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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: SH. SANJAY ARORA & SH. N. K. CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 141/(Asr)/2014 Assessment Year:
Sukhmani Society for Citizen Vs. Commissioner of Income Tax, Services, Mini Secretariat, Bathinda. Room No. 120, Bathinda [PAN: AAEAS 7047J] (Appellant) (Respondent)
I.T.A. Nos. 159 to 162/(Asr)/2014 Assessment Years: 2005-06 to 2008-09
Income Tax Officer, Vs. Sukhmani Society for Citizen Ward-1(1), Bathinda Services, Mini Secretariat, Room No. 120, Bathinda [PAN: AAEAS 7047J] (Appellant) (Respondent)
Appellant by : Sh. Devendra Singh CIT- D.R. Respondent by: Sh. J. K. Gupta (Adv.) Date of Hearing: 25.04.2018 Date of Pronouncement: 15.05.2018
ORDER Per Bench: This is a set of five appeals raising allied issues. While the appeal by the Assessee is against the order u/s. 12AA(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 06.01.2014 by the Commissioner of Income Tax, Bathinda
2 ITA Nos. 141, 159 to 162(Asr)/2014 (AYs. 2005-06 to 2008-09) Sukhmani Society for Citizen Services, Bathinda ('CIT' for short), the appeals by the Revenue are in respect of the quantum proceedings for Assessment Years (AYs.) 2005-06 to 2008-09, decided by the first appellate authority, being the Commissioner of Income Tax (Appeals), Bathinda ('CIT(A)' for short), vide his common order dated 28.03.2013.
Assessee’s appeal (in ITA No. 141/Asr/2014) 2. The issue in this case is if the cancellation of registration by the competent authority u/s. 12AA(3) of the Act is valid in the eyes of law. The same is on the premise that the assessee’s objects, including the manner of carrying them out, can no longer be regarded as a ‘charitable purpose’ in view of the amendment to section 2(15) by Finance Act, 2010 w.r.e.f. 01.04.2009, w.e.f. which date section 2(15) stands substituted by Finance Act, 2008. The extant law reads as under:
‘Section 2. Definitions.— (15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility : 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 ten lakh rupees (*) or less in the previous year.’ (*) (twenty five lakhs, by Finance Act, 2011, w.e.f. 01/4/2012)
3 ITA Nos. 141, 159 to 162(Asr)/2014 (AYs. 2005-06 to 2008-09) Sukhmani Society for Citizen Services, Bathinda It is claimed that the assessee’s activities constitute ‘business’ and, further, it charging for the services rendered by it to the recipients of those services, its’ object/s, admittedly an object/s of ‘advancement of any other object of general public utility’ is no longer a ‘charitable purpose’.
Before us, the ld. Authorized Representative (AR), the assessee’s counsel, would base his argument on the restricted scope of section 12AA(3), which reads as under: ‘Procedure for registration 12AA. (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 the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing canceling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.’
It is therefore only where the activity/s of the trust or institution is not genuine, or is not carried out in accordance with its objects, that the registration could be cancelled under section 12AA(3). This, in fact, stands held by the Hon'ble jurisdictional High Court as well in CIT v. Ved Niketan Dham (in ITA No. 70 of 2013 dated 21.08.2013, copy on record), so that the matter ought to be regarded as no longer res integra. The Departmental Representative (DR) would, on the other hand, rely on section 2(15). The registration granted to the assessee, he would continue, was no doubt on the same objects. However, the same can no longer, i.e., w.e.f. 01.04.2009, be regarded as constituting a ‘charitable purpose’ under law. Continuing the registration would work at cross purposes with the law, defeating
4 ITA Nos. 141, 159 to 162(Asr)/2014 (AYs. 2005-06 to 2008-09) Sukhmani Society for Citizen Services, Bathinda the very purpose of registration. Reliance was further placed by him on the decision by the Tribunal in Sukhmani Society for Citizen Services, Mansa v. CIT (in ITA No. 551/Asr/2011, dated 26.09.2012), besides others by the tribunal, confirming the denial of registration u/s. 12AA(1) to a society with similar objects and activities.
We have heard the parties, and perused the material on record. The competent authority, while granting registration, has to be satisfied about the objects of the applicant-trust/s institution, as well as the genuineness of its activities. Clearly, satisfaction qua the objects implies satisfaction as the same constituting a ‘charitable purpose’ under the Act. The cancellation of registration, power for which stands conferred u/s. 12AA(3), co-opted on the statute by Finance (No. 2) Act, 2004 w.e.f. 01.10.2004, could only be on the ground of the activities of the registered entity being either not genuine or being not carried out in accordance with its’ objects. There is admittedly no finding qua either of these two conditions, subject to the satisfaction of either of which only could the competent authority exercise his power of cancellation of registration. The question, though, perhaps, needs to be examined in a larger perspective. An authority conferring registration has an inherent power to cancel the same where there is a fundamental change in the conditions on the basis of which the registration was granted. A parallel could be drawn with the inherent power to rectify an order by any authority passing the same, i.e., where it finds a mistake to have crept in or imbues it. This, of course, would be subject to hearing the party being prejudiced, which stipulation also finds mention in the proviso to section 12AA(3), as indeed in sec. 154(3). Another example that comes readily to mind is where there is a change in the object/s of the registered entity, i.e., on the basis of
5 ITA Nos. 141, 159 to 162(Asr)/2014 (AYs. 2005-06 to 2008-09) Sukhmani Society for Citizen Services, Bathinda which objects registration stands granted to it. Could it be said that the registration cannot be revisited as there is no change in its’ activity/s or the same is not carried out in accordance with its objects? This issue in fact stands considered by the tribunal in Rajasthan Cricket Rajasthan Cricket Association v. CIT (in ITA No. 69/Jp./2011, dated 13/7/2012), answering this question in the affirmative. The change in law, whereby the objects could no longer be regarded as a ‘charitable purpose’, so that registration cannot obtain there-under, is one such fundamental change. This, it may be appreciated, could not be anticipated at the time of registration, for the change in law falls in the legislative field. The registering authority, while granting registration, can possibly stipulate only those conditions which could be envisaged at the time of its’ grant, and which would necessarily relate to the conduct of the entity being conferred the benefit of registration. The same may, therefore, not be regarded as absolute, or operate to bind the Revenue. As such, in our humble view, there is scope for traveling beyond the confines of the provision, on the basis of the inherent power of the authority granting registration. So, however, our view, brought forth only for its consideration by the higher forum in appropriate proceedings, is to necessarily submit to the wisdom of the higher court, which has a binding affect. The Hon'ble jurisdictional High Court has in Ved Niketan Dham (supra) clarified that the cancellation of registration u/s. 12AA(3) could only be on the satisfaction of the precondition of the activities of the trust being not genuine or being not carried out in accordance with its objects. Accordingly, notwithstanding the decision by the tribunal in, among others, Sukhmani Society for Citizen Services, Mansa (supra), which view stands against reiterated by the tribunal in Sukhmani Society for Citizen Services, Jalandhar (in ITA No. 52/Asr/2014 dated 24.04.2018), or the discussion in the foregoing part of
6 ITA Nos. 141, 159 to 162(Asr)/2014 (AYs. 2005-06 to 2008-09) Sukhmani Society for Citizen Services, Bathinda this order, the cancellation of registration cannot be sustained. While in the former order, the tribunal upheld the non-grant of registration u/s. 12AA, in the latter, it confirmed the denial of exemption u/s. 11. We decide accordingly, and the assessee succeeds.
Revenue’s Appeal (in ITA Nos. 159 to 162/Asr./2014) 5. The brief facts attending the Revenue’s appeals, common for all the years, is that the assessee was denied the benefit of section 10(23C)(iv) of the Act, or, alternatively, sections 11 and 12, in the absence of approval under the former section or, as the case may be, registration u/s. 12AA of the Act. The ld. CIT(A), while confirming this denial, further opined that if it at any future date the assessee may be allowed approval/registration, as indeed it has been, the denial of benefit under section 10(23C)(iv)/ss. 11 & 12, would have to be withdrawn inasmuch as the absence of the former is the basis of the said denial. This part of the impugned order stands assailed by the Revenue as not valid. The appeals by the assessee, as clarified by the parties during hearing, stand dismissed by the tribunal in view of the absence of the approval u/s. 10(23C)(iv)/cancellation of its registration u/s.12AA. The restoration of registration, in view of the decision by the hon’ble High Court in Ved Niketan Dham (supra), being followed by us, would operate to remove the very basis on which the benefit of ss. 11 & 12 stands denied to it, rendering the Revenue’s appeals infructuous. This is the assessee’s case before us.
We have heard the parties, and perused the material on record. The relevant part of the impugned order, objected to by the Revenue, reads as under: ‘Till date no condonation has been granted by the Hon’ble Chairman of Central Board of Direct Taxes, as such, assessee appellant is not entitled for exemption under section
7 ITA Nos. 141, 159 to 162(Asr)/2014 (AYs. 2005-06 to 2008-09) Sukhmani Society for Citizen Services, Bathinda 10(23C)(iv) of the Act till the application is considered by the Hon’ble Chairman of the Central Board of Direct Taxes and the prescribed authority as per law. Similarly, though the objects of the assessee appellant society are charitable as per judgments referred by the learned counsel of the assessee appellant society but for claiming exemption under section 11, 12, the assessee appellant society should have made an application to the learned Commissioner of Income Tax before the ending of the relevant assessment year. But no such application has been made before the due date for claiming exemption under section 11, 12 of the Act the filing of application within the prescribed time is a pre-condition, therefore non filing of application is not merely a technical ground for not allowing exemption under section 11, 12 or 10(23C)(iv) of the I.T. Act. Therefore, grounds of appeal No. 3 & 4 are dismissed. However, as and when the request of the assessee appellant is considered by the Hon’ble Central Board of Direct Taxes for condoning the delay in filing the application and registration granted by the prescribed authority the AO may allow the exemption according to law.’ We, in principle, agree with the Revenue that the ld. CIT could not have exceeded his jurisdiction inasmuch as the law has to take its course. However, as we see it, his observation is only for a consequential effect. Thus, to the extent, or read in this manner, there is no infirmity in the impugned order. Subject to this clarification, which we hereby issue, the impugned order requires no interference. Why, the benefit of sections 11 and 12 could, in spite of registration u/s. 12AA, be denied in view of section 13(8), inserted by Finance Act, 2012, with retrospective effect from 01/4/2009, i.e., AY 2009-10 onwards. In fact, sec. 2(15), as afore-noted, itself stands substituted only by Finance Act, 2010, w.r.e.f. 01/4/2009. The cancellation of registration could not therefore have effect prior thereto. We decide accordingly.
In the result, the assessees’ appeal is allowed, and the Revenue’s appeals are disposed of accordingly. Order pronounced in the open court on May 15, 2018 Sd/- Sd/- (N. K. Choudhry) (Sanjay Arora) Judicial Member Accountant Member Date: 15.05.2018
8 ITA Nos. 141, 159 to 162(Asr)/2014 (AYs. 2005-06 to 2008-09) Sukhmani Society for Citizen Services, Bathinda /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Income Tax Officer, Ward-1(1), Bathinda (2) The Respondent: Sukhmani Society for Citizen Services, Mini Secretariat, Room No. 120, Bathinda (3) The CIT(Appeals), Bathinda (4) The CIT concerned (5) The Sr. DR, I.T.A.T