust is a public charitable trust created by the trust deed dated 23rd December 1974. The trust, on 1st August 1975, had filed the prescribed form no. 10A for registering itself as required under section 12A(a) of the Income Tax Act. We were informed by the communication dated 15th March 1976 that the said application has been entered at Serial No. TR/10925 in the Register of applications under section 12A(a) of the Act maintained by the Income Tax Department. We now refer to Section 12AA(4) of the Act, inserted with effect from 1st October 2014, by the Finance Act (No. 2) Act, 2014, and submit that some of the activities of the Trust are not in compliance with the provisions of Section 13(1) of the Act. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2015-16 on 27th August 2015 in which the assessee did not claim the exemption under section 11. The assessee claimed exemption of dividend under section 10(34), as is normally admissible, in respect of the dividends from the domestic companies. On 24th May 2016, the assessee, once again sent a communication to the Commissioner of Income Tax concerned placing on record his understanding that with his surrender of registration, he is not required to follow the scheme of Section 11 to 13. This communication reads as follows: Commissioner of Income Tax (Exemptions), Piramal Chambers, Parel, Mumbai - 400 012 Dear Sir, We had vide our letter dated March 11, 2015, informed you that claiming of exemption u/s 11 of the Income-tax Act, 1961 ('the Act') was disadvantageous to the Trust and, therefore, the Trust did not desire to continue to avail the benefits of registration under section 12A(a) of the Act, viz. exemption from tax u/s 11 of the Act and that consequently the Trust would not be claiming exemption under section 11 of the Act i.e. in effect, surrender the registration obtained by the Trust. Pursuant to our letter, we received a Notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act, 1961 and further consistently been hit by the Section 13(1)(d) and 13(2)(h) of the Income Tax Act, 4. In view of the above, you are requested to show cause as to why the registration granted under section 12A of the Income Tax Act to you, as mentioned above, should not be cancelled. You may appear before the Pr CIT-17 Mumbai on 14.03.2018 at 11.30 AM either in person or through the Authorized Representative. Yours truly, Pr CIT-17, Mumbai 12. The assessee, alongwith five other similarly placed assessee trusts- namely R D Tata Trust, Tata Social Welfare Trust, Sarvjanik Seva Trust, Jameshdji Tata Trust and Tata Education Trust, challenged this show cause notice before the Hon ble Bombay High Court but subsequently withdrew the writ petition with the liberty to raise all the contentions in appropriate proceedings. Hon ble Bombay High Court, accordingly, disposed off these petitions vide judgment dated 29th October 2018 observing, inter alia, we dispose of each of these writ petitions with the liberty to raise all the contentions at an appropriate stage before the appellate forum/authority and that the petitions are disposed of with the libert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred by CIT(E) to the PCIT-17 vide letter dated 28.11.2017. vi) It is pertinent to note that subsequently the case records of the Trust with respect to the assessment were transferred to the Assessing Officer under your Honor's jurisdiction vide letter dated 07.12.2017 and Trust has been assessed by the non-exemption ward thereafter. vii) The above shows that surrender/ cancellation has been accepted and the same has been consistently reflected in the department's own actions. 14. None of these submissions, however, impressed the respondent Principal Commissioner of Income Tax. He proceeded with cancelling the registration of the assessee trust, as granted under section 12A, and he cancelled the registration with effect from the date of his order, i.e., 31st October 2019. The assessee has no grievance whatsoever with the cancellation of the Trust because that is exactly what he had prayed for many years before the date of this order, and the dispute of the assessee is confined to the date from which such cancellation has to be effective. Rival submissions: 15. Shri P J Pardiwalla, learned Senior Advocate, painstakingly took us through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ights or benefits which he does not desire. Whoever, waives, abandons or disclaims a right will lose it. (page 642) 16. Our attention is then invited to certain extracts from the well-known book Interpretation of Statutes authored by Maxwell, which are reproduced below for ready reference: Another maxim which sanctions the non-observance of a statutory provision, is that cuilibet licet renuntiare juri pro se introducto. Every one has a right to waive, and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual, in his private capacity (b), and which may be dispensed with without infringing on any public right or public policy. Thus, a person may agree to waive the benefit of the Statute of Limitations (c). The trustees of a turnpike road may, in demising the tolls, waive the provision of the Act which requires that the demise shall be signed by the sureties of the lessee (d). A passenger may waive the benefit of an enactment which entitles him to carry so many pounds of luggage with him; and he does so, it may be added, by taking a ticket with the express condition that he shall carry no luggage (a). The only perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of a statute in it then no question can arise of any one entering into a contract which is so prohibited but where there is no such prohibition it will have to be seen whether an Act is intended to have a more extensive operation 'as a matter of public policy. In Halsbury's Laws of England, Volume 8, Third Edition, it is stated in paragraph, 248 at page 143. As a general rule, any person can enter into a binding contract to waive the benefits conferred upon him by an Act of Parliament, or, as it is said, can contract himself out of the Act, unless it can be shown that such an agreement is in the circumstances of the particular case contrary to public policy. Statutory conditions may, however, be imposed in such terms that they cannot be waived by agreement, and, in certain circumstances, the legislature has expressly provided that any such agreement shall be void. 19. Learned counsel further relies, in support of the same proposition, upon the judicial precedents in the cases of Shri Poosaji Magnilal Vs The South Indian Humanitarian League [(2009) 2 CTC 25 (Mad)], Commissioner of Customs Vs Virgo Steels [(2002) 4 SCC 316)], Vellayan Chettiar Vs Province of Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. [Emphasis, by underlining, supplied to highlight the plea of the assessee] 22. Learned counsel submits that while section 12AA(3) requires the Commissioner to be satisfied of a violation , under sub section 12AA(4) a violation has to be only noticed . Once the assessee has informed the Commissioner of the violation, that satisfies the requirement of Section 12AA(4) inasmuch as the Commissioner cannot say that he has not noticed the violation, and no further satisfaction by the Commissioner is necessary. It is thus contended that the requirements of Section 12AA(4) were clearly satisfied in the present case. It is then pointed out that while under section pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinue to bind the assessee, it will result in an absurdity inasmuch as an assessee will have to deliberately commit a breach, as contemplated in section 12AA(3) or (4) so as to give the Commissioner an occasion to cancel the registration. That is clearly incongruous and could never have been intended by the legislature. 26. Learned counsel further submits that under the scheme of Section 12A, as it then existed and quite in contrast with the scheme of Section 12AA introduced by the Finance Act 1996, there was no requirement for the Commissioner being satisfied about genuineness of the activities of the trust and the requirement of registration was satisfied as soon as the assessee filed the application for registration in the prescribed manner. Our attention was invited to Hon ble Madras high Court s judgment in the case of New Life in Christ Evangelistic Association Vs CIT [(2001) 246 ITR 532 (Mad)] wherein it is said to have been held that the only purpose of registration under section 12 A was to establish identity of the Trust. Our attention was then invited to the CBDT circular 762 of 1998 which, inter alia, has, referring to the scheme of section 12 A as it then stood, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the letter dated 11th March, 2015 amounts to a purported surrender which the Trust Deed permitted, even then the purported letter is not bona fide but written for collateral/oblique purposes and hence, invalid. It was therefore, according to the learned Additional Solicitor General, necessary, to issue a show cause notice and after giving due opportunity to the Assessee to respond to the same, pass a reasoned Order as has been done in the instant case. 29. Learned ASG contends that the registration under section 12A does not amount to a benefit simplicitor to the assessee. His line of reasoning is as follows. It is submitted that as would be evident on a bare perusal of the relevant provisions of the Income Tax Act, 1961 registration of a Trust as a charitable or religious entity permits it, inter alia, to claim exemptions on its total income. These exemptions are permitted and provided for, as a quid pro quo for the fact that these bodies are involved in carrying out philanthropic activities. The legislature in its wisdom has deemed it fit to permit entities which seek to help society by performing charitable acts to be entitled to certain benefits from the taxation schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme of Section 11 to 13. Therefore, unlike in the case of CIT vs. Mahendra Mills (supra) relied on by the appellant, grant of registration cannot be regarded as mere grant of a right comparable to grant of depreciation allowance which is a benefit available to all assessee. The concept of depreciation is clearly distinct and different from that of registration as a charitable trust, and, for this reason, what is held in the case of Mahendra Mills (supra) would not be applicable in the present context. 30. It is then contended that while the assessee has an option to claim or not to claim the benefit of Section 11, as it is optional, but then, once a registration is granted, it is not at the option of the assessee to have or not to have the registration. Once the registration is granted, and unless it is lawfully cancelled, the assessee is bound by the same. Learned ASG then takes pain to clarify that claiming of benefit under Section 11 may be option of the trust, however, not claiming benefits under section 11 and surrendering the registration granted under section 12A are, two entirely different concepts. It is legally tenable for a Trust to be registered under section 12A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Companies Incorporation Rules, 2014. Hence, it is not as if a company having taken the benefits of being a charitable institution can unilaterally surrender or convert the same. Such conversion is subject to the express provisions of the Companies Act, 2013. Failure to perform or deliberate violations cannot be brushed aside by surrendering the registration unilaterally as is attempted to be done. If this is allowed, it would result in Trusts registering themselves on the pretext of charitable purposes, then carrying out commercial activities and upon being told to explain the wrongful use of the registration to claim exemptions (if exemptions were otherwise available), surrendering the registration and walking away scot free having abused and violated the law. It is submitted that this could never be the intent or purpose of the law. Even the plain language of the provisions suggests contrary to the assertions of the Trust on this aspect. 31. Learned ASG thus submits that the question of a unilateral surrender cannot and would not arise. In fact, there is no power or provision under the Act whereby a party can unilaterally effect a surrender of the registration. Section 12A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing an order in writing is maintained and is not diluted as urged by the Appellant. 5. It is therefore respectfully, submitted that there is no power for unilateral surrender provided for in the Act. 33. It is contended that the above submission is even buttressed by the clear legislative mandate of an Order in Writing being passed to cancel the registration. Hence, the legislature has consciously provided for an order of cancellation to be passed and not permitted a unilateral act of surrender. 34. It is contended that the appellant on its own considered it necessary to have the formal cancellation order as necessary as would be evident on a bare perusal of the letter dated 11th March, 2015. The letter dated 11/03/2015 sent by the Trust to Commissioner of Income-tax (Exemptions), Mumbai also bears out that even the Trust contrary to its present assertion, understood the statute in the same sense. The letter admits that there has been a violation and hence, states that they would no longer seek exemption. The letter expressly records that, Accordingly, the Trustees do not desire to continue to avail the benefits of the registration made by the Trustees in 1975. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Act nor can it be permitted since registration is not a simplicitor benefit but a benefit coupled with obligations. 37. It is then pointed out that the letter dated 11/03/2015 sent by the Trust to Commissioner of Income tax (Exemptions), Mumbai admits that there has been a violation and hence, states that they would no longer seek exemption. The letter expressly records that, Accordingly, the Trustees do not desire to continue to avail the benefits of the registration made by the Trustees in 1975. Hence, you are hereby informed that the Trust would not be claiming exemption under Section 11 of the Act, since upon withdrawal of the registration or in any event cancellation of the registration under Section 12A of the Act, it would not comply with the requirements of Section 12A(1)(a) read with 12AA(4) of the Act . The clear language of the letter suggests that the Trust was not seeking to surrender the registration. In fact, no words to the effect surrender or relinquish even found in the said letter. A bare perusal of the portion quoted above, would evince that what was urged by the Trust is that they would not claim the benefits of registration i.e. the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nscious decision of the trustees not to claim exemption under sections 11 and 12 of the Act w.e.f. A.Y. 2015-16 (as per their ITRs filed) rather than to correct their default of holding the impermissible investments or prohibited modes of investment, shows their disregard to the objects of the Trust Deed as well as to the provisions of Income Tax Act. The aforesaid wilful / conscious activities carried out by the trustees are against the basic objects of the trust within the meaning of the provision of section 12AA(3) of the Act. It is also contended that in the present case, the purported surrender on 11th March, 2020 was not genuine but merely an attempt to escape liability for past wrongdoings and as such a letter addressed for collateral and/or oblique purposes. It is claimed that the trustees knew that they had violated the provisions of section 13(1)(d) of the Act, and they would not be able to avail of the benefits of exemption under sections 11 and 12 of the Act. This fact had been affirmed by the Hon'ble ITAT, Mumbai in 2014 in the case of Jamshetji Tata Trust. Therefore, once the final fact-finding authority, had confirmed the Trust's violation of the aforesaid pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had objected to the earlier show cause notice. Learned ASG thus submits that the respondent Principal Commissioner was justified in cancelling the trust registration, by way of the impugned order, and in disregarding the so called unilateral surrender of registration granted to the assessee under section 12A. We are thus urged to uphold the impugned order and decline to interfere in the matter. Learned ASG vehemently opposes admission of the additional ground of appeal as it would require reference to many facts of the case which are not already on record. He submits that what is an inordinate delay, and what is not an inordinate delay, is essentially a factual question which cannot be agitated at this stage. In any case, such an investigation would require a reference to a large number of factual aspects which is not possible at this stage. He finally submits that if this aspect is to be adjudicated, the matter is required to be adjourned as hearing on that aspect, given the present limited facts, is not possible. 39. Learned counsel for the assessee, in his rejoinder, points out that the short question before us is the date from which the cancellation has to be effecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availed. In the absence of such a scheme of law, the same cannot be inferred in Section 12 A. Learned counsel once again reiterates his submissions, points out that his contentions remain unaddressed and submit that we must hold the cancellation to be effective from 11th March 2015. 40. We have given our careful consideration to submissions made by Shri P J Pardiwala, learned senior counsel for the assessee, as also by Shri Anil C Singh, learned Additional Solicitor General of India. We have also carefully perused the material on record and duly considered facts of the case in the light of the applicable legal position. Our analysis: 41. It is only elementary that the registration under section 12A of the Income Tax Act, 1961 is a foundational requirement for tax-exemption of charitable institutions under section 11, and the usual litigation before us, therefore, is the litigation wherein a trust seeks the aforesaid registration, when it is not granted, or seeks it with effect from a date prior to the date on which it is granted, when it is granted, so that a trust can avail more of the tax-exemption, if admissible, under section 11. In this case, however, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10, other than clause (1) and clause (23C) thereof, shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year. [Emphasis, by underlining, supplied by us] 45. The manner in which the above provision has been construed is this. As long as the assessee trust is registered as a charitable institution, by obtaining registration under section 12A or by being granted registration under section 12AA(1)(b), the assessee will not be entitled to any of the exemptions, barring under section 10(23C)(1), under section 10 of the Act. That is how this provision has been construed by the income tax authorities. Without going into the validity of that approach, which is not the subject matter of adjudication by us anyway, let us see the corollaries of this approach. Going by this logic, so far as dividend from Indian companies is concerned, the assessee, for the reason of registration as a charitable institution under section 12A, is deprived of exemption under section 10(34). To this extent, the registration under section 12A acts as a disability for the assessee, and, by thus ensuring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation. 47. Clearly, therefore, the amendment was brought in to ensure that the assessee does not have the benefit of choice between special provisions and general provisions. Once an assessee, to borrow the words used in the circular, voluntarily opts for the special dispensation, it should be governed by these specific provisions and should not be allowed the flexibility of being governed by other general provisions or specific provisions at will . The intention of the legislature was thus unambiguous; all that the legislature intended was to eliminate the unfettered choice between the general exemption and the specific exemption. However, the way this provision is being interpreted by the income tax authorities is that once an assessee is a registered charitable institution, irrespective of admissibility or even claim for exemption under section 11, the exemption under section 10(34) is inadmissible. That is how admittedly this provision has been construed by the revenue authorities, and that approach, coupled with the facts set out earlier, puts the assessee to a clear tax disadvantage. Effectively thus, as a result of the trust being held to be a charitable trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged to tax and such trust or institution, as the case may be, shall be liable to pay additional income-tax (herein referred to as tax on accreted income) at the maximum marginal rate on the accreted income. (2) . 50. This additional tax burden would not come into play in case the deregistration is with effect from the date on which the registration is claimed to have been surrendered i.e. 19th February 2015, the date on which the hearing in this respect is concluded by the Principal Commissioner of Income Tax, i.e. 20th March 2015, or even when it is taken as within a reasonable period from the date of conclusion of this hearing, say within 365 days from the date of closing the hearing i.e. 20th March 2016. Therefore, the date of cancellation of registration has an important bearing on this tax liability as well. 51. It would thus indeed seem that the actual trigger, and proximate reason for this unwelcome generosity of extending the benefit of registration under section 12 A, is the possible denial of exemption of dividends from domestic companies, under section 10(34) as also the fact that there may be certain adverse tax implications under section 115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopt it . In the case of K P Verghese (supra), Hon ble Supreme Court has observed that the circulars of the CBDT are, as we shall presently point out, binding on the tax department in administering or executing the provisions enacted in subsection (2), but quite apart from their binding character, they are clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of sub-section (2). The rule of construction by reference to contemporanea expositio is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous . Quite clearly, therefore, the CBDT circulars, as an aid for interpretation of the law as also as a binding authority on the field authorities employed in the execution of the Income Tax Act, provide a legitimate basis for understanding the provisions of the Income Tax Act. 54. In this light, let us once again take a look at the CBDT circular no 1/ 2015 (supra). This circular, relevant extracts from which we have reproduced earlier as well, specifically notes that Sections 11, 12 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return Of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. . 56. Clearly, therefore, registration under section 12A was a condition precedent for availing section 11 exemption. An exemption is clearly in the nature of a benefit, and, therefore, meeting a precondition for exemption is also a benefit. The registration under section 12A did not put the assessee under any obligation to do, or refrain from doing, anything. It was so for the reason that even if someone has registration under section 12A, and yet it does not perform any charitable activities or meet the requirements under the scheme of, as CBDT terms it, special dispensation of Sections 11, 12 and 13 of the Income-tax Act special provisions governing institutions which are being given the benefit of tax exemption , all that happens to the assessee is that the assessee does not get the said exemption. It was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust funds are accumulated for future, the accumulated monies are required to be used for charitable purposes and be invested as per the provisions of the Act (See Section 11 to 13) . These obligations, however, are vis- -vis the exemption under section 11 and not vis- -vis registration under section 12A. An assessee may be registered under section 12A and yet it may not claim an exemption under section 11, and, in such a situation, all these provisions relied upon by the learned ASG do not come into play. The registration under section 12A does not, therefore, put any such obligations on the assessee. It is an exemption under section 11, which puts these obligations on the assessee, but that is not the issue before us. Right now, we are only concerned about the implications of Section 12A. 58. Learned ASG has repeatedly stated that registration is not granted for the asking but is dependent upon the applicant being otherwise in conformity of the provisions of the statute and in a sense, undertaking to comply with the statute and the purpose of rendering charitable services and that registration is not a benefit available to all but a benefit which can be claimed by the Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be thrust upon an unwilling assessee. 60. We have also noted that, on 11th March 2015, the assessee on his own had informed the assessee that on account of its investment pattern becoming incompatible with the amended provisions Section 13(1) and in view of the provisions of Section 12AA(4), the assessee is no longer eligible for the continuance of registration under Section 12A. Once the learned Commissioner noticed this position admitted by the assessee, it was his duty to pass an order in writing withdrawing the registration. For ready reference, the relevant legal provision, i.e. section 12AA(4), is being reproduced once again as below: (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A, as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996), and subsequently it is noticed that (a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is invested in aid of enforcement of a right-public or private-of a citizen . While it was well within the notice of the Commissioner that it was a fit case for cancellation of registration obtained under section 12A and the assessee had informed, as also accepted, that position, learned Commissioner did not exercise his powers of cancellation. The Commissioner does not have a choice about taking or not taking a call in these proceedings. He had to take a call one way or the other in this matter. Such inaction on the part of the Commissioner simply cannot meet any judicial approval. What is done next is to ignore these proceedings without bringing them to a logical conclusion and start fresh proceedings, after a long gap, on a standalone basis, dehors the pending proceedings. That is equally impermissible. When the proceedings for cancellation of registration are pending for disposal, there cannot be another initiation of proceedings for the same purpose. What makes these proceedings even more unsustainable in law is the fact the delay in cancellation of registration has tax implications to the disadvantage of the assessee, and, to that extent, one will have to be really na v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive, at the most, from 20th March 2015. 62. We have also held that registration under section 12A, on the facts of this case and having been granted prior to 1st April 1997, was in the nature of a benefit to the assessee, and, therefore, it could not have been thrust upon an unwilling assessee. Be that as it may, this aspect of the matter is not really decisive, even if quite relevant, because as we have in the preceding discussion, once the Commissioner notices the admitted violation of Section 13(1), it was his duty, not only power, to cancel the registration granted under section 12A, and this has to relate back, at the minimum, to the date on which hearing in this matter was concluded. The inordinate delay in cancellation of registration, which is wholly attributed to the revenue authorities, cannot be placed to the disadvantage of the assessee. 63. As learned ASG rightly puts it, an order in writing for cancellation is a statutory requirement to bring an end to the registration. There can be no dispute with this proposition. The question, however, is the date from which such an order has to be effective, and on that aspect, we have already given our findings against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is content with that position. Any academic discussions about the nuances of this position at this stage is unwarranted. Of course, at the time of the related assessments or related proceedings, the Assessing Officer can deal with that those aspects of the matter. The trouble, however, is that given the complex web of legal developments, the cancellation is made effective from a later date the assessee is being put to a disadvantageous legal position and tax implications. If the assessee does not comply with the permissible mode of investment, for trusts what follows is the denial of exemption under section 11, but such a non-compliance cannot justify or legitimize the cancellation of registration being effected from a later date, than the date on which cancellation ought to have been effected, so as to put the assessee in a disadvantageous legal position with tax implications other than the legal, including penal, consequences for the non-compliance in question by the assessee. We cannot approve the approach adopted by the revenue authorities. 66. The question of whether the assessee had the powers, under the trust deed, to seek cancellation or withdrawal of regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the Commissioner, or his successors, could not have started other parallel proceedings for cancellation of registration obtained under section 12A. The registration having been obtained under section 12A was in the nature of a benefit to the assessee, and it was, therefore, entirely at the option of the assessee. In our considered view, an assessee unwilling to avail the benefit of registration obtained under section 12A cannot be, directly or indirectly and by actions or by inactions, compelled by the revenue authorities, to continue with the said registration obtained by the assessee, particularly when it pertained to the registration obtained in a period prior to the insertion of section 12AA. The present cancellation of registration under section 12A must, therefore, be held to be effective from 20th March 2015. To this limited extent, we uphold the plea of the assessee. 69. We have noted that many other peripheral issues, with regard to the conduct of the assessee trust and compliance with the statutory provisions under section 11 to 13, are raised in the course of the impugned proceedings. In our humble understanding, there is no need to deal with these aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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