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2015 (12) TMI 698 - ITAT CHANDIGARH

2015 (12) TMI 698 - ITAT CHANDIGARH - TMI - Registration under sect ion 12AA cancelled - as per CIT(A) activities of the assessee fall in the category of “advancement of any other object of general publicutility” and this phrase as provided in sect ion 2(15) does not now constitute a charitable purpose, therefore the same is purely commercial in nature in view of the proviso appended to the section - Held that:- The amendment to sect ion 2(15) of the Act cannot be the basis for cancellation of r .....

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s case. The learned Commissioner of Income Tax has nowhere given a finding in this regard. It is not the case of the Commissioner of Income Tax that the activities of the assessee are not genuine or not being carried out in consonance with the objects of the assessee. In this view also, the act ion of the learned Commissioner of Income Tax in cancelling the registration is not as per law. - Decided in favour of assessee. - ITA No.775/Chd/2014 - Dated:- 4-12-2015 - SHRI H.L.KARWA, VICE PRESIDENT .....

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sect ion 12AA of the Act was granted to the assessee vide order dated 28.9.2005 by the Commissioner of Income Tax, Patiala. 3. A show cause notice dated 18.3.2014 was issued by the Commissioner of Income Tax proposing to cancel the registration under sect ion 12A of the Act . 4. To bring home the reasons for withdrawal of registration under sect ion 12AA of the Act , elaborate discussion was made by the Commissioner of Income Tax. In view of these observations, the learned Commissioner of Income .....

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Tax cancel led the registration granted to the assessee under sect ion 12A of the Act . 5. Aggrieved by this order of the learned Commissioner of Income Tax, the assessee has come up in appeal before us. The only grievance of the assessee is that the cancelling of registration under sect ion 12AA(3) of the Act is not as per law. 6. The first content ion raised by the learned counsel for the assessee was that the only reason given by the learned Commissioner of Income Tax while withdrawing the re .....

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e purpose of proviso to sect ion 2(15) of the Act is to hi t any assessee only to the extent that the assessee will not be eligible for exempt ion under sect ion 11 of the Act , which has to be verified by the Assessing Officer on yearly basis during the assessment proceedings. The mere fact that the assessee has been granted registration under sect ion 12A of the Act or 12AA of the Act as a charitable institution will have no bearing on the denial of registration. The fact that the object of th .....

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Income Tax and stated that in view of the amendment to sect ion 2(15) of the Act and the detailed discussion made by the learned Commissioner of Income Tax, the assessee has certainly lost its character of being a charitable organization. Therefore, the order passed by the learned Commissioner of Income Tax is valid and as per law. 8. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The u .....

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the said sect ion. 9. On the issue that on the basis of amendment to section 2(15) of the Act , the learned Commissioner of Income Tax does not get the power to withdraw or cancel the registration, we are guided by a latest order of the Amritsar Bench of the I .T.A.T. in the case of Kapurthala Improvement Trust Vs. CIT, 60 Taxmann.com 301 (Amritsar -Trib. ) , whereby it has been held that the consideration of first proviso to sect ion 2(15) of the Act has no role to play in matters relating to r .....

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ch read as under : 9. We find that, as learned counsel rightly points out. the scope of powers of the Commissioner under section 12AA(3) for cancellation of registration already granted is very limited in scope in as much as it can only be invoked only when (i) that the activities of the trust are not genuine, and( i i ) that the activities of the trust or the institution are not being carried out in accordance with the objects of the trust or the institution. Section 12AA(3) specifically provid .....

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e with the objects" of the assessee trust. The case of the CIT rests on the first proviso to Section 2(15) coming into play on the facts of this case but then such a factor cannot warrant or justify the powers under section12AA(3)being invoked. We, therefore, uphold the grievance of the assessee that the action of the learned Commissioner, in withdrawing the registration under section 12AA(3), was well beyond the limited scope of the powers conferred on him by the statute. The assessee, the .....

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institution under section 12A or 12AA - whether in respect of granting or declining of a registration or in respect of cancellation, even if otherwise permissible, of a registration. A close look at the scheme of the Act would unambiguously show this aspect of the matter. 10. On a closer look at the said order of the I .T.A.T. , Amritsar Bench, we f ind that the proposition so laid down by the I .T.A.T. , Amritsar Bench is based on the following reasons : i) The scope of powers of the Commission .....

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der section 12A or 12AA -whether in respect of granting or declining of a registration or in respect of cancellation. iii) What is clear from the riders in the definition of charitable purposes' is that rider set out therein, under first proviso to section 2(15), can only come into play on year to year basis and not in absolute terms. The safeguard against the objects of the trust being vitiated insofar as their character of 'charitable activities' is concerned, is inbuilt in the pro .....

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ties as may be hit by the first proviso to section 2(15) not only the assessee must be engaged in carrying out such activities as may hit the first proviso to section 2(15) but also the receipts of the assessee from such activities must exceed a specified limit. The second limb of this disability clause needs to be satisfied with respect to each assessment year. Obviously, therefore, this aspect of the matter cannot be examined at the stage of the grant or withdrawal of registration since the re .....

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exemption under section 11, as a result of the activities of an assessee being held to be not for charitable purposes under section 2(15) read with provisos thereto, is in respect of entire income of the assessee trust or institution but only for the assessment year in respect of which the first proviso to section 2(15) is triggered. vii) If the status of registration is to be declined to an assessee only on the ground that some of the objects may be hit by the first proviso to section 2(15) bu .....

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