2019 (11) TMI 996 - ITAT DELHI

Exemption u/s 11 - cancelling the registration u/s. 12AA(3) - Acquisition of "Associated Journals Limited (AJL)" by the "Young Indian" - CIT (E) withdrawing the registration granted u/s. 12A retrospectively from A.Y. 2011-12 on the alleged grounds that the activities carried on by the Appellant are not genuine and are not in accordance with the objects of the assessee - Assessee had suo moto surrendered its registration u/s. 12A in March 2016

HELD THAT:- Had the intention of the assessee company being clear and bona fide from the date of its inception, that it wanted to acquire AJL only to carry out its charitable activities, then it should have been stated so and brought on record not only at the time of seeking registration u/s. 12AA, but also at the time of cancellation. The events clearly pointed out that even before incorporation of Young Indian, the registered office was shifted to Delhi and the Directors managing the affairs of the assessee company were taken on Board of AJL. Not only that, Young Indian was permitted to use the property of AJL as its registered office.

there was a clear-cut breach on part of the assessee company. If there was concealment and suppression of material facts, then such a registration granted is always open for cancellation or revocation at any time by the ld. DIT (E)/CIT (E) when it comes to his notice.

The assessee nowhere had clarified or sated that the purpose of acquiring AJL and its activities, except for reiterating that as a shareholder, Young Indian does not have any ownership interest, whatsoever, in the properties owned by AJL as it is a separate legal entity.

CIT(E) was fully justified in law and on facts in cancelling the registration from the date of granting of registration itself, i.e., from the assessment year 2011-12.

Even after grant of registration u/s. 12AA, no genuine activities have been carried out by the assessee either in furtherance of its objects or otherwise, which can be held to be for charitable purpose because one of the so called purpose of acquiring AJL was not carried out at all. Otherwise, also, we have already discussed and given our categorical findings that till the grant of registration and surrender made by the assessee, no worthwhile activities were carried out by AJL. In fact, what it turns out to be is that, the assessee has acquired AJL, a company that owns property worth hundreds of crores from which the AJL had been enjoying only rental income.

Clearly, AJL, which had been earning rental income, cannot be held that its activities were aligned with the objects of the assessee company or through AJL; it was carrying out activities in pursuance of its objects qua that period. Hence, in that sense, the assessee’s activities cannot be held to be genuine. Thus, the cancellation of registration u/s 12AA by the Ld. CIT (E) from A.Y. 2011-12 is upheld.

Though we have tried to note down various arguments placed by the parties and the judgments relied upon and have also dealt with all the core arguments, but some of the contentions and submissions made are not being dealt with, as we do not find them to be relevant on the facts and circumstances and also in view of our detail discussion and findings given above.

Accordingly we hold that the ld. CIT (E) was justified in cancelling the registration from the assessment year 2011-12, because none of the activities of the assessee was carried out in accordance with its objects nor its activities can be held to be genuine. Consequently, the appeal of the assessee is dismissed.