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2016 (5) TMI 1221 - ITAT BANGALORE

2016 (5) TMI 1221 - ITAT BANGALORE - TMI - Registration granted u/s 12A cancelled - whether the CIT is empowered even w.e.f. 01/06/2010 to withdraw registration of trust earlier registered under the provisions of sec.12A of the Act with retrospective effect? - Held that:- It is not the case of the assessee-trust that the conditions specified in sub-sec.(3) of sec.12AA were not present in the present case even from 01/04/2004 till date of the impugned order. As held by us in the foregoing paragra .....

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, Judicial Member And Shri Inturi Rama Rao, Accountant Member For the Appellant : Shri G.Venkatesh, Advocate For the Respondent : 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 o .....

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red 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 01/04/2004 on account of the Show Cause Notice dated 06/03/20 14 and consequently the order is bad in law. c. Without further prejudice, the Show Cause Notice does not indicate that it is proposed to be retrospectively withdrawn and con .....

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r period on the facts of the case_ 4. Grounds on applicability of 12 AA(3) of the Act: a. Without prejudice the learned CIT failed to appreciate that the section 12 AA(3) itself was inserted w.e.f. 01/10/2004 and cancelling the registration with retrospective effect from 01/04/2004 amounts to providing unintended retrospective effect of the provision which is not in accordance with the legislative intention on the facts and circumstances of the case. b. The learned CIT erred in law as unintended .....

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der on the facts and circumstances of the case. b. The learned CIT has not given any finding on the issue of activities are not genuine nor has the trust not being carried in accordance with the objects of the trust. In the absence of these two conditions precedent the CIT was precluded from exercising his powers under 12AA(3) of the Act on the facts and circumstances of the case. c. The learned CIT erred in holding that the Appellant is not carrying on the activity of running educational instit .....

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ng 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 soci .....

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12/2010. While fact stood thus, the CIT, Hubli initiated proceedings u/s 12A(3) to cancel registration granted u/s 12A and show cause notice was served upon the assessee-society vide letter dated 6/3/2014 for the following reasons: i. The society was formed only for the benefit of Brahmin community which violates the provisions of sub-sec.(3) of sec.13 of the Act. ii. The society is not carrying on any activities towards objects of the trust. iii. There was no element of charity running old-age .....

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eing run jointly along with Akshya Trust. The CIT, after considering the submissions held that the activity of the assessee-society was not genuine since no activities have been carried on for long time and therefore, cancelled the registration granted u/s 12A w.e.f. 01/04/2004 vide impugned order. 4. Being aggrieved, assessee-society is before us in the present appeal. 4.1 Learned counsel for the assessee submitted that the assessee-society has been carrying on the object for which the society .....

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10. 4.2 On the other hand, learned Departmental Representative relied on the orders of the CIT. 5. We heard rival submissions and perused material on record. The issue 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 activ .....

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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 carrying on the activities of trust. It is neither the case of the assessee-society that leasing of building is one of the activities f .....

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of the Act to cancel registration granted u/s 12A of the Act. However, we note that power of cancellation of registration obtained u/s 12A came t be incorporated by way of amendment introduced by the Finance Act, 2010 w.e.f. 01/06/2010. Therefore, w.e.f. 01/06/2010, power vests with the CIT even to cancel registration granted under any clauses of sub-sec.(1) of sec.12A. Now, the issue is whether the CIT is empowered even w.e.f. 01/06/2010 to withdraw registration of trust earlier registered unde .....

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of new section i.e. 12AA of the Act. However, subsequently by the amendment introduced by the Finance Act, 2010 w.e.f. 01/06/2010, power to cancel registration registered under sec.12A was conferred. This demonstrates the intention of the Parliament that the CIT is empowered to cancel registration with retrospect effect subject to condition specified in sub-sec.(3) of sec.12AA of the Act. If this is not the intention of the Parliament there was no need to specifically provide that the CIT is em .....

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al 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 w .....

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rred to the one which would render it otiose or sterile. In that view of the matter, the court should not adopt a construction which would upset or even impair the purpose in introducing a particular provision in the statute [Calcutta Jute Manufacturing Co. v. CTO, (1997) 106 STC 433, 439 (SC)]. Therefore, we hold that the CIT is very much empowered to cancel registration of the trust once registered u/s 12A of the Act with retrospective effect. The Hon ble Bombay High Court in the case of Sinha .....

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