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2015 (5) TMI 859 - ITAT MUMBAI

2015 (5) TMI 859 - ITAT MUMBAI - TMI - Withdrawal of registration u/s. 12A - legal consequence/s of the applicability of proviso to section 2(15) on the registration of an entity as a charitable institution - Held that:- The language of proviso to section 2(15) extends to any activity that may be in the nature of trade, commerce or business - all terms of wide amplitude, or any activity of rendering any services in relation to the same. We, accordingly, have no hesitation in holding that the ass .....

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atter be referred to the hon’ble President of the Tribunal for constituting a larger bench of the tribunal to decide the highly contentious issue raised by the assessee’s Ground No.1, decided differently by different coordinate benches of this tribunal, for uniform application across the tribunal, of course after hearing the parties. The larger bench of the tribunal, in the case the reference made hereby is accepted by the hon’ble President, shall, apart from the other arguments and case law as .....

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he assessee’s Ground I. We decide accordingly. - MA No. 126/Mum/2014, ITA No. 625/Mum/2012 - Dated:- 10-4-2015 - Shri D. Manmohan And Shri Sanjay Arora JJ. For the Appellant : Shri S. E. Dastur & Shri Madhur Agarwal For the Respondent : Shri Rajiv Panth & Shri Neil Philip ORDER Per Sanjay Arora, A. M.: This is a Miscellaneous Petition by the Assessee, i.e., for assessment year (A.Y.) 2009-10, in respect of the order by the Tribunal dated 31.12.2013 in it s case for the said year. 2. Vi .....

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for the Revenue in withdrawing its registration u/s. 12A of the Act as a charitable institution, granted on - 22.07.2002 (PB pg.39), with effect from assessment year (AY) 2009-10, is the invocation of section 2(15), i.e., read with proviso thereto, effective from the said assessment year, contending that the proviso to section 2(15) is applicable to it and, therefore, it is no longer a charitable institution. The assessee appealed there-against, contesting the said withdrawal (u/s.12AA(3)) on b .....

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Gd. 2. The Tribunal, however, without deciding its ground no.1, proceeded to decide Gd. 2, i.e., the alternate ground. This, despite as many as six decisions being relied upon by the assessee in its favour on that ground (Gd. # 1), which though stand duly reported at para 3.1 of its order. In fact, it does not even decide the same (Gd.2), restoring the matter back to the file of ld. DIT(E) to decide the same. It was not permissible for the tribunal to do so, i.e., without deciding Gd.1. Continui .....

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ordance with subjects, traveled outside the scope of the appeal and, thus, exceeded its jurisdiction. The power of the tribunal u/s.254(1), howsoever wide, is not absolute and is confined to the grounds raised, and for which reliance was placed on decision of the hon ble Bombay High Court in the case of Pokhraj Hirachand v. CIT [1963] 49 ITR 293 (Bom) and J.B. Greaves IT v. CIT [1963] 49 ITR 107 (Bom). On his attention being drawn to the rule 11 of the Appellate Tribunal Rules, 1963, which provi .....

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les (being under the 1922 Act), were also placed on record. The tribunal, he continued, can decide in the appellant s favour on any other ground. Reference was further made by him to the decisions in the case of Jasmine Commercials Ltd. vs. CIT [2011] 56 DTR 159/200 Taxman 338 (Cal) (pages 5,6); ACIT v. Saurashtra Kutch Stock Exchange Limited [2008] 305 ITR 227 (SC); and M. Visvesvaraya Industrial Research & Development Centre vs. ITAT & Others [2001] 251 ITR 852 (Bom) (pages 855 and 856 .....

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was the material before the tribunal to decide the issue, it would be justified in deciding the same, rather than setting it aside to the file of a lower authority/s to decide afresh. 3.2 The ld. DR, on the other hand, did not raise any specific objection, being content in relying on the impugned order, stating that it was a considered decision by the tribunal, not liable for any modification whatsoever. 4. We have heard the parties and perused the relevant material on record. 4.1 We may, to beg .....

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hat the power of withdrawal u/s. 12AA(3) could only be on violation of two conditions stipulated under the said section and not otherwise. 3. The Appellant therefore, prays that in absence of such violation, the withdrawal of registration granted u/s. 12A of the Act by invoking powers u/s. 12AA(3) be held as ab-initio void and bad-in-law. WITHOUT PREJUDICE TO GROUND I: GROUND II: 1. On the facts and circumstances of the case and in law, the DIT(E) erred in holding that the income from the activi .....

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pellant therefore prays that it be held that the provision of section 2(15) does not apply to the Appellant and accordingly the activities per se does not amount to carrying on any nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business. WITHOUT PREJUDICE TO GROUND I & II GROUND III 1. On the facts and circumstances of the case and in law, the DIT(E) erred in withdrawing the registration granted u/s 12A retrospectively fr .....

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en for it to do so, is the assessee s case. This is for the simple reason that being a legal ground, where decided in its favour, there shall be no necessity to decide Ground 2, challenging the application of the proviso to section 2(15), i.e., on facts. It was even otherwise incumbent on the assessee to assume the said ground, lest it be argued that the assessee admits the application of proviso and, thus, section 2(15), to it. The arguments by the assessee during the hearing (of the appeal) qu .....

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out jurisdiction. 4.3 The decision of the tribunal is contained at para 5 of its order, which reads as under: 5. The issue of applicability or otherwise of section 12AA(3) in the instant case being factually indeterminate, we only consider it fit and proper in the facts and circumstances of the case to restore this matter back to the ld. DIT(E) for allowing the assessee a reasonable opportunity to present its case in this regard before him, to be decided per a speaking order and in accordance wi .....

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ts; the same being the subject matter of the legal aspect afore-noted. We do so as the assessee s case would require being examined by the tribunal thereon only if the same survives an examination on facts, i.e., satisfies the test of s. 12AA(3) on facts. We decide accordingly. The tribunal has, as apparent, not decided Gd.1 for the reason that in its view the question as to whether the conditions for the withdrawal of registration u/s.12AA(3) stands satisfied are not, i.e., de hors section 2(15 .....

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learly states that the issue of application (or otherwise) of section 2(15) shall not influence the determination of the issue as to whether the precedent conditions of section 12AA(3) are, in facts and circumstances of the case, met or not. The assessee s first charge is, thus, without basis. 4.4 We, next, come to the second aspect of the matter, whereby with reference to scope of the powers of the tribunal, its decision is challenged as incompetent. The tribunal s power is, again with referenc .....

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CIT [1967] 63 ITR 232 (SC), the subject matter of appeal, in the opinion of the hon ble apex court, was rightly discerned by the tribunal as the WDV of the building, machinery, etc. of the assessee for calculating the depreciation allowance u/s.10(2)(vi) of the Act (Income Tax Act, 1922). It was clarified that it was open for the Revenue to raise a contention in this regard before the tribunal for the first time, supporting the finding of the Appellate Assistant Commissioner (AAC) on any ground .....

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uch depreciation should be taken in the consideration for computing the WDV under the Act. In CIT vs. S. Nelliappan [1967] 66 ITR 722 (SC), the apex court again has clarified that in deciding the appeal, the tribunal has not restricted to the grounds said forth in the memorandum of appeal or taken by the leave of the tribunal. Following the said decision, the apex court in CIT vs. Assam Travels Shipping Service [1993] 199 ITR 1 (SC) confirmed the decision of the tribunal in remanding the matter .....

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rmed by the apex court to be issue before the tribunal. In Martin Burn Ltd. vs. CIT [1993] 199 ITR 606 (SC), the action of the tribunal in remanding the matter back to the ACIT for passing order u/s.263 after making further investigation was upheld. The question arising before the tribunal was perceived as not limited to what had been considered by the CIT, but as also what had not been, but ought to have been, in the exercise of his power in the matter. In CIT vs. National Taj Traders [1980] 12 .....

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subject matter of the appeal. The decision, express or implied, of the AAC, is the subject matter of appeal, and to which therefore the power of the tribunal is restricted to. Subsequently, the hon ble court, vide its full bench decision in the case of Ahmedabad Electricity Co. Ltd. vs. CIT [1993] 199 ITR 351 (Bom) (FB), upon an extensive review of precedents, clarified that the power or purview of the tribunal shall, as in the case of first appellate authority, extend to the whole assessment, .....

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/s raising different aspect/s of the matter before it, decided expressly or impliedly by the authorities below, whose orders are under challenge before it, i.e., is the subject matter of the tax proceedings. 4.5 The next question before us is whether the withdrawal u/s.12AA(3), i.e., de hors section 2(15), was or could be considered as arising out of the order under appeal before the tribunal. Toward this, we have perused the assessee s reply, to the show cause notice; the order u/s. 12AA(3), an .....

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ation of proviso to section 2(15). The issue, which the tribunal considered as the second limb of the matter before it, i.e., the application of s. 12AA(3) independent of s. 2(15), was thus not a subject matter of appeal, and the tribunal had wrongly assumed jurisdiction in its respect. The tribunal, as it appears to us, was moved by the assessee s reply before the ld. DIT(E), stating its activities as genuine and carried out in accordance with it objects (PB pgs. 41-55) as well as its argument .....

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lly covered by the assessee s Gd. 2. No doubt, the Revenue is not barred in law from raising, and is at liberty to raise, the said issue in another proceedings, even as argued before us by the ld. AR; there being even otherwise no estoppel against law. But, on a fair look at the order u/s. 12AA(3), doing so in the instant proceedings, i.e., the appellate proceedings before the tribunal, would amount to extending the scope thereof inasmuch as the same not contemplated by the said order. The tribu .....

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h in fact constituted the Tribunals decision, so that it is also incorrect to state that the same did not constitute a decision. Though of no consequence in view of our acceptance of a mistake by the tribunal in inferring the subject matter of appeal, the assessee having relied on Kansai Nerolac Paint (supra) toward the same, we may meet the said reliance. The said decision is distinguishable inasmuch as in that case the tribunal decided likewise, restoring the matter back to the file of the fir .....

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ould have made its decision in the said case as subject to the validity, i.e., the veracity of the said documents, by the Revenue. In the present case, on the contrary, restoration by the tribunal was after consideration the facts of the case, finding the facts on record as indeterminate, so that it cannot be said that all the facts are on record or established. The said decision would thus by itself by of no consequence in the instant case. Order u/s. 254(1) 6. Continuing further, this, therefo .....

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e, but then, equally, Ground # 1 shall arise for consideration only it is found as a fact that section 2(15) is applicable thereto. It is pointless to decide Ground 1, i.e., the impact of section 2(15) on registration of an entity as a charitable institution, without first considering if section 2(15), including proviso thereto, is at all attracted in the facts of the case. We shall, therefore, proceed to decide Ground #2 first. Section 2(15) reads as under: Definitions. 2. In this Act, unless t .....

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e a charitable purose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: Provided further that the first proviso shall not apply, if the aggregate value of the receipts from the activities referred to therein is twenty-five .....

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on and undertaking such schemes in different areas, viz. agricultural, horticultural, diary, fishery, cattle breeding, etc. If this is not an economic activity, carried on in an organized manner, what we wonder it is? It is also not the case that the assessee does not charge any sum for its activities. That is, generates revenue there-from. The expression business is well known in the income-tax law, being in fact defined u/s.2(13) thereof to include trade, commerce or manufacture or any adventu .....

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sactions bears clear indicia of trade (pg. 773). The principle/s of law being clear, the determination rests on the finding/s of fact, which is to be arrived at by taking the totality of the facts and circumstances into account. As explained, business is a term of wide import, encompassing within it the different forms and shades of transactions, viz. trade, commerce, etc., which are again terms of considerable amplitude. The import or even the common parlance meaning of all these terms is not i .....

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dia (ICAI) v. Director General of IT [2012] 347 ITR 99 (Del), where the term has been elucidated by the hon ble courts. The language of proviso to section 2(15) extends to any activity that may be in the nature of trade, commerce or business - all terms of wide amplitude, or any activity of rendering any services in relation to the same. We, accordingly, have no hesitation in holding that the assessee s activities are covered by the proviso to section 2(15); the gross receipt for the current yea .....

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hold, and shall therefore form part of this order, as indeed shall the other parts of this order, save as not specifically modified or withdrawn per this order. Both the parties have, as shall be evident there-from (refer paras 3.1 & 3.4) relied on several decisions by the tribunal. No doubt, the assessee has relied on one decision by the hon ble high court [CIT v. Sarvyodaya Ilakkiya Pannai [2012] 343 ITR 300 (Mad)], but then the said decision stands also considered by the tribunal in the c .....

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ered opinion, therefore, the appropriate course under the circumstances, even as indicated during the hearing in the instant proceedings - to no objection by either party, is that the matter be referred to the hon ble President of the Tribunal for constituting a larger bench of the tribunal to decide the highly contentious issue raised by the assessee s Ground No.1, decided differently by different coordinate benches of this tribunal, for uniform application across the tribunal, of course after .....

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