TMI Blog2014 (1) TMI 1536X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be construed as a conferment of arbitrary power to the Commissioner. In the assessee’s case, the Commissioner of Income-tax found that 1971 society had not filed return of income which suggests that there were no activities undertaken by the said 1971 Society/Association - After the new trust was formed in 1987 viz., "Sri Vidya Mandir Trust", the 1971 Society does not have any objects and even if the Society has any other objects, those objects ceased to exist after registration of the 1987 Trust, when all its assets and liabilities were transferred and all activities ceased - Sub Section (3) of Section 12AA of the Act has to be strictly followed and the authority has to deal with even those cases having registration granted to the trust under the erstwhile provision – The CIT was justified in cancelling registration granted to trust – Decided against assessee. - Tax Case (Appeal). No. 674 of 2013 - - - Dated:- 2-12-2013 - Chitra Venkataraman And T. S. Sivagnanam,JJ. For the Appellant : Mr. A. Satyaseelan For the Respondent : Mr. J. Narayanaswamy, Standing Counsel for Income Tax Department JUDGMENT (Judgment of the Court was made by T. S. Sivagnanam, J.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and wishes of the trust. 3. The assessee trust viz., "Sri Vidya Mandir Trust", which was formed in 1972, applied for registration under Section 12A(a) of the Income Tax Act, 1961(hereinafter called as the "Act"). The Commissioner, on being satisfied that the assessee is entitled for such registration, granted registration under the said provision. The Society viz.,"Sri Vidya Mandir", which was registered under the provisions of the Societies Registration Act was converted into Trust called as "Sri Vidya Mandir Association" by a deed dated 07.09.1987. Certain members of the assessee trust were also the members of the newly formed association. In terms of the registered trust deed of Sri Vidya Mandir Association dated 07.09.1987, wherever, the words "Sri Vidya Mandir Association" have occurred in Sri Vidya Mandir Trust or in Sri Vidya Mandir Foundation or in Sri Vidya Mandir Association registered under the Societies Registration Act XXI of 1860 with S.No.267 of 1971 or in any other context shall be known and followed and recognised as Sri Vidya Mandir Association registered under the Trust Deed dated 07.09.1987. That apart all the properties movables and immovables assets and li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and articles of association of the 1971 association also provided that on dissolution, the assets and liabilities has to be transferred to any institution with similar objective. Therefore, it is contended that the Tribunal erred in law in not recognising the transmission of the beneficiary status of the 1971 association into the 1987 association in law and erred in accepting and confirming the view of the Commissioner that there is no link between the 1972 trust and the 1987 trust. Further, the learned counsel contended that the Tribunal rendered an erroneous finding that there is no specific object for the 1972 trust. Learned counsel, by placing reliance on the decision in the case of Director of Income-Tax (Exemptions) Vs. Mool Chand Khairati Ram Trust reported in (2011) 339 ITR 0622 submitted that the Commissioner had no power to cancel the registration prior to the insertion of Sub-Section 3 to Section 12AA of the Act, which was inserted by Finance (No.2) Act, 2004 with effect from 01.10.2004. 7. Per contra, learned Standing counsel appearing for the Revenue, while supporting the order of the Income Tax Appellate Tribunal as well as Commissioner of Income Tax submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Articles of Association of the 1971 association/Society and (iii) the instrument creating the new trust by trust deed dated 07.09.1987. After going through the documents and the objects for which the three entities were established, it was rightly held by the Commissioner that all the educational institutions, which were run by the 1971 Society are being run by the 1987 Trust, after its registration; both the entities are referred to as "The Association" in their respective documents; all educational institutions came to be run by the 1987 Trust and there is no mention of the object clauses of the 1987 trust in the instrument of 1972. In the light of the said fact, the Commissioner took note that the assessee trust does not have any objects and even the reference to objects of 1971 association/society, which came into existence much prior to the assessee's association/trust. 12. The Commissioner further pointed our that after Sri Vidya Mandir Association/trust was registered under the Trust Deed dated 07.09.1987, the objects of the new trust was no different from the objects of the 1971 Society; thus, the objects of the assessee trust underwent change perforce with the intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation fee and donation to the admissions in the educational institution and therefore, the trustees personally gained from those donations and they ceased to carry on the activity in accordance with the objects of the trust. The said show cause notice ultimately culminated in an order cancelling the registration under Section 12AA(3) of the Act and the order of the Commissioner was challenged before the Tribunal. The Tribunal came to the conclusion that the Commissioner was empowered to cancel the registration on specific grounds. Further the Tribunal held that the section did not empower the Commissioner to cancel or withdraw the registration, which has been granted under Section 12A of the Act. Further, the Tribunal held that provisions of Sub Section (3) of Section 12AA of the Act which are brought on the statute book with effect from October 1, 2004, by the Finance (No.2) Act, 2004, could not have retrospective effect, consequently, the order passed by the Commissioner was set aside. The Revenue filed appeal before the Division Bench of the High Court. Following the amendment by the Finance Act of 2010 with effect from June 1, 2010, the Commissioner of Income-tax issued fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective when it takes away a right which has vested or accrued in the past. The effect of the provision is to empower the Commissioner to cancel the registration of a trust where he is satisfied that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the trust or institution. This cannot by any stretch of imagination, be regarded as a retrospective alteration of the law. In any event, Parliament has plenary powers as a legislative body to enact legislation either with retrospective or prospective effect subject only to the requirement that such legislation should not offend the provisions of Part III of the Constitution. Empowering the Commissioner to cancel the registration of a trust or institution on the ground that the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution cannot be construed as a conferment of arbitrary power. Where a benefit is granted by the Legislature, whether by way of an exemption or otherwise, the Legislature is entitled to ensure that the benefit conferred by the statute is utilized only for the purpose for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Allahabad High Court relied on General Clauses Act, 1897, which held that the Commissioner's power under Section 12AA being a quasi-judicial power or not being one falling under the category of the 'orders' mentioned in Section 21 of the General Clauses Act, 1897, the provisions of Section 12AA of the Act cancelling the registration could not have the effect of rescinding the order originally granted to the trust under Section 12AA of the Act. Thus, the Delhi High Court agreed with the view taken by the Allahabad High Court reported in (2011) 336 ITR 250 (All) in the case of Commissioner of Income-tax Vs. Manav Vikas Avam Sewa Sansthan, that the order cancelling the registration granted under Section 12A being quasi-judicial power does not fall under the category of "orders" mentioned under Section 21 of General Clauses Act, 1897, which provides that the power conferred on an authority empowered to issue orders including the power to rescind such orders however, would not confer jurisdiction of the Commissioner to rescind the order thus passed granting registration. 19. We respectfully express our disagreement with the view taken by the Delhi High Court in the case of Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d trust as one of its objectives, thus, one and only object, which was referred to 1972 trust viz., administering the Vidya Mandir Association and that having come to an end, it is difficult for this Court to accept the plea of the assessee that the trust continues even today. It is no doubt true under Clause V of the trust deed dated 19.01.1972, if at any time, the object of the trust should become impossible of fulfillment, the properties and funds belonging to the trust shall be utilised for such other allied charitable or educational purposes as the Board for the time being may determine. As of today, there are no materials to show that there were any such necessity and possession was taken as regards the constitution of newly formed trust. In any event, as observed by the Commissioner of Income Tax and the Income Tax Appellate Tribunal in their orders, we do not find any specific objects manifested in the trust deed. In the circumstances, when the one and only object was, it had to run educational institutions, to that end, the new trust was formed in 1987, hence, we do not find any justifiable ground to hold that the Commissioner would be powerless even to cancel the registra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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