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2016 (2) TMI 603 - ITAT MUMBAI

2016 (2) TMI 603 - ITAT MUMBAI - TMI - Registration granted under section 12AA(1) denied - receipts / earning of the assessee during the relevant previous year has exceeded prescribed limit - Held that:- Only because the receipts / earning of the assessee during the relevant previous year has exceeded prescribed limit, for that reason alone the assessee institution cannot be considered as non-charitable. For cancellation / withdrawal of registration under section 12AA(3), the provisions of secti .....

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ancellation / withdrawal of registration under section 12AA(3) though, it may be relevant for examining assessee's claim of exemption section under section 11 which can only be looked into during the assessment proceedings. In view of the aforesaid, we are inclined to set aside the order of the learned DIT(E) and direct him to restore registration granted under section 12AA(1) of the Act to the appellant institution from the date of cancellation. - Decided in favour of assessee - ITA Nos. 6525 & .....

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elling the registration granted under section 12AA(1) of the Act. 2. Briefly stated the facts are, the appellant institution was initially incorporated under the Indian Companies Act VII, 1913, and registered on 18th June 1924, with the Registrar of Companies, Bombay, as Bombay Chambers of Commerce. Subsequently, after the Companies Act, 1956, came into force, the assessee was registered as Bombay Chamber of Commerce and Industries, w.e.f. 29th June 1956, with the Registrar of Companies, Bombay. .....

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(Exemption)-1(1), Mumbai, for cancellation of registration granted under section 12AA(1), on the ground that assessee is carrying on activity in the nature of trade commerce or business receipts of which are in excess of ₹ 10 lakh thereby attracting the proviso to section 2(15) of the Act, the learned DIT(E) on 14th October 2011, issued a notice to the appellant institution directing to show cause as to why the registration granted under section 12A, should not be cancelled / withdrawn as .....

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, cancelled the registration granted under section 12A of the Act primarily for the reason that assessee has indulged in activities which are in the nature of trade, commerce or business, hence, it is not for a "charitable purpose" as per section 2(15) of the Act. The learned DIT(E), specifically referring to the proviso to section 2(15), opined that since the income earned by the assessee by way of certificate of origin fees, secretarial fees, labour advisory fees, seminar and trainin .....

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urpose of section 11 of the Act. Accordingly, provisions of section 12AA(3) of the Act gets attracted. Holding as above, the learned DIT(E) passed the impugned order cancelling the registration granted under section 12A(1) of the Act earlier. 3. The learned Counsel, Shri P.J. Pardiwala, appearing for the appellant institution submitted, as per section 12AA(3) of the Act, the registering authority can cancel / withdraw the certificate of registration granted to a trust or institution subject to f .....

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there being no change in the objects of the assessee, activities of the trust cannot be held to be non-genuine or not for charitable purpose. He submitted, there is also no material on record to show that the assessee has not carried on activities in accordance with its objects. He submitted, as neither of the two conditions as prescribed under section 12AA(3) are satisfied, cancellation / withdrawal of registration under section 12AA(3) is impermissible in law. Learned counsel submitted, merel .....

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IT(E) being satisfied with the objects of the assessee, had granted registration under section 12AA(1) there being no change in the object nor there being any material brought on to indicate that the assessee has not carried on activities in accordance with its object, cancellation / withdrawal of registration is invalid in law. For such proposition, he relied upon the following decisions:- i) Maharashtra Cricket Association v/s CIT, [2014] 152 ITD 1 (Pune.); ii) Bombay Presidency Golf Club Ltd. .....

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opment Board, [2015] 55 Taxmann.com 34 (Kar.). 4. The learned Departmental Representative, Shri N.P. Singh, supporting the reasoning of the learned DIT(E), submitted, as the earnings of the assessee from commercial activities during the relevant year has exceeded the prescribed limit as per the second proviso to section 2(15) of the Act, the activities of the trust cannot be considered to be for charitable purpose. The learned Departmental Representative submitted, under section 12AA(3), the reg .....

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vious that only reason on which the learned DIT(E) has cancelled / withdrawn registration granted under section 12AA(i), is fees earned by the assessee from different activities are in the nature of trade, commerce and business, therefore, assessee institution cannot be considered to be existing for "charitable purpose". He, therefore, has held that the activities of the trust have become non-genuine. Undisputedly, the assessee was registered as a company in the year 1956, under Compan .....

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hat the income / contribution received by a trust / institution existing for charitable purpose would not be exempt under sections 11 and 12 of the Act unless the trust / institution has made an application for registration under section 12A of the Act and such trust / institution in case of an application for registration being made after 1st June 2007 is registered under section 12AA of the Act. On a perusal of the provisions of section 12AA, which was introduced in the statute w.e.f. 1st Apri .....

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s of its activities, the registering authority shall pass an order registering the trust or institution. However, sub-section (3) of section 12AA, empowers the registering authority to cancel / withdraw registration granted under sub-section (1) if he is satisfied that the activities of the trust or institution are not genuine and secondly, if such activities are not carried out in accordance with the objects of the trust or institution. If we examine the facts of the present case in the light o .....

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e Act, whether conditions prescribed therein have been satisfied. As it emerges from the facts and material on record, the primary object of the assessee as per its memorandum and article of association is "to promote and protect the trade and manufacturers of the state of other parties of the country". It is evident from record that the main / primary object of institution at the time of grant of registration under section 12A in the year 1998, has not undergone any discernible change .....

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hether there is either change in objects of the institution or activities are not carried out in accordance with the object, the learned Departmental Representative fairly submitted that neither there is any allegation by the learned DIT(E) to that effect nor he has brought any material on record to demonstrate such fact. Thus, from the aforesaid facts, it is very much clear that the conditions of section 12AA(3) of the Act, have not been fulfilled. Merely because appellant institution has earne .....

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rned DIT(E) was satisfied with the charitable nature of assessee's objects and also genuineness of its activities. There being no material on record to support the conclusion that the activities of the trust are not genuine or they are not carried out in accordance with its object, conditions of section 12AA(3), have not been satisfied in the instant case. As the registering authority has been vested with power to cancel / withdraw the registration only under sub-section (3), he must satisfy .....

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nd business and it exceeds the prescribed limit. What follows from the plain reading of the provision is, if the income of the trust / institution from activities in the nature of trade, commerce or business, is within the prescribed limit, it would still be considered to be existing for charitable purpose. Thus, restriction imposed under the first proviso to section 2(15) would be relevant only for the purpose of grant of exemption under section 11 of the Act and not for cancellation / withdraw .....

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h that either there is change in the objects of the appellant institutions on the basis of which registration was granted earlier or the activities of the institution are not in accordance with its stated objects. As held in the judicial pronouncements cited by the learned counsel, the first proviso to section 2(15), is not at all relevant for the purpose of cancellation / withdrawal of registration under section 12AA(3) though, it may be relevant for examining assessee's claim of exemption .....

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by the learned Commissioner (Appeals)-I, Mumbai, for the assessment year 2009-10. 8. Briefly stated the facts are, for the year under consideration, the assessee filed its return of income on 30th September 2009, claiming exemption under section 11 of the Act. In the course of assessment proceedings, the Assessing Officer noticing that learned DIT(E) has cancelled / withdrawn the registration granted under section 12AA(1), held that assessee is not eligible for exemption under section 11. Of-co .....

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