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Mumbai Metropolitan Region Development Authority Versus The Director of Income Tax (Exemption)

2015 (9) TMI 1057 - BOMBAY HIGH COURT

Registration under Section 12A denied - jurisdiction of the Respondent under Section 12AA(3) of the Act to withdraw the registration granted under Section 12AA - Held that:- Ground (i) with regard to jurisdiction has been referred to the President of the Tribunal for considering the constituting of Larger Bench. In these facts, the legal maxim sublato fundaments credit opus would apply meaning thereby, in case the foundation is removed, the superstructure falls, so far as the Tribunal is concern .....

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he Appellant's appeal under Section 254(1) of the Act finally on one issue and kept pending on the other issues. The Tribunal under the Act is the final fact finding authority and has to consider all question that are raised before it arising from orders of Authorities under the Act. Thus, this piecemeal disposal of an appeal under Section 254(1) of the Act is not normally resorted to for the reasons pointed out in question (b) above. Moreover, such approach on the part of the Tribunal would lea .....

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etitioner : Mr S E Dastur, Sr. Adv. with Mr. Madhur Agarwal and Mr. Atul Jasani For the Respondent : Mr Suresh Kumar ORDER P. C. This Appeal under Section 260A of the Income Tax Act, 1961 (the Act), challenges the order dated 10th April, 2015 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order relates to the Assessment Year 2009-10. 2. The impugned order dated 10th April, 2015 allowed the rectification application filed by the Appellant and recalled its order date .....

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r of Income Tax under Section 12AA(3) of the Act for violation of conditions other than those specified therein? and (ii) Without prejudice to (i) above, whether the activity carried out by the Appellant is not for charitable purpose as defined under Section 2(15) of the Act being hit by the amended proviso thereto? The basic jurisdictional issue being (i) above was referred to the President of the Tribunal to consider the constituting of a Larger Bench to decide it and the without prejudice iss .....

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e and in law, the Tribunal was right in deciding Ground No. (ii) of the memorandum of appeal without deciding Grounds No. (i) of the memorandum of Appeal even though Grounds No.(ii) was without prejudice to Ground No.(i) and would only arise for adjudication if Ground No.(i) is decided against the Appellant? (B) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in adjudicating Ground No. (ii) of the memorandum of appeal when the said ground was not argu .....

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and bad in law?" 4. As the issue is within a narrow compass coupled with the fact that the finding of the Tribunal on issue (ii) would affect all pending assessments as the same would conclude the issue of exemption before the Assessing Officer. Thus, at the request of the Counsel, the appeal itself is being disposed of at the stage of admission. Brief facts:- 5. The Appellant is authority established under the Mumbai Metropolitan Regional Development Authority (MMRDA) Act, 1974. Its main o .....

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erted to the definition of charitable purpose in section 2(15) of the Act w.e.f. 1st April, 2009. The proviso, inter alia, provided that advancement of any other object of general public utility would not be considered to be a charitable purpose, if it involves carrying on any trade, commerce and/or business irrespective of nature of use or application of income from such activities. 7. On 13th December, 2011, the Respondent issued a show cause notice to the Appellant, calling upon the Appellant .....

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or both of the two eventualities mentioned therein are met namely not being genuine or the activity is not carried on in accordance with its objects. It was contended that neither of the two conditions necessary for exercising the jurisdiction under Section 12AA(3) of the Act are satisfied. Thus, the Respondent had no jurisdiction. Without prejudice to the above, the Appellant also submitted that the activities carried out by it would not amount to carrying on any trade, commerce or business as .....

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27th December, 2011 of the Respondent on the following grounds: (i) The Respondent does not have jurisdiction to withdraw registration granted under Section 12A of the Act in exercise of its power under Section 12AA(3) of the Act. This is so as the withdrawal only can be done when the Appellant's activities are not genuine or are not being carried out in accordance with its objects. As neither of the two above condition precedents were satisfied, the Respondent could not have exercised juri .....

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the hearing before the Tribunal, the Appellant urged only one ground i.e. the jurisdiction of the Respondent under Section 12AA(3) of the Act to withdraw the registration granted under Section 12AA of the Act. The issue raised in grounds (b) and (c) were not urged, this was for the reason that if the first issue is decided in favour of the Appellant, the other issue would not arise for consideration. The Tribunal by its order dated 31st December, 2013 set aside the order of the Respondent dated .....

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he Tribunal, seeking to rectify mistake apparent from the record and recall the order dated 31st December, 2013. The Appellant submitted that the only issue which was argued before the Tribunal leading to the order dated 31st December, 2013 was with regard to the jurisdiction of the Director of the Income Tax to cancel and/or withdraw under Section 12AA(3) of the Act, the registration granted under Section 12A of the Act by relying upon the proviso to Section 2(15)of the Act. The other issue on .....

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its order dated 31st December, 2013. Thereafter, the Appellants' appeal against the order dated 27th December, 2011 of the Respondent was considered on merits under Section 254(1) of the Act and partly disposed of on merits with regard to issue (ii) and partly kept in abeyance by referring the issue (i) of the President of the Tribunal to consider and constitute a Larger Bench to decide the jurisdictional issue. 13 The grievance of the Appellant is not with regard to that part of the order .....

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der Section 254(2) of the Act and also an appeal under Section 254(1) of the Act. The challenge in this appeal is to the order dated 10th April, 2015 of the Tribunal to the extent it deals with the appeal under Section 254(1) of the Act. 14. We shall now deal with each of the above substantial questions as admitted. 15. Regarding Question A (a) The challenge here is to the order dated 10th April, 2015 to the extent it is passed under Section 254(1) of the Act by deciding ground (ii) in the memor .....

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ng a decision on ground (ii) as this issue would have to be decided sometime or the other. We do not accept the above submission made on behalf of the Revenue; (c) Ground (i) taken up by the Appellant before the Tribunal is a jurisdictional issue. Therefore, if ground (i) is decided in favour of the Respondent, there is no need for the Tribunal to examine ground (ii) in the appeal before it. This issue raised in ground (ii) needs to be examined by the Tribunal only if ground (i) is decided again .....

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erned. It may be open to the Assessing Officer during the assessment proceedings to consider whether the activities of the Appellant are hit by the proviso to Section 2(15) of the Act and entitled to exemption. There is a difference between Registration and exemption; (d) Accordingly, Question (A) is answered in the negative i.e. in favour of the AppellantAssessee and against the Respondent-Revenue. 16. Regarding Question B (a) The challenge here is to the order dated 10th April, 2015 of the Tri .....

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it did not deal with the above issue. This is evident from the order dated 10th April, 2015 of the Tribunal itself specifically recording in para 2 thereof as under: "2:- Vide its instant application the assessee seeks a recall of its order afore-referred by the Tribunal for deciding its appeal afresh in accordance with law. In the alternative, the tribunal can, where the parties consent thereto, it having already heard the parties at length, proceed to decide assessee's Ground No.1, w .....

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appeal urged in the memorandum of appeal before the Tribunal has been reproduced in paragraph 4.1 of the order dated 10th April, 2015 of the Tribunal. It is very clearly stated therein that ground (ii) is without prejudice to ground (i) viz-the jurisdiction of the Respondent to exercise its power of withdrawal under Section 12AA(3) of the Act. In spite of the aforesaid position, the impugned order proceeds to decide the ground Nos. (i) and (ii) by holding that both are taken without prejudice to .....

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the extent it has referred the issue of jurisdiction as raised in ground (i) by the Appellant to the President of the Tribunal for consideration to constitute a Larger Bench; (b) We find that this reference to the President for constitution of a Larger Bench was in the face of seven decisions of the Tribunal concluding the issue of jurisdiction in favour of the Appellant. All these decisions are mentioned in the order passed on 31st December, 2013 (since recalled) in support of the Appellant .....

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also of the High Court of Madras in CIT v/s. Sarvodaya Hakkiya Pannai 343 ITR 300, the impugned order holds that the issue is required to be referred to the President of the Tribunal to consider constitution of a Larger Bench in view of conflicting view of High Courts. No reference to any High Court decisions adverse to the stand taken by the Appellant is found in the order dated 10th April, 2015 of the Tribunal. In support of the stand of the revenue, the only decision to which reference is ma .....

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Supply Ltd. 206 ITR 727 which has observed to the effect that a decision of nonjurisdictional High Court is not binding upon the Tribunal. It appears prima facie to be rendered in the context of the question whether this Court is bound by a decision of another High Court. However, in the present facts, there were seven decisions of the Tribunal including of the Mumbai Bench in favour of the Appellant. Amongst the above decisions of the Tribunal is the decision in the Maharashtra Housing & A .....

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h. We are unable to understand as to how the Tribunal could completely overlook the same and more particularly when the same learned Member had also authored the decision in Rajasthan Housing Board (supra) and Maharashtra Housing & Area Development Authority (supra); (d) In view of the order dated 10th April, 2014 referring the issue raised in ground (i) to the President of the Tribunal for constitution of Larger Bench is not supported by any reasons warranting a constitution of a Larger Ben .....

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the same may not be faulted. Thus, we would be restoring the issue to the Tribunal for fresh consideration. However, in view of the above in the present facts in view of lack of consideration, question (C) is answered in the negative i.e. in favour of the AppellantAssessee and against the Respondent-Revenue. 18 Regarding Question D (a) The challenge here is to the manner in which the order dated 10th April, 2015 has been passed. We find that the order dated 10th April, 2015 while dealing with t .....

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(ii) only after deciding on the issue of jurisdiction of the Respondent to cancel registration under Section 12AA(3) of the Act. In case, the ground (i) is decided in favour of the Appellant, the entire exercise of deciding ground (ii) would be a wasted effort. Moreover, the authorities under the Act would have acted upon issue (ii) being finally decided only for the revenue to revise its decision if ground (i) is decided in favour of the Appellant. (c) Besides, we also find that the order date .....

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