Commissioner of Income Tax-V, vs. M/s.Sirveen Control Systems,

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ITTA/472/2011HC TelanganaHBHC01073263201124 July 20134 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that non-observance of bye-laws is a ground for disallowing expenses but not for rejecting registration under Section 12AA. Cancellation of registration is uncalled for if there are breaches, and the department can disallow expenses during assessment.

What were the facts?

The Revenue appealed against an ITAT order that allowed the assessee's appeal, restoring the registration under Section 12A(a). The Revenue questioned whether the Tribunal was justified in restoring the registration and if the assessee's activities were charitable.

What were the issues?

Whether the Tribunal erred in restoring registration under Section 12A(a) and quashing the Section 263 order, considering the assessee's activities were allegedly not charitable.

Which sections of the Income-tax Act were involved?

Section 12A,Section 12AA,Section 263,Section 11,Section 12,Section 13,Section 143(3),Section 2(15)

AI-generated summary — verify with the full judgment below

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 472/ 2011 Commissioner of Income Tax, Alwar ----Petitioner Versus M/s Himalaya Shiksha Samiti, Bhakera C/o Silver Oak School, Jaipur Road, Alwar ----Respondent _____________________________________________________ For Petitioner(s) : Mr. Daksh Pareek on behalf of Mr. Sameer Jain For Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 30/11/2017 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the assessee. 2. Counsel for the appellant has framed the following substantial questions of law:- “1.Whether under the facts and circumstances of the case and in law the Tribunal was justified in directing to restore the registration u/s. 12A(a) of the I. T. Act ? 2. Whether under the facts and circumstances of the case and in law, the order of Tribunal is erroneous as it has quashed the order passed u/s. 263 of the I. T. Act ignoring the material facts which indicates that the activities of the assess are not charitable in nature?

(2 of 4) [ITA-472/2011] 3. Whether under the facts and circumstances of the case and in law, the order of the Tribunal is perverse in not considering the material evidence which indicates that the activities of the society were not charitable but were purely commercial in nature? 4. Whether under the facts and circumstances of the case and in law, the society is eligible for registration u/s. 12A(a) of the Act when the mandatory provisions of Section 11, 12 and 13 of the I. T. Act were not complied with? 5. Whether under the facts and circumstances of the case and in law, the Tribunal has committed an error of law by upholding the assessment under u/s. 143(3) dated 30.1.2006 which was clearly erroneous and prejudicial to the interest of revenue?” 3. Recently in the case of Rajasthan Cricket Association in Income Tax Appeal No. 257/2017 dated 21.11.2017. This court has held that the non observation of any of the conditions of bye-laws is a ground for rejection of the expenses of the income and expenses of the income would be considered exempted but it is not a ground of rejection under Section 12AA of the Income Tax Act. While deciding the said case the court held as under:- “In our considered opinion, the contention which has been raised pursuant to the observations and amendment which is made under Section 12AA of the Income Tax Act and proviso which is impressed by the counsel for the department and Section 2(15) of the Act and proviso to

(3 of 4) [ITA-472/2011] Section 12AA which has been amended w.e.f. 1.4.2009 which has been introduced in the Finance Act w.e.f. 1.4.2012, will not apply in the present case inasmuch as all proceedings are for the financial year 2005-06, 2008-09 & 2009-10. However, it is true that in one of the case where it has been made effective from 1.4.2009 therefore, in one of the appeal for the assessment year 2009-10 the same will apply to proviso. While considering the matter, the real purpose of registration is to be seen that the object falls within the definition of Section 12AA and proviso. If there is any breach of any condition/s then they may cancel the registration, however, they have to follow the procedure. The contention that non communication of changes of purpose will automatically cancel the registration, in our considered opinion, is not a valid argument. However, in view of the specific clause which has been there under Form 10A, we are of the considered opinion that it will be open for the department while making assessment to follow provision of Section 11(5) and Section 13 to disallow the expenses of the income as the case may be, if the same is not income in expenses as per the approved bye-laws but

nonetheless

cancellation

of registration is uncalled for. In that view of the matter, all the issues are answered in favour of the assessee and against the department. However, we make it clear that earlier order which has been passed by the High Court, we are not modifying in any manner whatsoever, it will be open for the department to take appropriate proceedings in accordance with law. The appeals stand dismissed.”

4 Therefore, no substantial question of law arises, the appeal stands dismissed. (VIJAY KUMAR VYAS)J. (K.S. JHAVERI)J.

(4 of 4) [ITA-472/2011] B.M.G/Gourav/12

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