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2015 (7) TMI 198 - ITAT BANGALORE

2015 (7) TMI 198 - ITAT BANGALORE - TMI - Registration given to it u/s 12A cancelled - Whether the Tribunal was correct in holding that the assessee is entitled to continue registration under Section 12A? - Held that:- A registration granted earlier under Section 12A of the Act can be cancelled under two circumstances; (a) If the activities of such trust or institution are not genuine, (b) The activities of trust or institution not being carried out in accordance with the object of the trust or .....

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stipulated in subsection (3) of Section 12AA of the Act, which empowers the authority to cancel registration, do not exists in this case. The registration granted is cancelled in view of the amendment of first proviso to Section 2(15) of the Act. That is not a ground specified in the Statute for cancellation of the registration. In fact, sub-section(8) to Section 13 which is introduced by Financial Act, 2012 which came into effect from 1.4.2009 categorically provides that, nothing contained in S .....

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t proviso, the assessee would not be entitled to the benefit of exemption from the tax. If the case of the assessee falls with first proviso to Section 2(15) of the Act, the benefit of registration which flow from Section 12A of the Act is not available. Anyhow, that is a matter to be considered by the Assessing Authority. But on that ground, registration cannot be cancelled, which is precisely the Tribunal has held. See Director of Incometax (Exemption) vs. Karnataka Industrial Area Development .....

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f the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] invoking powers vested on him under sec.12AA of the Act. 2. Facts apropos are that the assessee, a statutory body formed by the Government of Karnataka for promoting and securing the development of Bangalore metropolitan area, was granted registration u/s 12A of the Act on 26/3/2003 based on an application filed by it. On 15/3/2011 the ld.DIT(E) issued a show cause notice to the assessee seeking reasons why the r .....

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that a registration granted under section 12A could be cancelled only if the activities of the assessee were not genuine or if the activities were not carried out in accordance with the objects. 3. However, the DIT(E) was not impressed by the above reply. According to him, objects of BDA were hit by proviso to sec.2(15) of the Act as amended w.e.f. 1/4/2009. As per the ld.DIT(E), the assessee was also involved in commercial activities like development of shopping complex. Ld.DIT(E) noted that t .....

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nment of Karnataka. Ld.DIT((E) thus held that the assessee was not eligible to enjoy the exemption u/s 11 of the Act. He cancelled the registration granted to the assessee u/s 12A of the Act w.e.f assessment year 2009-10. 3. Now before us, the ld.AR strongly assailing the order of the ld.DIT(E), reiterated the contentions taken by him before the ld.DIT(E). Reliance was placed on the judgment of the Hon'ble jurisdictional High Court in the case of Director of Incometax (Exemption) vs. Karnata .....

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istration granted u/s 12 of the Act could be cancelled. Both the conditions were not met. Per contra, learned Departmental Representative supported the order of the ld.DIT(E). 4. We have perused the order of the ld.DIT(E). It is not disputed that the assessee has substantial other receipts about ₹ 25,563/- lakhs and also income from sale and auction of houses/sites. It is also not disputed that the BDA is an authority set up by the State Government with primary object of designing the layo .....

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n. The said Board was also having substantial receipts in the nature of sale of application Form, recovery of fines and penalties, rent receipt, water supply charges, gain on disposal of land, forfeiture of deposit and interest. Their Lordships, on an appeal filed by the Revenue against the order of the Tribunal, wherein it had set aside the cancellation of registration held as under at paras.2 to 9 of its judgment dated 7/11/2014: "2. The assessee, Karnataka Industrial Area Development Boa .....

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he fact that the accounts for the year ended 31.3.2009 shows receipts by way of gain on disposal of land to the extent of ₹ 18,69,72,000/- and excess of income over expenditure at ₹ 155,76,64,004. An extract of the Income and Expenditure account for the financial year 2008-09 is reproduced as under: INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31.3.2009 EXPENDITURE Rs. INCOME Rs. To repairs and maintenance 76,18,544 By sale of application forms 1,11,91,886 Administrative expense .....

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it renders. Therefore, the authority was of the view, there is no element of charity or providing any services or industrial sites free of cost. After meeting all the expenses, KIADB has earned a net profit of ₹ 155,76,64,004/-. Under various heads, KIADB has earned huge profit. Thereafter, taking note of the change in the definition of Section 2(15) of the Act, which came into effect from 1.4.2009, it was held that the activity carried on by the assessee is in the nature of trade, commer .....

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by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal relying on the judgment in the case of Karnataka Badminton Association in ITA No.1272/Bang/2011 held; the registration already granted under Section 12A cannot be revoked for the reason that the Charitable Trust or Institution pursuing of advancement of objects of general public utility carried on commercial activities and therefore as the conditions stipulated in Section 12AA(3) do not exists in this case, set as .....

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ial in nature and therefore cannot be considered as charitable under Section 2(15) of the Income Tax Act? ii). Whether the Tribunal was correct in holding that Director of Income Tax (Exemption) has not given any finding with regard to genuineness of the activities or the activities not in accordance with the objects of the institutions, without appreciating that clear finding is recorded holding activities of the assessee were not in accordance with the objects and the objects are amended witho .....

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gregate value of the receipts from the said activities exceeds ₹ 25,00,000/- and therefore, it squarely falls under the first proviso to Section 2(15) of the Act and therefore it ceases to be an institution for charitable purpose. Therefore, rightly the registration under Section 12A of the Act was cancelled which has been erroneously interfered with by the Tribunal. 6. Per contra, learned counsel appearing for the assessee contended, once a person is granted registration under Section 12A .....

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case for interference is made out. 7. From the aforesaid facts and rival contentions, it is not in dispute that the assessee was granted registration under Section 12A of the Act. Now the said registration is cancelled by invoking the power conferred under Section 12AA(3) of the Act. Therefore, it is necessary to find out under what circumstances the registration granted earlier could be cancelled. Section 12AA(3) of the Act, reads as under: Section 12AA(3) [(3)Where a trust or an institution ha .....

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or institution: Provided that no order under this subsection shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] 8. A reading of the aforesaid provision makes it very clear, a registration granted earlier under Section 12A of the Act can be cancelled under two circumstances; (a) If the activities of such trust or institution are not genuine, (b) The activities of trust or institution not being carried out in accordance with the object of the .....

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s stipulated in subsection (3) of Section 12AA of the Act, which empowers the authority to cancel registration, do not exists in this case. The registration granted is cancelled in view of the amendment of first proviso to Section 2(15) of the Act. That is not a ground specified in the Statute for cancellation of the registration. In fact, sub-section(8) to Section 13 which is introduced by Financial Act, 2012 which came into effect from 1.4.2009 categorically provides that, nothing contained in .....

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