2011 (10) TMI 471 - AT - Income Tax

Registration/ Cancellation of Trust - Trust registered dated 4.11.1982 Director exemption sought cancellation issued a notice on 15.4.2010 - Held That - By virtue of amendment effected in sub-section (3) of sec. 12AA Commissioner can cancel registration with effect from 01.06.10. In the given case notice was issued on 15.4.10 he was not having any power to cancel such registration. Therefore the very foundation to initiate proceedings against the assessee for cancellation of the registration is erroneous. Returned loss - Advance for purchase of income treated as Application of income - AO argued S.K Aggarwal individual falling within 13(3) exemption under 11 & 12 not applicable - Held That - S.K Aggarwal is the chair person of the institute. Advance of Rs 1, 18, 05, 316 was not used for the purpose of society rather for personal purpose thus benefit of Sec 11, 12 not applicable. Taxation as AOP after applying Maximum marginal rate of tax - Held That - CIT(Appeals) has not considered these issues on account of non co-operation from assessee. thus we remand the matter back for fresh perusal. Validity of Interest under 234A 234B - Held That - Charging of interest mandatory.

Summary

Issues Involved:
1. Cancellation of registration under Section 12A(a) of the Income-tax Act.
2. Applicability of Section 13(3) regarding advances given to a specified person.
3. Inclusion of various funds and donations as income.
4. Taxation status as an Association of Persons (AOP) and application of maximum marginal rate.
5. Chargeability of interest under Sections 234A and 234B.

Issue-wise Detailed Analysis:

1. Cancellation of Registration under Section 12A(a):
The primary issue in ITA No. 5797/Del/2010 was the cancellation of the registration granted under Section 12A(a) of the Income-tax Act, 1961. The assessee argued that the Director of Income-tax (Exemption) erred in canceling the registration, citing a decision by the Hon'ble Delhi High Court in DIT (Exemption) v. Mool Chand Khairati Lal Trust. The court held that the power to cancel registration under Section 12A(a) was not available until the amendment effective from 1.6.2010. The Tribunal found that the notice for cancellation issued on 15.4.2010 was erroneous as the Director lacked the authority at that time. Consequently, the cancellation order was set aside, and the registration was restored.

2. Applicability of Section 13(3) Regarding Advances Given to a Specified Person:
In ITA No. 5467/Del/2010, the issue was whether the provisions of Section 13(3) applied to an advance given to Mrs. SK Aggarwal, the chairperson of the trust, for the purchase of land. The Assessing Officer and CIT(A) held that the advance benefited a specified person under Section 13(3), disqualifying the amount from exemption under Sections 11 and 12. The Tribunal upheld this view, noting the lack of evidence that the land was purchased for the society's objectives and confirming that the amount was used for the benefit of Mrs. Aggarwal.

3. Inclusion of Various Funds and Donations as Income:
The assessee contested the inclusion of contributions towards the benevolent fund, development fund, medical welfare, and special fund as income. The CIT(A) held these amounts as income, referencing the Supreme Court's judgment in Miss Mohini Jain v. State of Karnataka, and found no evidence of an overriding title on these donations. The Tribunal agreed but remitted the issue to the Assessing Officer to verify related expenses and ensure they were not incurred for persons specified in Section 13(3). The ground regarding corpus donations was not pressed and thus rejected.

4. Taxation Status as an Association of Persons (AOP) and Application of Maximum Marginal Rate:
The assessee challenged the determination of its status as an AOP and the application of the maximum marginal rate. The Tribunal found no discussion on these issues in the orders of the Assessing Officer or CIT(A). Given the lack of reasoning and the non-cooperation of the assessee, the Tribunal remitted these issues to the CIT(A) for readjudication.

5. Chargeability of Interest under Sections 234A and 234B:
The assessee's challenge to the chargeability of interest under Sections 234A and 234B was deemed consequential and dependent on the outcome of the other issues.

Conclusion:
The Tribunal allowed ITA No. 5797/Del/2010, partly allowed ITA No. 5467/Del/2010 for statistical purposes, and allowed ITA No. 2876/Del/2011 for statistical purposes. The CIT(A) was directed to reconsider the issues in light of the restored registration under Section 12A and provide a detailed, reasoned order.