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2016 (7) TMI 136 - ITAT KOLKATA

2016 (7) TMI 136 - ITAT KOLKATA - TMI - Registration application u/s 12AA denied for 2 reasons, (I) delay in filing the registration application and (II) activities of the assessee-trust are in the nature of commerce and trade - Held that:- (I) Rejecting the registration application on the ground that it is filed late is not correct because, Ld CIT has power to grant registration prospectively and exemption Sections 11 & 12 will be available from the first day of assessment year immediately .....

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Shri Waseem Ahmed, Accountant Member And Shri S. S. Viswanethra Ravi, Judicial Member For the Appellant : Dr. Samcer Chakraborty, Sr. Advocate & Shri Abhijit Biswas, Advocate For the Respondent : Shri S. Srivastava, CIT-DR ORDER Per Waseem Ahmed, Accountant Member This appeal by the assessee is against the order passed u/s 12AA of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 31.12.2009 of Commissioner of Income Tax, Durgapur dated 10.09.2009. Dr. Samcere Chakraborty .....

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The ld. DR raised no objection if the delay of condonation is considered. Hence, we condone the delay and proceed for hearing the appeal. 3. Solitary ground raised by assessee in this appeal is that Ld. CIT erred in rejecting the registration application u/s 12AA of the Act on account of delay in filing the registration application and holding that the activities of the assessee are non charitable. 4. Facts in brief are that assessee-applicant is a Development Authority constituted u/s. 11 of th .....

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declared following income in the earlier years:- Items of income: Year ended 31-03-2008 Year ended 31-03-2007 Year ended 31.03.2006 All figures are in Rupees crores Rs. Rs. Rs. a) Relating to land 33.74 43.12 18.37 b) From water distribution 3.96 3.17 2.18 c) Contractual income from Public Private Partnership 15.19 8.27 NIL d) Ground rent/licence fee etc. as rental income 0.81 0.94 2.63 e) Interest and dividend 11.22 5.64 3.49 On the basis of aforesaid income, the Ld. CIT observed that the activ .....

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ation is made. In the instant case the application was submitted by assessee for registration u/s 12A of the Act on dated 19.03.2009. In view of above the Ld. CIT rejected the application filed by assessee u/s 12A of the Act. Being aggrieved by this order of L d CIT(A) assessee preferred an appeal before us. 5. We have heard rival contentions and perused the materials available on record. Before us Ld. AR argued that the activity and source of income assumed by assessee-trust is erroneous on the .....

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amendment made in the Finance Act 2007, it is necessary for the trust / institution to file registration application u/s 12A of the Act within one year from the date of its creation or establishment, whichever is later. If it is filed on or after 01.06.2007 the exemption shall be available u/s. 11 and 12 of the Act on prospective basis. The Ld. counsel for the assessee further submitted that the expression incorporated u/s 2(15) of the Act that the object of public utility is not restricted to t .....

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the Act the activities of the assessee-trust are in the nature of commerce and trade and therefore the assessee-trust is not to entitle for registration u/s. 12A of the Act and he vehemently relied on the order of L d CIT. 6. From the facts of the case, we find that assessee-trust in the instant case, is the West Bengal Statutory Body. It was claiming exemption from its income tax u/s 10(20A) of the Act till the AY 2003-04. However, the same has been omitted by the Finance Act, 2002 with effect .....

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he question before us arises so as to whether L d CIT is right in rejecting the registration application in the aforesaid facts and circumstances of the present case. There is no doubt that the power of L d CIT has been withdrawn for condoning the delay of registration application. The law of Income Tax Act clearly states that in terms of Sec. 12A(2) where the application made for registration u/s. 12A of the Act on or after the first day of June, 2007, the exemption of income would be available .....

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y following the financial year in such application is made:] From a bare reading of the aforesaid proviso this is amply clear that exemption Sections 11 & 12 will be available from the first day of assessment year immediately following the financial year in which the application is made. Now in the instant case, since the application has been made on 19.03.2009 then the assessee-trust cannot claim the exemption for the earlier years but certainly entitle to claim the exemption benefit prospe .....

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tivities of the assessee-trust are in the nature of trade, commerce or business, we find that various benches ITAT have decided this issue in favour of assessee. Reference in this connection is made to Chandigarh Bench in the case of Punjab Cricket Asociation v. CIT (2016) 65 taxmann.com 239 (Chandigarh -Trib) 157 ITD 227 (Chan) wherein the head note:- ÏT: Commissioner is empowered to cancel registration granted to a society under section 12A from assessment year 2011-12 onwards, he cannot .....

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ival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 9. We find that, as learned counsel rightly points out, the scope of powers of the Commissioner under section 12AA(3) for cancellation of registration already granted is very limited in scope in as much as it can only be invoked only when (i) that the activities of the trust are not genuine, and (ii) that the activities of the trust or the institution are not bein .....

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t are "not genuine" or that the "activities of the assessee are not being carried out in accordance with the objects" of the assessee trust. The case of the CIT rests on the first proviso to Section 2(15) coming into play on the facts of this case but then such a factor cannot warrant or justify the powers under section 12AA(3) being invoked. We, therefore, uphold the grievance of the assessee that the action of the learned Commissioner, in withdrawing the registration under .....

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efinition of 'charitable purposes', have no role to play in the matters relating to registration of a trust or institution under section 12A or 12AA - whether in respect of granting or declining of a registration or in respect of cancellation, even if otherwise permissible, of a registration. A closer look at the scheme of the Act would unambiguously show this aspect of the matter. 11. Let us begin by taking a look at Section 2(15) which defines charitable activities and first and second .....

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lves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previou .....

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ected by the same disabling provision for another year. The reason is that it is not only the nature of the activity but also the level of activity which, taken together, determine whether this disabling clause can come into play. The safeguard against the objects of the trust being vitiated insofar as their character of 'charitable activities' is concerned, is inbuilt in the provisions of Section 13(8) which was brought into effect with effect from the same point of time when proviso to .....

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Explanatory Memorandum to the Finance Bill 2012 fhttp://indiabudgetnic.in/budget2012-2013/ub2012- 13/mem/meml.pdFI explained the reasons and backdrop of this legislative amendment as follows: Assessment of charitable organization in case commercial receipts exceed the specified threshold Sections 11 and 12 of the Act exempt income of any charitable trust or institution, if such income is applied for charitable purposes in India and such institution is registered under section 12AA of the Act Se .....

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the nature of trade, commerce or business; but the aggregate value of receipts from the commercial activities does not exceed ₹ 25,00,000 in the previous year, then the purpose of such institution shall be considered as charitable, and accordingly, the benefits of exemption shall be available to it. Thus, a charitable trust or institution pursuing advancement of object of general public utility may be a charitable trust in one year and not a charitable trust in another year depending on t .....

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f notification issued in respect of trust or institution. Therefore, there is need to ensure that if the purpose of a trust or institution does not remain charitable due to application of first proviso on account of commercial receipt threshold provided in second proviso in a previous year. Then, such trust or institution would not be entitled to get benefit of exemption in respect of its income for that previous year for which such proviso is applicable. Such denial of exemption shall be mandat .....

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