TMI Blog2016 (6) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... on made on behalf of the Revenue is based not on facts as existing but on probability of future events. We are unable to accept the submission based on clairvoyance. Further, we are unable to understand what prejudice is caused to the Revenue since whenever the receipts on account of commercial activities is in excess of the limits provided in proviso to Section 2(15) of the Act, the Assessing Officer is mandated/ required to deny exemption under Section 11 of the Act as provided in Circular No.21 of 2016 dated 27th May, 2016. Accordingly, the issue stands covered in favour of the Revenue by virtue of Circular No.21 of 2016. In view of the issue being covered by the CBDT Circular No.21 of 2016, no grievance against the impugned order can be made by the Revenue. - Income Tax Appeal No. 2349 of 2013 - - - Dated:- 6-6-2016 - M. S. Sanklecha And A. K. Menon, JJ. For the Appellant : Mr. A. R. Malhotra with Mr. N. A. Kazi For the Respondent : Mr. Nitesh Joshi with Mr. A. K. Jasani ORDER P. C. This Appeal under Section 260A of the Income Tax Act, 1961 (the Act), challenges the order dated 10th July, 2013 passed by the Income Tax Appellate Tribunal (the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y out set, the learned Counsel for the Respondent Assessee submitted that in view of the Central Board of Direct Taxes Circular having Circular No. 21 of 2016 dated 27th May, 2016, the Revenue cannot press this appeal. This submission is without prejudice to its submission that it is not carrying on any trade, commerce or business. For the present, it is submitted that even if it is assumed to be carrying on trade, commerce or business, the appeal cannot be pressed by the Revenue in view of the binding Circular No.21 of 2016. 7 It would be appropriate to reproduce the above Circular No.21 of 2016 in its entirety as under: (1) Sections 11 and 12 of the Income Tax Act, 1961 ('Act') exempt income of charitable trusts or institutions, if such income is applied for charitable purpose and such institution is registered under section 12AA of the Act. (2) Section 2(15) of the Act provides definition of 'charitable purpose'. It includes 'advancement of any other object of general public utility' provided it does not involve carrying on of any activity in the nature of trade, commerce or business etc. for financial consideration. The 2nd proviso to said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any particular year, the specified cutoff is exceeded, the tax exemption would be denied to the institution in that year and cancellation of registration would not be mandatory unless such cancellation becomes necessary on the ground(s) prescribed under the Act. (5) With the introduction of Chapter XIIEB in the Act vide Finance Act, 2016, prescribing special provisions relating to tax on accreted income of certain trusts and institutions, cancellation of registration granted u/s. 12AA may lead to a charitable institution getting hit by subsection (3) of section 115TD and becoming liable to tax on accreted income. The cancellation of registration without justifiable reasons may, therefore, cause additional hardship to an assessee institution due to attraction of tax liability on accreted income. The field authorities are, therefore, advised not to cancel the registration of a charitable institution granted u/s. 12AA just because the proviso to section 2(15) comes into play. The process for cancellation of registration is to be initiated strictly in accordance with section 12AA(3) and 12AA(4) after carefully examining the applicability of these provisions. (emphasis s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of the institution or the activities of the institution, are not genuine. The aforesaid Circular by placing reliance upon 13(8) of the Act inter alia provides that the Registration granted to the Trust would continue even when the receipts on account of business is in excess of ₹ 25 lakhs. In such case, the Assessing Officer while framing the Assessment for the subject Assessment Year would be entitled to deny the benefit of exemption to such a Trust for that year. 11 The submission made on behalf of the Revenue that the Circular No.21 of 2016 would have only prospective effect in respect of Assessment made subsequent to the amendment under Section 2(15) of the Act w.e.f. 1st April, 2016 is also not sustainable. The amendment in Section 2(15) of the Act brought about by Finance Act, 2016 w.e.f. 1st April, 2016, is essentially that where earlier the receipts in excess of ₹ 25 lakhs on commercial activities would exclude it from the definition of 'charitable purpose' is now substituted by receipts from commercial activities in excess 20% of the total receipts of the institution. In the above view, Circular No.21 of 2016 directs the Officer of the Revenue no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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