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Facts
The assessee, Jamsetji Tata Trust, a charitable trust, filed its income tax return declaring Nil income for AYs 2015-16 and 2016-17. The Assessing Officer added Rs. 2,10,92,63,867/- as dividend income, contending that the assessee's Section 12A registration was still in force despite its voluntary surrender, thus denying exemption. The assessee argued it should be treated as an AOP and eligible for dividend income exemption.
Held
The CIT(A) deleted the addition, ruling that the assessee's Section 12A registration was effectively cancelled from March 20, 2015, allowing it to be treated as an AOP and claim exemption for dividend income. The Tribunal upheld the CIT(A)'s decision, following previous coordinate bench judgments which affirmed that a trust can voluntarily opt out of 12A registration, and its cancellation is effective from the date of acquiescence to the show-cause notice.
Key Issues
Whether a charitable trust that voluntarily surrenders its Section 12A registration can be treated as an AOP and claim exemption for dividend income under Sections 10(34)/10(35), and the effective date of such cancellation.
Sections Cited
10(34), 10(35), 11, 12, 13(1), 13(2), 11(7), 12A, 12AA
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
Shri Percy Pardiwala a/w Atul T. Assessee by : Suraiya/Sukhsagar Sayal, A/Rs Revenue by : Shri Vivek Perampurna, CIT D/R सुनवाई की तारीख/Date of Hearing : 04/08/2025 घोषणा की तारीख /Date of Pronouncement: 08/08/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: & 27/01/2025 and 28/01/2025 by NFAC, Delhi pertaining to AYs 2015-16 and 2016-17.
Since common issues are involved, both the appeals were heard together and are disposed off by this common order for the sake of convenience and brevity.
We have heard the parties on the facts of AY 2015-16. The grievance of the revenue for AY 2015-16 reads as under:- & 2 “1. " Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made by the Assessing Officer on account of dividend income ignoring the fact that dividend income was claimed exempt u/s 10(34)/10(35) of the Act despite the fact that the assessee's registration u/s 12A was in force during the previous year relevant to AY 2015-16 and thus contravene the provisions of section 11(7) of the Act ?" 2. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the addition made by the Assessing Officer on account of dividend income ignoring the fact that mere surrender of registration u/s 12A of the Act, suo-moto, does not entitle the assessee to be out of registration u/s 12AA of the Act granted in perpetuity, unless it is withdrawn by the competent authority?" 3. "The appellant craves the leave to add, substitute, modify, alter, delete or amend all or any ground of appeal either before or at the time of hearing."
Briefly stated the facts of the case are that the assessee filed its return of income on 31/08/2015 declaring Nil income. The return was selected for scrutiny and statutory notices were issued and served upon the assessee.
The assessee is a charitable trust created vide trust-deed dated 23/12/1974 and is registered with the Charitable Commissioner, Mumbai. During the year under consideration, the assessee has earned income from dividend on shares, income from units, interest and royalty. While scrutinizing the return of income, during the course of assessment proceedings and on perusal of the assessment records for AY 2014-15, it was seen that the assessee is not eligible for exemption u/s 11 & 12 in view of the violation of Section 13(1) and 13(2) of the Act. 5.1. The AO noticed that for the year under consideration the assessee has claimed dividend income as exempt. The assessee was asked to justify its claim of exemption of dividend income. In its reply, the assessee strongly contended that since it has surrendered its registration u/s 12A of the Act and no longer claimed exemption, it is assessable as & 3 an AOP and has accordingly filed its return of income as an AOP. Being an AOP, the assessee is required to file its return of income in Form ITR- 5 and not in ITR-7, which is applicable to charitable trust registered u/s 12A of the Act and for claiming exemption u/s 11/12 of the Act. The AO was not convinced with the explanation of the assessee. The AO was of the opinion that even if the assesse has surrendered its registration u/s 12A of the Act suo moto, it does not entitle the assessee to be out of the registration u/s 12A of the Act has the power to grant and cancel registration u/s 12A of the Act lies with the Principle Commissioner only who is the competent authority. The AO observed that the assessee did apply for the cancellation of registration and the competent authority has granted a hearing opportunity but has not passed any order cancelling the registration which means that the registration is still in force and assessee cannot claim that, it is not a trust with registration u/s 12A of the Act. The AO further observed that power of cancellation of the registration lies with the competent authority only and the assessee cannot absolve itself from its duties as a trust, simply by stating that it has surrendered its registration u/s 12A of the Act. 5.1.1. The AO referred to Finance No. 2 Act, 2014 which has inserted two new sub-Section (6) & (7) w.e.f. 01/04/2015 i.e., AY 2015-16 and onwards. The AO was of the firm belief that since the registration u/s 12A of the Act is in force as per the newly introduced provision of Section 11(7) no exemption u/s 10(34) of the Act is allowed and accordingly an amount of Rs. 2,10,92,63,867/- being dividend income claimed exempt is added back to the total income of the assessee.
I.T.A. No. 2057/Mum/2025 & 4 6. The assessee agitated the matter before the ld. CIT(A) and reiterated its claim of surrender of registration u/s 12A and basis which the assessee claimed that the dividend income u/s 10(34)/10(35) of the Act. It was brought to the notice of the ld. CIT(A) that the Tribunal in held that the order cancelling the registration granted to the assessee trust will have effect from the date on which the hearing on the first show-cause notice requiring the assessee to show- cause as to why the registration u/s 12A of the Act should not be cancelled, therefore, in effect, the order of the Tribunal gave the effect of date of cancellation of registration w.e.f. 20/03/2015 relevant to FY 2014- 15 i.e. AY 2015-16 which is under consideration.
Considering the order of the Tribunal, the ld. CIT(A) held that the assessee’s case has to be considered for AY 2015-16 as if the assessee was an AOP without having any registration u/s 12A as a trust and automatically becomes eligible for exempting its income u/s 10(34) & 10(35) of the Act and accordingly directed the AO to delete the impugned addition.
Before us, the ld. D/R placed strong reliance on the assessment order and the ld. Counsel for the assessee reiterated what has been stated before the lower authorities and drew our attention to the order of the Co-ordinate Bench in the case of Jamsetji Tata Trust in ITA No. 7239/Mum/2019, wherein the Co-ordinate Bench drawing support from the decision of the Mumbai Bench in the case of Navajbai Ratan Tata Trust vs. PCIT in ITA No. 7238/Mum/2019, wherein the Co-ordinate Bench held as under:-
“Our conclusions: 68. In view of the above discussions, as also bearing in mind the entirety of the case, we are of the considered view that the impugned order of cancellation of registration granted to the assessee under section 12A must be held to be effective from the date on which the hearing on first show-cause notice was concluded and the show cause notice issued by the Commissioner was formally acquiesced by the assessee in the said hearing, i.e., 20' March 2015, since, without disposing of the said matter, 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.
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 aspects so far as our adjudication, on the core issue requiring our adjudication in this appeal, is concerned. All these issues so raised by the revenue authorities are left open for adjudication at the appropriate stage such as in the assessment, or any other related, proceedings, if and so necessary. Our observations hereinabove have no bearing, or should be construed as having any bearing, on these issues.
The admission of additional ground of appeal
is also an academic issue in the light of the above conclusions arrived by us, and there is no need to deal with that aspect of the matter either. As we have decided this appeal on the short issue about the date from which the impugned order must be held to be effective, we refrain from dealing with all other issues, including the additional ground of appeal, at this stage. There are many other facets of arguments advanced before us and the grievances raised before us. However, we see no need to deal with all these aspects of the matter at this stage.
6. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench in the case of Navajbai Ratan Tata Trust vs PCIT (Supra). These observations will apply mutatis mutandis in the present case as well. Respectfully following the same, we hold that the impugned order cancelling registration granted to the assessee trust will have effect from the date on which hearing, on the first show cause notice requiring the assessee to show cause as to why registration under section 12A not be cancelled, and the assessee formally acquiesced to the said notice 10.03.2015, i.e on 20th March 2015.”