TMI Blog2019 (1) TMI 1478X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court. The pronouncements that answers the questions raised in these writ petitions are summarised in the succeeding paragraphs. Commissioner's inherent powers to cancel the certificate of registration flowing from his power to issue registration, it was held that without any express powers conferred under the statue, review or revocation is not permissible. On the question, the courts had further observed that the order passed by the Commissioner under Section 12AA is neither legislative and nor executive and essentially quasi judicial in nature and therefore went on to hold that Section 21 of the General Clauses Act is not applicable to the order passed by the commissioner under Sec 12 AA. Whether the cancellation will operate from a retrospective date? - As held that the amendment to Section 12AA(3) is prospective and not retrospective in character. The courts reasoned that even when the parliament had plenary powers to enact retrospective legislation in matters of taxation, the amended section is not seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to operate retrospectively, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to do 'medical relief' to the needy people and they were granted registration under Section 12A(a) of the Income Tax Act, by the Commissioner of Income-Tax, Madurai, vide its order dated 09.10.1992. On the strength of the Deed of Trust, they established manufacturing operations for the manufacture and sale of Ophthalmic Lens, instruments, medicines and other Eye care products. According to the petitioner firm, the income earned from the aforesaid activities was being fully utilised for the attainment of the objects of the Trust and this position was accepted by the first respondent Assessing Officer in the income tax assessments of the petitioner firm for many years. 2.2.It is further averred that the petitioner firm filed income tax returns in respect of the assessment years 2004-2005, 2005-2006, 2006-2007 and 2007-2008 on 25.10.2004, 25.10.2005, 31.10.2006 and 31.10.2007 respectively and after due verification, it was accepted by the Department. When that being the factual position, the Commissioner of Income Tax, Madurai, initiated action under Section 12AA(3) of the Income Tax Act and cancelled its registration vide his Order dated 30.12.2010 by holding that the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancellation of registration is inherent and flows from the authority of granting registration. Section 12AA(3) of the Income Tax Act was amended only to provide clarity to the power of cancellation of the authority concerned. Therefore, it was contended that the reopening of the assessment is in order and prays for the dismissal of the writ petitions. 4.1.The petitioner through their rejoinder to W.P(MD)Nos.12067 to 12070 of 2011, wherein, it is stated that the registration under Section 12(A) of the Income Tax Act was granted after due application of mind by the Commissioner of Income Tax and after verification of all the materials produced by the petitioner. Further, the respondent extracts the statutory provision inserted by the Finance Act No.2 of 2004 with effect from 01.10.2004. This provision is not relevant or material in the instant case insofar as it deals with registration granted under Clause (b) of Sub-Section 1 of Section 12AA. The material clause would be Section 12AA(3) subsequent to amendment by the Finance Act 2010 with effect from 01.06.2010. 4.2.The specific submission of the petitioner is that the operation of the provision, Section 12AA(3) as amended wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The deed of Trust of the petitioner contains a clause whereunder, one of the objects is to collaborate with institutions or entities with similar objects as itself. It was averred that the same has not been taken into account while passing the impugned order. While on the one hand the respondent denies the exemption sought by the petitioner under Section 11 on the ground that the petitioner performed no charitable activity the respondent had denied an opportunity of hearing specifically sought by the petitioner in this regard. 6.1. Learned counsel for the respondent through their counter in W.P(MD)No.1104 of 2012 has contended that the petitioner's firm has advertised itself in the website that Aurolab is manufacturing division of Aravind Eye Hospital, supplies high quality ophthalmic consumables at affordable prices to developing countries. Therefore, the petitioner Trust is carrying out manufacturing and trading of certain identified products related to eye surgery. It is also contended in the course of scrutiny assessment that the assessee's Trust was involved in the manufacture and sale of intra colour lenses and other eye care products and has created huge surplus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apart from the five beneficiaries, no other charitable activity was undertaken by the assessee-Trust. Since its inception, the assessee-Trust has adopted the same method of accumulation of huge surplus after ear-marking very small amounts for charitable activity that too by way of making donations to other charitable institutions. In this regard, the respondent also draws attention of this Court through paragraph No.11 of their counter affidavit regarding the amount of ₹ 10 crores given to M/s.Aravind Medical Research Foundation as a donation. 6.4. According to them, the documents put forth by the assessee- Trust is not based upon the actual facts, figures and circumstances existing in their case. It was alleged that the petitioner shifted their stands in hindsight based on the options available to them. The Tribunal after perusing voluminous records has eventually found that the petitioner is not eligible for exemption under Section 11 of the Act. The petitioner has also preferred a tax appeal before the Hon'ble High Court, Madras and the same is pending. Pendency of tax appeal cannot be a ground to grant exemption under Section 11 of the Act and prayed for dismissa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent does not apply to the facts and legal position of the present case. The Bench, in the case of FICCI, was dealing with the definition of 'charitable purpose' under Section 2(15) of the Income Tax Act with reference to the 4th limb of the Section concerning the carrying on of an activity directed towards 'advancement of general public utility'. This is not applicable in this case where the petitioner is covered under the 1st and 2nd limbs of Section 2(15) dealing with 'relief of the poor' and 'medical relief'. He also submits that Section 12A of the Income Tax Act which provides for grant of registration for seeking exemption under Section 11 of the Act did not originally contain a provision for cancellation of registration. It was only with effect from 01.06.2010 that the Parliament has inserted Section 12AA(3) of the Income Tax Act granting the power to cancel registrations granted Section 12A as it stood prior to amendment in 1996. The averment of the respondent that the amendment was made only to provide clarity in this regard is unacceptable, apart from being contrary to law. The amendment to Section 12 AA(3) with effect from 01.06.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower the proper officer to cancel the registration granted under erstwhile Sec 12A of the Income Tax Act, 1961. Subsequent to the amendment, vide an order dated 30.12.2010, the registration granted to the petitioner was cancelled on the allegation that the petitioner failed to fulfil the conditions required for enjoying the exemption available to the Section 12A registered assessee. In the appeal preferred by the petitioner before the Income Tax Appellate Tribunal against the cancellation order dated 30.12.2010, the learned Tribunal had after concurring with the findings of the commissioner upheld the said cancellation order of the Commissioner. The petitioner had filed a TAX Appeal before this Court against the ITAT Order confirming the cancellation which is pending adjudication. 12. While so, the respondent had proceeded to reopen the assessment for the assessment years 2004-2005, 2005-2006, 2006-2007, 2007-2008 vide the impugned orders dated 12.08.2011 after rejecting the objections filed by the petitioners. The petitioner avers that there is no allegation of escapement of income on account of any act of commission or ommission on the part of the petitioner. It is the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under the statute. It was also argued that once the registration is cancelled, the cancellation will operate retrospectively from the date the grant of registration. They had also resisted all allegations of denial of the principles of natural justice in the proceedings. 15.From the submissions before this Court, it is seen that the Tax Appeal pending before this Court is agitated by the contesting parties on the question of facts as to whether the performance/activities of the petitioner fulfilled the conditions of grant of registration. Whereas, the matters agitated in these Writ Petitions are pure questions of law. The question whether the order cancelling the certificate of registration dated 30.12.2010 is correct and legal is the subject of the outcome of the tax appeal. Therefore, the correctness of the order dated 30.12.2010 is outside the purview of the present Writ petitions. Only the effect of the cancellation order dated 30.12.2010 on the petitioner which is purely a question of law is the subject of the present writ petitions. The threshold limit introduced vide provisos to the amended Sec 2(15) is also not a subject of these Writ Petitions as the grant of registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e questions raised in these writ petitions are summarised in the succeeding paragraphs. 19.On the question whether the Commissioner had inherent powers to cancel the certificate of registration flowing from his power to issue registration, it was held that without any express powers conferred under the statue, review or revocation is not permissible. On the question, the courts had further observed that the order passed by the Commissioner under Section 12AA is neither legislative and nor executive and essentially quasi judicial in nature and therefore went on to hold that Section 21 of the General Clauses Act is not applicable to the order passed by the commissioner under Sec 12 AA. 20.On the second question as to whether the cancellation will operate from a retrospective date, it was held that the amendment to Section 12AA(3) is prospective and not retrospective in character. The courts reasoned that even when the parliament had plenary powers to enact retrospective legislation in matters of taxation, the amended section is not seen to have explicitly provided to have a retrospective character or intend. Therefore, without a specific mention of the amended provisions to ope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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