TMI Blog2016 (5) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent : Shri Sanjay Kumar, CIT(DR) ORDER Per Inturi Rama Rao, AM This is an appeal filed by the assessee-trust directed against the order of the Commissioner of Income-tax, Hubli, passed u/s 12AA(3) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] dated 25/03/2014. 2. The assessee-trust raised the following grounds of appeal: 1. The Order of the learned Commissioner of Income-tax, Bangalore - I, Bangalore passed under section 12AA(3) of the Act is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant's case. 2. The order of cancellation under section 12AA(3) is not in accordance with law and requires to be set-aside on the facts and circumstances of the case. 3. Grounds on Cancellation of registration of a trust registered under Section 12 A of the Act: a. The learned CIT erred in not appreciating that cancellation of registration granted 12A has to always be prospectively and consequently the order passed is bad in law and requires to be cancelled. b. The learned CIT was not justified in cancelling the registration with effect from 01/04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate that if there is a lull in the activities of the Trust for various reasons the remedy is not to cancel the registration of the Trust that to with retrospective effect on the facts of the case. 6. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 7. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of Justice and equity 3. Briefly, facts of the case are that the assessee is a society registered under the Karnataka Societies Registration Act, 1960 on 17/04/1984. The society was registered under the provisions of sec.12A of the Act on 08/06/1991 vide Registration No.718/121/90/CIT-II. The assessee-society was also granted recognition under the provisions of section 80G of the Act. It was stated that the society was formed for the purpose of carrying out charitable activities. Pursuant to this object, assessee has constructed a school building and old-age home etc. However, the school building was given on lease to Akshya Trust, which is also a society registered u/s 12A of the Act for license ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in the present appeal is about legality of the order passed by the CIT under the provisions of subsec.( 3) of 12AA of the Act. The provisions of sub-sec.(3) of sec.12AA of the Act empower the CIT to cancel registration granted under clause (b) of sub-sec.(1) of sec.12A of the Act, where the CIT is satisfied that the activities of the trust or institution are not genuine and are not carried out in accordance with objects of the trust/institution. Therefore, conditions to be satisfied by the CIT before invoking provisions of sub-sec.(3) of sec.12AA are that the objects of the trust are not genuine or not being carried on in accordance with objects of the trust. The Hon ble High Court of Karnataka, in the case of Director of Income-tax (Exemption) vs. Venkatesha Education Society (2012) 48(I) ITCL 27(Kar)(HC) held that where trust not carried out the activities for which the trust was set up, it can be said that the condition of genuineness of the activities is not satisfied. In the present case, assessee-society not carried out any activity since 2001. The fact that school building was given on lease to another society for the purpose of running school does not amount to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th retrospective effect, the amendment which was carried out by Finance Act, 2010 to the provisions of sub-section (3) of section 12AA empowering the CIT to cancel registration u/s. 12A becomes redundant or otiose, because the original provisions of section 12A governing the registration had ceased to operate after insertion of provisions of section 12AA w.e.f. 1.4.1997. Had the intention of the Parliament been not to confer the power of withdrawal of registration with retrospective effect, there was no need of amendment by Finance Act, 2010. Therefore, the purpose of the amendment is to confer on the Commissioner under sub-section (3) of section 12AA the power of withdrawing the registration once granted u/s. 12A or 12AA with retrospective effect. When interpreting a provision in a taxing statute, a construction, which would preserve the purpose of the provision, must be adopted. As observed in State of Tamil Nadu v. M.K. Kandaswami [(1975) 36 STC 191, 198 (SC)], in interpreting a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book should be eschewed. If more than one construction is possible, that which preserves its workab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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