COMMISSIONER OF INCOME TAX GURGAON vs. PRABHU DAYAL MEMORIAL RELIGIOUS & EDUCATIONAL ASSOCIATION

Facts

The Commissioner of Income Tax (Central), Ludhiana, cancelled the registration of the respondent, Prabhu Daya Memorial Religious Educational Association, under Section 12AA(3) of the Income Tax Act, 1961, effective from October 1, 2004. The Income Tax Appellate Tribunal (ITAT), in its order dated April 7, 2016, held that the Commissioner lacked the power to cancel registration prior to the amendment of Section 12AA by the Finance Act, 2010, which introduced the power to cancel registration. The ITAT considered the amendment to be clarificatory and retrospective from October 1, 2004. The Revenue appealed this decision to the High Court, arguing that Section 12A is independent of Section 12AA and that the amendment was indeed clarificatory.

Held

The High Court disagreed with the Revenue's contention that the amendment to Section 12AA by the Finance Act, 2010, was clarificatory and retrospective from October 1, 2004. The Court held that if the Revenue's argument were accepted, the very purpose of making the amendment effective from June 1, 2010, would be rendered purposeless. The Court emphasized that the scope of Section 12A and Section 12AA of the Act must be read and considered independently. Citing its own decision in ITA-21-2021 (The Commissioner of Income Tax, Patiala vs. Young Scholar’s Educational Society, Barnala) and relying on the Supreme Court's decision in Industrial Infrastructure Development Corporation (Gwalior) M.P. Limited vs Commissioner of Income-Tax, Gwalior (2018) 403 ITR 1 (SC), the Court reiterated that the factors considered for granting approval under Section 10(23C) are also relevant for cancellation of registration under Section 12AA. The Court found no reason to change its previously taken view. Consequently, the appeal filed by the Revenue was dismissed.

Key Issues

1. Whether the Commissioner of Income Tax had the power to cancel the registration granted under Section 12A of the Income Tax Act, 1961, prior to the amendment of Section 12AA by the Finance Act, 2010, specifically for the period effective from October 1, 2004. This is a question of law concerning the interpretation of Section 12AA and its amendments. Assessee's Contention: The assessee argued that the power to cancel registration was not available to the Commissioner prior to the amendment of Section 12AA by the Finance Act, 2010. They contended that the amendment, effective June 1, 2010, was clarificatory and retrospective from October 1, 2004, implying the power existed from that date. Revenue's Contention: The Revenue argued that Section 12A is independent of Section 12AA and that the amendment made to Section 12AA by the Finance Act, 2010, should be treated as clarificatory and retrospective from the date of introduction of Section 12AA, i.e., from October 1, 2004. They believed this would validate the Commissioner's action.