TMI Blog2010 (9) TMI 1099X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the CIT is unsustainable. We hold so. In the final analysis, we set aside the impugned order and the registration granted to the assessee, in terms of its application dt. 9th June, 2008, is hereby restored. Resultantly, the appeal of the assessee is allowed. - G. S. Pannu (Accountant Member) And Sushma Chowla (Judicial Member) For the Petitioner : Ashwani Kumar, R. K. Kaushal For the Respondent : N. K. Saini ORDER G. S. Pannu (Accountant Member) 1. This appeal by the assessee is directed against the order of the Commissioner of Income-tax, Shimla (in short the CIT) dt. 15th July, 2009 passed under s. 12AA(3) of the IT Act, 1961 (in short 'the Act') withdrawing registration granted to the assessee under s. 12AA(l)(b) of the Act. The appellant has challenged the order of the CIT on the grounds that neither in law and nor on facts the impugned order is justified. 2. In brief, the only dispute in this appeal revolves around the justification for invoking the provisions of s. 12AA(3) of the Act by the CIT to withdraw the registration granted to the assessee under s. 12AA(1)(b) of the Act. The facts relevant to the said controversy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out activities in accordance with its objects as laid down in the memorandum of association. It is contended that the society is sponsored by the State Government for the purposes of promoting, developing and popularizing non-conventional and renewable sources of energy. All its activities are being carried out as per the objectives contained in the memorandum of association and its bona fides stood established since all its activities are manned by the State Government officials. Secondly, it is contended that with regard to the activity of identifying potential sites for setting up micro-hydel projects, it has been explained that the assessee is the nodal agency appointed by the State Government for receiving and processing the applications received from independent power producers. The assessee was carrying out the task assigned to it by the State Government and it has no role to play in actual running of any such business or commercial activity. The amounts received by way of application fees, sale of brouchers, upfront premium received and additional security charges received, etc. from such prospective power producers are as per the mandate of the State Government and the sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fulfilment of other conditions prescribed in the relevant sections. 6. Sec. 12AA(1) of the Act prescribes the procedure for registration. In terms thereof, the CIT is empowered to call for such documents or information from the applicant and make such enquiries as may be deemed necessary in this behalf. It is quite clear from the said section that the CIT is to satisfy himself about the genuineness of the activities and the objects of the applicant, before he passes an order registering or refusing to register an applicant. As per the said scheme of the Act, at the time of registration the main ingredients required to be seen by the CIT are two-folds-firstly, that the objects of the applicant are for charitable purpose within the meaning of s. 2(15) of the Act; and, secondly, that the activities of the applicant are genuine. 7. Sub-s. (3) of s. 12AA permits the CIT to cancel the registration granted in terms of s. 12AA(1)(b) of the Act. In order to do so, sub-s. (3) mandates that the CIT ought to be satisfied on two counts,-firstly, that the activities of the trust or institution are not genuine; and, secondly, that the activities are not being carried out in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two points mentioned therein, and not for any other reason. We may conclude here that the registration already granted under s. 12AA(1)(b) of the Act can be cancelled only on the fulfilment of the conditions mentioned in s. 12AA(3) of the Act and not for any other reasons. 9. In this background, we may now examine the reasons put forth by the CIT in this case to cancel the registration already granted to the assessee under s. 12AA(1)(b) of the Act. The first premise drawn by the CIT is that the activities carried out by the assessee are not in accordance with its objects. The discussion in this regard is contained in paras 4.1 to 5.5 of the impugned order. The CIT has noted the objective of the assessee per its memorandum of association in para 4.1 of the order which is as under:- The objective of the agency is to promote the research, development and popularization of non-conventional and renewable sources of energy and thereby to deal with the problems caused on account of rapid depletion of non-renewable energy sources. 10. The CIT further noticed the functions which are to be carried out by the society as per cl. 2(b) of the memorandum of associatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e project is not approved by the Government for any reason. After processing, the applications are submitted to the State Government for consideration. In respect of projects that are approved by the Government , MoU is signed by the State Government with the concerned investor. At this stage, an upfront premium is collected by the agency for projects above 2 MW and the amount of such premium is at ₹ 45,000 per MW. Thereafter the investor is required to submit a detailed project report and if the same is approved by the Government an implementation agreement is signed by the Government with the investor. Thereafter the agency monitors the implementation of the project. In cases where the generating capacity is enhanced, additional security charges are levied by the agency. The Central Government provides a capital subsidy in respect of such hydro-power projects approved. This subsidy is routed through the agency. Thus, the entire functions relating to the setting up of the small hydro projects with private sector participation are carried out by the agency, even though the final approvals are given by the State Government and agreements are sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, activities enumerated by the CIT in points (a) to (c) in para 4.3 of his order cannot be considered as activities not in accordance with the objects of the appellant society. The activity enumerated in point (d) shall be dealt with by us a little later. 12. In paras 5.3 and 5.4 of the impugned order the activities of distributing solar energy devices and setting up micro-hydel generator sets have been wrongly held by the CIT as activities not in accordance with the objects of the appellant society. Quite clearly, such activities which are carried out by the assessee in terms of the Government mandated schemes in the field of non-conventional and renewal sources of energy qualify to be the activities in accordance with the objectives for which the appellant society has been set up by the Government of Himachal Pradesh. 13. Now, we may discuss the activity noted by the CIT in point (d) of para 4.3 of his order. In this regard, the assessee is designated as a nodal agency by the State Government for harnessing small hydel potential upto 5 MW capacity. In this connection, assessee is mandated by the Government of Himachal Pradesh to receive and process proposals from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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