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2013 (11) TMI 1280 - AT - Income TaxCancellation of Registration Granted u/s 12A of Income Tax Act,1961 – Objects of the Trust – Charitable or not – Proceedings u/s 12AA (3) - Held that:- Registration already granted to the Assessee cannot be cancelled on the ground that the Assessee which pursues as a charitable purpose, “advancement of objects of general public utility” carries on commercial activities -the order passed u/s. 12AA(3) of the Act was liable to be quashed – Relying upon CIT v. Sarvodaya Ilakkiya Pannai [2012 (2) TMI 160 - Madras High Court] The income of the society comprised of receipts from the activity of letting out a kalyana mantapa owned by it on rent, fees received from the members on sale of liquor in the bar run by the assesse, it does not follow that the activities of the Assessee are not genuine or that the activities were not being carried out in accordance with the objects of the Assessee - The DIT(E) in the order had only commented about the objects of the Assessee not being charitable - That cannot be a ground for the DIT (E) to invoke the provisions of Sec.2(15) of the Act - by reason of the statutory amendment to the definition of “Charitable Purpose” u/s.2(15) of the Act by insertion of a second proviso, by the Finance Act, 2010 with retrospective effect from 1.4.2009, even if there are receipt from commercial activities - it was not open to the DIT(E) in an action u/s. 12AA(3) of the Act to examine the objects of the trust to see if the same were charitable in nature - That had already been done when a registration was granted to the assessee u/s. 12AA(1) of the Act - It was not open to the DIT(E) to re-examine the objects of the trust in proceedings u/s.12AA(3) of the Act. The DIT(E) in exercise of his powers u/s 12AA(3) of the Act, cannot curtail the right of an assessee which was charitable trust or institution which pursues the advancement of objects of general public utility from claiming the exemption u/s 11 & 12 of the Act in a year in which the receipts of the charitable organization from commercial activities is less than the limits prescribed in the second proviso to Sec.2(15) of the Act - It was clear from the reading of the provisions of Sec.2(15) of the IT Act, 1961 as well as Sec.12AA(3) of the Act, that registration already granted u/s 12A cannot be revoked for the reasons that the charitable trust or institution pursuing of advancement of objects of general public utility carries on commercial activities - the order u/s12AA(3) is liable to be cancelled. Nature of Income – Business Income or not - Rental Income from letting out – Held that:- Relying upon COMMISSIONER OF INCOME-TAX Versus SENGUNTHAR THIRUMANA MANDAPAM [2006 (6) TMI 64 - MADRAS HIGH COURT] - The kalyana mantap had been let out to one of the trustees - The trustees had the absolute discretion to apply the income to any of the objects - the reasons set out in the order by the DIT(E) for canceling the registration does not satisfy any of the conditions laid down in section 12AA(3) of the Act - Decided in favour of Assessee.
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