TMI Blog2019 (11) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... a clear-cut breach on part of the assessee company. If there was concealment and suppression of material facts, then such a registration granted is always open for cancellation or revocation at any time by the ld. DIT (E)/CIT (E) when it comes to his notice. The assessee nowhere had clarified or sated that the purpose of acquiring AJL and its activities, except for reiterating that as a shareholder, Young Indian does not have any ownership interest, whatsoever, in the properties owned by AJL as it is a separate legal entity. CIT(E) was fully justified in law and on facts in cancelling the registration from the date of granting of registration itself, i.e., from the assessment year 2011-12. Even after grant of registration u/s. 12AA, no genuine activities have been carried out by the assessee either in furtherance of its objects or otherwise, which can be held to be for charitable purpose because one of the so called purpose of acquiring AJL was not carried out at all. Otherwise, also, we have already discussed and given our categorical findings that till the grant of registration and surrender made by the assessee, no worthwhile activities were carried out by AJL. In fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged grounds that the activities carried on by the Appellant are not genuine and are not in accordance with the objects of the assessee. 2. On the facts and circumstances of the case and in law, the CIT (E) erred in not appreciating that the Assessee had suo moto surrendered its registration u/s. 12A in March 2016 and that once the registration u/s. 12A is surrendered in March 2016, nothing survives to be cancelled subsequently. 3. The Appellant craves leave to add, to amend, to alter and/or to delete all or any of the above grounds of appeal. 03 Before us, during the course of marathon hearing, four volumes of paper books on behalf of the appellant-assessee have been filed, along with two separate sets of paper books of additional evidences, one filed during the course of arguments and other during the course of rejoinder submissions. On behalf of the department, two sets of paper books have been filed along with a statement giving dates and evident of various stages. Besides this, various documents and judgments were also filed from both the sides. All the submissions and relevant documents that are germane to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2011. However, before the payment of ₹ 50 lakhs to AICC, AJL had allotted 9,02,16,898 shares (almost 99.99% of the holding) to YI in lieu of loan of ₹ 90 crores by increasing the share capital from ₹ 1 crore to ₹ 10 crores. Thus, almost entire shareholding of AJL went to YI. Certain additional shares of AJL were also purchased by Mrs. Sonia Gandhi, Mr. Rahul Gandhi and Mrs. Priyanka Gandhi to gain full control of AJL. At the time of making an application for registration u/s. 12AA, the assessee company disclosed the list of shareholders and directors of Young Indian during the assessment year 2011-12 as under: Name Position in YI No. of shares held Mrs. Sonia Gandhi Director since 22.01.2011 - 1900 shares (36%) Shri Rahul Gandhi Director since 22.01.2011 - 1900 shares (36%) Shri Moti Lal Vora Director since 22.01.2011 - 600 shares Shri Oscar Fernandes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. He was Director of AJL since 21.12.2010 23.11.2010 Commencement of directorship of Mr. Suman Dubey He held 550 shares in YI which were later on transferred to Mrs. Sonia Gandhi He was Director of AJL since 21.12.2010 13.12.2010 First Managing Committee Meeting of YI Mr. Rahul Gandhi appointed as director 13.12.2010 Commencement of directorship of Mr. Rahul Gandhi 1900 shares held for 36% stake in YI 16.12.2010 Transfer of Loan by of ₹ 90 Crores By AICC to AJL assigned to YI by Journal Entry Within 25 days of incorporation of Young Indian 21.12.2010 Mr. Suman Dubey and Mr. Sam Pitroda Appointed directors of AJL in Extra Ordinary General meeting Initially directors of YI, were appointed as direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After issue of PAN by IT authorities 15.02.2011 Loan from Dotex Merchandise (P) Ltd., Kolkata Loan of ₹ 1 crore was taken from this company to pay AICC ₹ 50 Lakhs for assignment of loan in AJL Confirmation letter dated 24.12.2010 26.02.2011 Allotments of shares in AJL to YI 9,02,16,898 shares issued in lieu of assignment of loan of ₹ 90 Crore by increasing its authorized share capital to 10 crores from 1 crore. Mrs Sonia Gandhi, Mr. Rahul Gandhi and Ms. Priyanka Gandhi purchased additional shares to gain full control of AJL 01.03.2011 Payment of ₹ 50 Lakhs to AICC for loan assignment Payment of ₹ 50 lakhs was disclosed as an expenditure for the object enshrined in MOA of YI 07 One of the main objects of Young Indian as enshrined in the Memorandum of Association (MOA) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred only to some other trust having similar objectives. 7. A note on activities carried out since inception/last 1/2/3/4 years with supporting documentary evidence. 8. Please justify your claim for registration u/s. 12AA 80G. 9. Please explain the change in fact circumstances of the case since the last rejection order. 10. Please furnish the details of donation including corpus donations received made giving Name, Address, PAN of donors. 11. Please furnish contact No E-mail Address of the Applicant its members. 12. Justify with the bill/vouchers of the income applied for charitable activities along with proof of beneficiaries. 13. Please file the undertaking that there shall be no infringement to the proviso to the section 2(15) of the IT Act. 10 In response, the assessee had filed certain documents including Note on activities which were as under: Young Indian ( YI ) is a Company registered u/s. 25 of the Companies Act, 1956 ( the Companies Act ) with the main object of inculcating in the mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a Permanent Account Number and shall communicate the PAN to this office. The Trust/ Society/ Non Profit Company shall maintain accounts regularly and shall get these audited in accordance with the provisions of section 12A(b) of the Income Tax Act, 1961. Separate accounts in respect of each activity and specified in memorandum shall be maintained. A copy of such account shall be submitted to the Assessing Officer. A public notice of the activities carried on/ to be submitted to the Assessing Officer. A public notice of the activities carried on/ to be carried on and the target group(s) (intended beneficiaries) shall be duly displayed at the Registered/ Designated Office to the organization. Separate books of accounts in respect of profits and gains of business incidental to, attainment of objects shall be maintained in compliance to section 11(44) of the Income Tax Act 1964. All the Public Money so received including for Corpus or any contribution shall be communicated to this office. No change in the Trust Deed/ Memorandum of Association/ instrument shall be effected without the approval of the jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g these shares does not envisage any dividend, either present or expected. Therefore, in our view, our continuing to hold shares of The Associated Journals Limited does not militate against Section 11(5) of the Income Tax Act, 1961. However, currently and in the foreseeable future we do not have significant surpluses, which presently makes our registration under Section 12AA virtually academic in nature. After considering all aspects we have decided to surrender our registration u/s 12A read with Section 12AA with immediate effect. The original Registration Certificate issued u/s 12AA bearing no. 2011-12/100 DEL-YR21296 dated 9/5/2011 is surrendered herewith. This is to call upon you to note that the registration stands cancelled with immediate effect. Thank you. Yours faithfully, Motilal Vora Director DIN: 00628348 Encl: Original Registration Certificate bearing no. 2011- 12/100 DEL-YR21296 dated 9/5/2011 FINDING GIVEN IN THE IMPUGNED ORDER OF CIT (E) 14 In the impugned order, the ld. CIT(E) in para 3 has noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Young Indian was incorporated with main object of inculcating in the mind of India s youth, commitment to ideal of democratic and secular society for its entire population without any distinction as to religion, caste or creed and to awaken India's youth to participate in activities that promote foregoing objectives. In this context, you are requested to furnish details along with evidence of charitable activities undertaken by M/s. Young Indian to fulfill above object during A.Y. 2011-12 to 2016-17. Please clarify if there is any change in aim and objects of M/s. Young Indian during AY 2011- 12 AY 2016-17. It is evident from the records that the only substantial activity undertaken by M/s. Young Indian during P.Y. 2010- 11 was to acquire M/s Associated Journals Ltd. by acquiring its 99.99% shares. It is important to mention here that M/s AJL has been engaged in the business of real estate and the source of its income was rental income as well as other business income from construction and development of commercial complexes since FY 2008-09. Please explain whether earning of income from real estate business through M/s AJL is covered within the aims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor any commercial interest income was earned by the assessee and even in the audited accounts filed with the return of income from year to year, it can be seen that no income has been credited to the income expenditure account of the company. Thus, such an allegation is baseless. Regarding surrendering of registration certificate issued u/s. 12A, it was submitted that the assessee never admitted that its activities are not in conformity with the terms of registration, rather it was clearly stated that currently and in the foreseeable future, the assessee do not expect significant surplus and therefore, registration u/s. 12AA virtually became academic in nature. It is purely a prerogative of an assessee whether it would like to avail any benefit of exemption provided under law and it is well-settled law that if the assessee does not desire to avail benefit provided in law, then he may chose not to avail the same. Reliance is placed on the judgment of Hon ble Supreme Court in the case of CIT vs. Mahindra Mills (2000) 243 ITR 56 (SC). Thus, after having surrendered its registration certificate w.e.f. 21.03.2016, it ceases to enjoy the benefit of the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,603 Professional fees 15,000 Legal Expenses 3600 Audit Fee 8273 Preliminary Expenses written off 1,21,814 Total 53,21,290 18 In the notes to accounts, the assessee explained the nature of ₹ 50 lakhs spent in the following manner: 1. In pursuit of its objects, the Company acquired loan owed of ₹ 90,21,68,980 by The Associated Journals Ltd. ( the said company ), presently engaged in achieving a recast of its activities so as to have its main object congruent to the main object of the Company, for a consideration of ₹ 50 lacs. As a part of restructuring exercise of the said Company, the said loan was converted into 9,02,16,898 ordinary shares of ₹ 10 each fully paid. Since said acquisition is treated as application on the objects of the Company (and accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried out by AJL and noted that AJL was a company incorporated under the Companies Act, 1956 and in earlier years engaged in publishing newspaper like National Herald , NavJeevan and Qaumi Awaz newspapers. However, the business of publication of newspapers ceased to exist, w.e.f. 02.04.2008 and all the employees of the company took VRS w.e.f. 02.04.2008. After the publication of newspapers ceased to exist, the income of AJL was mainly from real estate business and this company was engaged in purchase, construction and sale and renting out of its properties. He also took note of important properties held by the AJL in various parts of the country, the details of which are as under: a Lease Hold Land Address Delhi 5-A, Bahadur Shah Zafar Marg, New Delhi-02 Patna Village Phulwari, Patna b Free Hold Land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. (a) Freehold land includes 2 plots of Land allotted to the Company in 1983 by Government of Maharashtra at Bandra, Mumbai for ₹ 31,23,054/- on deferred payment basis. However, in 1991 the Govt. of Maharashtra on representation by the company had agreed to convert the said land from free hold to lease hold. Fresh representation has been made to Govt. of Maharashtra for reversing this decision, converting this land to Freehold, which is pending. (b) The payment made up to 31.03.2009 to Govt. of Maharashtra on account of annual lease rent etc. has been shown under the head capital work in progress . (c) The Title Deed in respect of land allotted in Mumbai, Patna and Panchkula is yet to be registered/ executed. 5. (a) Advances/ Security Deposits received from the parties in earlier years relating to construction activity on company s land at Lucknow and Mumbai has been grouped under Other Liabilities and Unsecured Loans and no provision of interest has been made thereon. (b) No provision has been made of interest on amount of ₹ 165 lakhs received from parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(E) held that the claim of the assessee was factually incorrect and was not tenable for the following reason: It is evident from the financial records of the assessee company, as summarized above that during assessment year 2011-12 to 2014-15, the assessee had not carried out any activities in accordance with its object except for acquisition of AJL, a company solely engaged in profit making business from real estate. Since, the assessee had full control over AJL by acquiring its 99% of total shareholding, some of the directors/ share holders of the assessee company namely Shri Moti Lal Vora, Sh. Oscar Fernandes, Sh. Sam Pitroda and Sh. Suman Dubey were Chairman and Managing Director of AJL since 22.03.2002, Director since 17.06.2010, Director since 21.12.2010 and Director since 21.12.2010 of the AJL respectively during AY 2011-12 to 2014-15 and the only activities carried on by the assessee was to manage and run business of the AJL by engaging in the real estate business with the help of its directors and shareholders. In these circumstances, it would be reasonable and logical to infer that the only activities carried on by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16, was in the wake of the fact that the investigation was mounted against the assessee by the Investigation Wing in the year 2014 and after having received the enquiry report from the Investigation Wing, the Assessing Officer had started investigation against the assessee by way of issue of summons u/s. 131 and proceedings u/s. 133(6) in the year 2015. Because of this enquiry, the Assessing Officer had issued notice u/s. 148 in January 2017 for reopening the assessment for A.Y. 2011-12. Thus, the surrender was made by the assessee as a sequel to the investigation against the assessee and it was not suo moto action by the assessee. He further held that there was no provision for surrendering of certification of registration u/s. 12A by the assessee under the Act and the assessee had made the surrender after having claimed the benefit of exemption on the income of ₹ 2 crores received by it as contribution during the A.Y. 2016-17 in its return of income and suo moto surrendering registration will not lead to automatic cancellation of registration. He also distinguished the judgment of Hon ble Supreme Court in CIT vs. Mahindra Mills (supra) as relied upon by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The claim of the assessee that information as contained in the report of the AO was without basis has been examined in detail with reference to disclosure made by the assessee and its subsidiary M/s. AJL in the return of income and annual reports and it has been noticed that the findings of the AO in report were verifiable were based on credible basis as evident from the discussion and findings as recorded in preceding paragraphs 8 to 11 of this order, accordingly, the contention of the assessee was found factually incorrect. The claim of the assessee that activity of AJL could not be held as activity of assessee has been examined in detail in paragraph 9 to 12 of this order and the claim was found both factually and legally untenable for the reason that only activity carried on by the assessee was to manage, control and engage in the real estate business or the AJL after acquiring all the properties of the AJL through Directors and shareholders of the assessee company as discussed earlier. In this context, the disclosure made by the assessee in the annual report ending 31.03.2011 as examined in detail above may also be referred to. The case law as cited by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Herald and Navjivan newspapers, erstwhile newspapers published by AJL, registration certificates of National Herald newspaper and Sunday Navjivan with Registrar of Newspapers for Indian and various kind of reports of Google showing the outreach of the online news portals operated by AJL. Further, resolution passed by the Board of Directors of AJL to resume the publication of newspapers on 26.09.2016 and letter of AJL to the Registrar of Newspapers of India to resume newspaper business, copy of Form No. 23 submitted before the ROC with amended MOA to show that the amended objects of the AJL were in consonance with the objects of Young Indian are placed in the additional evidence paper book. Besides this, various presentations, photographs showing operation of Young Indian were also filed. 31 The reason stated for filing all these additional evidences was that these are filed to counter various statements made by the CIT(E) which are mainly based on conjectures and surmises and the ld. CIT(E) without giving any proper opportunity have stated several incorrect facts. It was pointed out that the ld. CIT (E) observed that the object of AJL was never re-casted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as well as AJL. Thus, the ld. CIT (E) has merely relied upon the information received from the ACIT and JCIT and had not independently and objectively applied his own mind. For instance, relevant observation made by the ld. CIT (E) at page 13 to 15 was highlighted before us. The ld. counsel further submitted that the requirement u/s. 12AA(3) before canceling the registration is that the ld. CIT(E) should be satisfied that the activities of the assessee are not genuine or are not in accordance with the objects. Such satisfaction cannot be a borrowed satisfaction based on the finding of another officer without application of mind independently. In support, reliance was placed on the following two decisions: (i) PCIT v. Meenakshi Overseas (P) Ltd., 395 ITR 677 (ii) CIT v. SPL s Siddhartha Ltd., 345 ITR 223. 34 With regard to various observations and allegations of the ld. CIT (E), the Ld. Counsel tried to give his point-wise rebuttal on various issues raised in the impugned order. First of all, with regard to the allegation that the MOA of AJL was never re-casted to alig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, clause (v) of the MOA mentioned that (i) The profit, if any, or other income and property of the Company whenever derived shall be applied solely for the promotion of its objects as set forth in this Memorandum. (ii) No portion of the profits, other income or property aforesaid shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit to persons who, at any time, are or have been members of the Company or to anyone or more of them or to any persons claiming through anyone or more of them. (iii) No remuneration or other benefit in money or money s worth shall be given by the Company to any of its members, whether officers or members of the Company or not, except payment of out-of-pocket expenses, reasonable and proper interest on money lent, or reasonable and proper rent on premises let to the Company. 36 Further clause (x) of the MOA provided that on winding up or dissolution of AJL, the surplus, if any, shall not be distributed among the members of the company but shall be given or transferred to such other section 8 company having obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary suspension of publication business. Even third party newspapers had published that there was temporary suspension of publication business by AJL. Thus, there was no closure of business or business itself had ceased to exist, rather it was only a temporary suspension. He submitted that, in fact, the publication had later on re-commenced, which is evident from the following facts, placed in the paper book of additional evidences: - On 23/01/2014, AJL wrote to the Registrar of Newspapers for India (RNI) informing it of its intent to restart publication of the newspapers. Please see page 267 of the AB - PB I; - On 26/09/2016, a resolution was passed by the Board of Directors of AJL to resume the publications of newspapers. Please see page 266 of the AB - PB I; - On 14/11/2016, AJL launched National Herald Website. Please see pages 204 to 213 of the AB - PB I; - On 15/11/2016, an agreement was entered between AJL and Press Trust of India for Wire News Services. Please see pages 245-249 of the AB - PB I; - On 12/06/2017, AJL launched the Commemorative Edition of National Herald (Publication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. It was pointed out that in public interest, State Governments, as a policy, had allotted lands/buildings to various entities engaged in the newspaper business to partly use it for running newspaper business and partly to rent it out. The same is done by the Government to ensure independence of the press. The newspaper publishing business, being capital intensive in nature, is primarily a loss making business. In fact, the price at which newspapers are sold is very nominal so that it can reach to masses and generally, the cost of publishing a newspaper is higher than the price at which the same is sold. Therefore, in order to promote press and ensure its freedom, the Government allots lands/buildings to various entities engaged in the newspaper business so that they can recoup their losses from publication business and survive by commercially exploiting the said allotted lands/buildings by renting out the same. The lease deed allotting the said lands/buildings specifically permits the lessees to use the property for renting out. Indeed, said practice of renting out the properties by newspaper business is permissible in standard newspaper leases and allotments o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry and freedom of speech and expression should, therefore, be given paramount importance and generous support and the government should be more cautious while levying taxes on other matters concerning newspaper industry. Reliance was also placed on another decision of Hon ble Supreme Court in the case of Bennett Coleman Co. Ors. Vs. UOI (1973 AIR 106) . Relying on these judgments, it was submitted by the Ld. Counsel that for the said freedom of press, lands were allotted to the companies and permission was granted to partly rent out the same and therefore, AJL cannot be regarded as engaged in the Real Estate business and it is part and parcel of publication business of AJL. 41 The ld. counsel further submitted that AJL had never purchased or sold any property after year 2008 as alleged by the ld. CIT (E). It was submitted that certain land parcels were allotted to AJL by the Government from time to time between the periods 1962 to 2005. In the year 1962, the Government of India allotted land to AJL situated at 5A, Bahadur Shah Zafar Marg, New Delhi for the purpose of carrying out newspaper publication. As per terms of allotment, AJL was allowed to let out pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut and improve its financial position with the longterm view to first stabilize its financial position and then revive its publication business. Ld. Counsel pointed out that, in the years 2016-17 and 2017-18, the digital and print publication activities of AJL respectively have recommenced and the company is fully committed to continue to conduct its publication activities to their fullest potential. In FY 2016-17, the company had restarted its digital publication business and in the following financial year revived its traditional print newspaper business, thus ending the brief temporary suspension . Thus, renting of the properties has revived the financially distressed position of AJL and today it is a healthy going concern newspaper and digital publishing business run in the public interest. Thus, said activity cannot be said to be real estate business. 42 Regarding allegation of ld. CIT (E) that AJL had some properties which goes to show that it is a real estate company, for which reference was made by him to the notes on account of AJL as on 31.03.2009, wherein it was stated that the company has taken booking amount for sale of shops and floors from intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court in Mrs. Bacha F. Guzdar (supra) and catena of other judgments. Thus, it cannot be held that the assessee company was conducting the duties of AJL. In any case, the AJL is not into the Real Estate business but in publication activities. Therefore, the question of Assessee Company having been engaged in commercial activities does not arise. In fact, by acquiring the shares of AJL, it was never intended to make any gain. The assessee being a section 25 company and even if any alleged gain would have been derived then it would not have been distributed as dividend. Therefore, there could not be any motive to undertake any commercial transaction to derive any benefit or gain. Further, AJL had passed resolution on 21.01.2016 to get the company registered under section 8 of the Companies Act, 2013, the effect of which is that even AJL is prohibited from declaring dividend or distributing any profit amount to the shareholders. 44 As far as allegation of the ld. CIT (E) that the assessee company did not carry out any genuine activities in accordance with its objects, Ld. Counsel submitted that the assessee company acquired 99% shareholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g India on National Herald Web. The ld. counsel has also placed several presentations and photographs showing operations of the assessee at page 301 to 386 of the additional evidence paper book. Thus, he submitted that e-medium was the ideal platform to reach today s youths as it was available on all electronic platforms in the form of mobiles, laptops, tabs etc. Apart from that, the ideology of democracy and secularism was also being spread through the newspapers of AJL. In support, he showed us the Commemorative Edition of National Herald. Thus, it was submitted that on the platform of AJL, Young Indian had achieved its objects for spreading the ideology of democratic and secular society. Accordingly, it cannot be held that no genuine activities were carried out by the assessee towards its objects. 45 Without prejudice to the submissions made above, the ld. counsel submitted that the cancellation order of the ld. CIT(E) is bad in law because before issuance of show cause notice, the assessee had suo moto surrendered its registration. He submitted that the assessee had already filed a letter before the DIT (E) surrendering its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if cancellation of registration is not by any investigation report then how can investigation be the reason for surrender of registration by the assessee. 47 Lastly, Ld. Counsel submitted that the assessee is entitled to surrender the registration u/s. 12AA even though Act does not provide any specific provision prohibiting such surrender. In support, he has relied upon the judgment of Hon ble Supreme Court in the case of Mahindra Mills (supra) and also following judgments: (i) Cyanamid India Ltd. v. Collector of Central Excise, Baroda (1997) 1997 taxmann.com 1518(CEGAT New Delhi) (ii) Gothi Plastic Industries vs. Collector of Central Excise, Trichy (1996) 1996 taxmann.com 486 (CEGAT Chennai) 48 Further, when the assessee had surrendered registration in March, 2016 and for a long period of 17 months, no action was taken, then in absence of any action taken by the department, it should be deemed to have been accepted by the department. The ld. counsel referred to sub-sec. (2) of section 12AA wherein, it has been stated that every order granting or rejecting registration, has to be passed within six months from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .10.2014 and therefore, any cancellation on this ground prior to the said date, is not permissible. Submissions on behalf of the Revenue 51 On behalf of the Revenue, Ld. Special Counsel, Shri G. C. Srivastava, Advocate, first of all objected for admission of additional evidence filed by the assessee on the ground that, firstly , they are not relevant for deciding the issue in hand; secondly , most of the documents and materials, which have been placed in the additional evidence paper book-1, are post cancellation order of ld. CIT (E) dated 26.10.2017, which are placed in the additional evidences. For instance, documents placed at item No. 2, 5, 10 and 12; therefore, these documents should not be admitted; and lastly , he questioned the genuineness of the evidences. 52 Thereafter, Mr. Srivastava submitted that in order to appreciate entire gamut of facts and background of the case and to have an over view of entire factual matrix and the material available with the Commissioner and the records called by him for its perusal as concluded by the ld. CIT(E) in para 17 of his impugned order, the facts of the case ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Assessee Company, the AICC transferred loan of ₹ 90.21 crores which was due to them from AJL in favour of the Assessee Company for a consideration of ₹ 50,00,000/-. He pointed out that the paid-up capital of the Assessee Company was only ₹ 5,00,000/- and did not even have the funds to pay the meager consideration of ₹ 50 lakhs. e. The Assessee Company took a loan of ₹ 1 crore from M/s Dotex Merchandise Pvt. Ltd. ( Dotex ) The Assessee Company paid the said ₹ 50 lakhs out of the loan from M/s Dotex to All India Congress Committee (AICC) on 01.03.2011. However, much before the payment of ₹ 50 lakhs to AICC, AJL had already allotted 9,02,16,898 shares in lieu of the loan of ₹ 90 crores (approx.) to the Assessee Company by increasing its share capital from ₹ 1 Crore to ₹ 10 Crores. Certain additional shares of AJL were also purchased by Smt. Sonia Gandhi, Sh. Rahul Gandhi and Smt. Priyanka Gandhi to gain full control of AJL. These transactions as appearing in the bank account of the Assessee Company were noted as suspicious transactions and the Financial Intelligence Unit ( FIU ) receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is incorporated with a small capital mid funds by way of contribution from Patron Members may provide support to emu recurring income, which would be deployed for the main object for which the Company is incorporated. Nevertheless, within the framework of this main object the activities, their magnitude mid pace will necessarily depend on the funds available with YI which in turn, depends on the ability' to attract donation (from Patron members or otherwise) which, in its own turn is linked to the ability of the Donors to claim deduction u/s. 80G of the Income Tax Act. The application for registration u/s 12AA is the first step in that direction. h. It has been pointed out by him that the Assessee Company never applied for registration u/s 80G and not a penny of donation was raised from any agency. i. Further, in the note dated 09.05.2011, the Assessee Company did not even whisper about the activity of acquisition of shares of AJL nor made any attempt to place on record a full and true account of the activities of the Assessee Company from the date of its incorporation till the request for grant of registration. Thus, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o point out a single activity in furtherance of its stated objects for which it was created during the said period, and the only activity carried out by the Assessee Company was of borrowing the amount of ₹ 1Crore, making payment of ₹ 50 lakhs to AICC, applying for allotment of shares against cancellation of loan of ₹ 90 crores assigned by AICC to them, has absolutely nothing to do with the furtherance of objects of YI. The only move that was taken was to acquire AJL that had stopped its publication activities but was only holding on to certain properties and exploiting these for rental income or construction of shops, etc. The CIT (E) also pointed out that the surrender of registration after the investigation by the Department cannot be used as a tool to prevent the rigors of cancellation of registration. 54 Mr. Srivastava then drew our attention to another fact that while the Income tax and investigation proceedings were going on and parallel proceedings were also undertaken by Land Development office for taking back the possession of land allotted in New Delhi to AJL post cessation of the publication activity. Inspections were carried out on 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. The appellant company was permitted to use the property of AJL as its head office/registered office. iv. The manner in which a loan of ₹ 90 crores (approx.) was assigned by AICC in favour of the Assessee Company for a paltry consideration of ₹ 50 Lacs speaks volumes of the real intent and motive of the transaction. v. The Assessee Company was not having the financial capability by way of corpus or the revenue receipts to pay even this consideration and had to allegedly borrow a sum of ₹ 1 Crore from a company named M/s Dotex Merchandise Pvt. Ltd., based out of Kolkata. vi. AJL promptly increased its share capital and allotted 99.99% shares to the appellant company, some of the directors separately acquired a small number of shares to have full control over AJL. vii. These transactions were questionable and speak volumes as observed by the Hon ble High Court of Delhi. (Para 20 of the Hon ble High Court order in W.P. (C.) 12133/2018). 56 The second core argument taken on behalf of the Revenue was that, most of these vital facts were suppressed by the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire theory of revival of publishing newspaper business was after the AJL realized that it was in violation of clause of Perpetual Lease Deed of the Property, housed in 5A, Bahadur Shah Zafar Marg, New Delhi. 58 Another contention raised by the ld. counsel of the assessee that AJL had converted itself into section 8 company in January, 2016 as per Companies Act, 2013, i.e., non-profitable Company, enabling Young Indian, which was section 25 company as per Companies Act, 1956, to carry out its objectives. The contention raised was that both the companies were not for profit and therefore, any profit derived from its activities would have been solely applied for the promotion of the objects. In support, evidences have been filed in form MGT-14 along with amended MoA filed with the additional evidence. He pointed out that no such application is available on the MCA Website, as having been filed by AJL and most importantly, no license has been granted by the Registrar of Companies till date so as to establish that AJL had become a section 8 Company. Thus, it cannot be said that AJL was converted into section 8 Company. Mere amending the MoA of AJL does not lead to any i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of grant of exemption/registration. However, on a perusal of the order dated 18.11.2014 withdrawing the approval granted under Section 10(23C)(vi) of the Act, it is seen that it has been given effect to from the assessment year 2010- 2011. Likewise the order cancelling the assessee's registration under Section 12AA of the Act is from the assessment year 2010-2011. Can it be said that these orders of cancellation are with retrospective effect. The definite answer for this question is an emphatic 'No'. Admittedly, the business premises of the assessee was subjected to search during the assessment year 2010-2011. The Assessing Officer while completing the assessment found large scale diversion of funds and several improper actions on the part of the assessee in direct conflict to the terms of the Deed of Trust and conditions of registration/exemption. Therefore, it was recommended to the competent authority to initiate proceedings for cancellation of the exemption/registration. The matter was decided after due opportunity to the assessee and speaking orders have been passed and obviously these orders will take effect from the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strong reliance was placed on the judgment of Hon ble Supreme Court in the case of Mrs. Bacha F. Guzdar (supra). To rebut such a pleading, Mr. Srivastava, placed before us two judgments of Hon ble jurisdictional High Court (Delhi) in the case of Associate Journals Ltd. vs. Land Development Office. Drawing our attention to the Division Bench order and judgment dated 28.02.2019 (LPA 10 of 2019 and CM No. 566/2019 and 649/2019), he submitted that identical submissions have been considered by the Hon ble High Court and the matter regarding lifting of corporate veil was subject matter of detailed consideration by the Hon ble court. After reading various arguments placed by both the parties before the Hon ble Court, he drew our attention to para 65 and 66 of the judgment wherein this issue has been discussed threadbare. He submitted that if the company has been found to evade the obligation under law or indulged in any fraudulent activity under law or for the purpose of taking undue advantage or indulge in any fraudulent activity against the public interest, the doctrine of lifting of corporate veil can be invoked. The Hon ble Court after examining this issue at lengt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment as provided u/s. 13(1) (d). After having realized that the registration could be withdrawn both for the breach of the conditions as mentioned in sub-section (3) and sub-sec. (4) of section 12AA, the assessee company has written a letter of so called surrender of registration. Thus, said surrender was not bona fide and its activities were not in accordance with the objects and the real intent and motive and had failed to achieve the objectives for which it was created. The assessee company did not offer to surrender the registration from A.Y. 2011-12 when they acquire AJL, but only post year 2016. Thus, after enjoying benefit of registration, it was not open to the assessee to make voluntary surrender of registration for future years. Accordingly, the claim that surrender was bona fide cannot be accepted. REJOINDER BY THE APPELLANT 63 In the rejoinder proceedings, the ld. counsel for the assessee first of all vehemently objected on the reliance placed on the judgments of Delhi High Court in the case of Associate Journals Ltd. (supra) on the ground that the same are subjudice. The ld. DR has relied upon various additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order has been stayed, albeit what has been stayed is, the further proceedings pursuant to the High Court order, i.e., direction for eviction proceedings of the building and not the entire order. Even otherwise also, if any further proceedings have been stayed that does not mean the order of Hon ble jurisdictional High Court becomes inoperative and in so far as the findings and principles propounded therein is a binding judicial precedence to the courts/Tribunals under the same jurisdiction. 67 As a rejoinder to various submissions made by the ld. Special Counsel for the Revenue, he submitted that first of all it has been accepted by the department before this Tribunal that publication business of AJL was suspended several times in past and got revived time and again. This is evident from the chart of dates and events submitted by the Revenue prior to 2008. In so far as the effect of said order of Hon ble Supreme Court on the judgment of Delhi High Court order, he submitted that the said order has to be treated to be non-operational because it indicates that either the order is passed on wrong facts or law has not been applied correctly. In support, he relied upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner, Ambala in respect of construction of building for newspaper/press in Panchkula. See copy of the same at Page 526 to 528 of AE-PBII. AJL has sanctioned plans for construction of printing press at Panchkula property dated 26.11.2012 is at Page 529 to 532 of AE - PB II. The same clearly shows the area pertaining to Press is demarcated on those plans; AJL's plans for construction of printing press at Mumbai property was sanctioned by the relevant Authorities in 2013 and 2016. A copy of the sanctioned plans is set out at page 533 to 538 of AE - PB II. The same clearly shows the area pertaining to Press is demarcated on those plans; On February 22, 2013, the Board of Directors of AJL noted in its meeting that the publication of National Herald would be considered on web-site. A copy of the said minutes is enclosed at page 539 of AE - PB II. On September 12, 2014, the internet / web domain name www.nationalherald.com was registered. The necessary registration proof is enclosed at page 540 of AE - PB II. (However, since the actual commencement took time, the said approval expired and a new approval of do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived Show Cause Notice dated June 18, 2018 referring to the 09.04.2018 inspection and alleging for the first time that no printing activity was being carrying out in that premises. (Please note that the said show cause notice acknowledges that the company's news paper printing activity is being carried out elsewhere). A copy is enclosed at page 566 to 567 of AE-PBII. (8) There was a subsequent notice from LDO dated 24 September 2018. It relies on the order passed by the Ld Assessing Officer under the Income tax Act, 1961 u/s. 148 to allege that there is a transfer of properties from AJL to YI on account of YI becoming almost 100% shareholder. It is then contended that such transfer is in contravention of the lease deed. Hence, the property is liable to be re-entered. From the above details, he submitted that: (a) The allegation that the newspaper printing activity was an afterthought pursuant to the inspection on 26.09.2016 gets demolished; (b) The non printing of news paper as alleged in the LDO proceedings is merely in respect of Delhi premises. LDO itself acknowledges that the newspaper is being prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide copies of accounts for latest 1/2/3 years. Since the application dated 29.03.2011 was filed on 31.03.2011, the accounts for the first financial year were not prepared. The Appellant could have very well mentioned Not Applicable against item no. 2. However, out of good governance, the Appellant submitted the same documents that were submitted to the ROC on October 15, 2010 for the purposes of section 25 license. Requirement of filing Future annual income and expenditure estimates and Assets and Liabilities Statement with their estimated values as on seven days before making the estimate are the requirements under the Companies Act, 1956 for obtaining licence u/s. 25 and not under the IT Act for obtaining registration u/s. 12AA r.w.r. 17A. However, the said documents, out of good governance, were also submitted along with the application for registration u/s. u/s 12AA. This also explains why the date mentioned on Annex 5A and 5B is October 14, 2010 . Therefore, the allegation that registration is obtained by suppression of material facts is without any basis. Besides this, the only other requirement in Rule 17A is to provide the instrument of formation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above, there is no substance in the contention of the Id. DR that the note did not talk about the activity of acquiring shares in AJL in February 2011. The said argument of the Ld. DR is not even alleged by the Ld. CIT in his cancellation order and it is not the basis of cancellation. How can the Id DR be permitted to say this at this stage? In support of such a contention, reliance was placed on the decision in the case of Welham Boys' School Society v. CBDT [2006] 285 ITR 74 (Uttaranchal), wherein it is held that where in the show cause notice or in the impugned order, the Commissioner had not alleged that the assessee had obtained the registration by practicing fraud or forgery, said ground cannot survive before the Court. 73 Further, the Jurisdictional High Court has, in case of Maheshwari Mandal (Delhi) vs The State of Delhi Ors (W.P. (C) 2029/2016 and CM Nos. 8748/2016, 21328/2016 and CRL. M.A. Nos. 5911/2017 6253/2017) held that where in the original proceedings it was not alleged that registration was obtained by fraud then said ground cannot be taken during appeal. The relevant extract of the judgment is as under: 15. This C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o show cause why adverse inference should not be drawn from the said agreement. 75 Regarding the allegation of ld. representative of the department that the assignment of loan converted into shares of AJL is only activity and besides this, no activity was carried out, he clarified that acquisition of shares in AJL is a preparatory activity in pursuance of the objective of the Appellant. This fact has been disclosed in the notes to Audited Accounts of March 31, 2011 in the following manner:- The revival of AJL and resuming its newspaper activity was a tall task in view of huge losses and inability to raise funds due to huge debt. Ultimately, it succeeded. This helped YI achieve its objective of getting a ready platform for reaching out to the youth of the country. It was further stated that YI directly also, in a small way, reached out to the youth in pursuance of its objective to inculcate in the mind of India's youth the ideal of democracy by organizing an initiative in 2018 to spread the awareness about the importance of voting during the Karnataka Assembly elections. YI further, on its own have been reachi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the publications including paying employees' salaries, VRS, PF, ESI, statutory dues and taxes and building and maintaining its newspaper offices. In the year 2012, in respect of loan given by AICC to AJL, a petition was filed before the Election Commission of India by a political rival of AICC seeking de-recognition of AICC under section 16A of Election Symbols (Reservation and Allotment Order), 1968 on the ground that the party loaned more than ₹ 90 crores to AJL in violation of the guidelines and rules for registration as well as recognition of political parties. The Election Commission of India dismissed said petition holding that there is no direction or instruction of the Election Commission regulating the manner in which the party may spend the funds raised by them and that section 29B/C of the Representation of People Act, 1951 provide for the manner in which the political parties may raise funds and that there is no provision whatsoever in the Act prescribing the manner in which the political parties may use those funds. It is humbly submitted that the said order clearly validates the authenticity of the loan provided by AICC to AJL. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chandise Pvt. Ltd. of ₹ 1 crore at 14% interest and utilization thereof for payment to AICC of ₹ 50 lakhs, do not appear to be in line with the stated objects of the assessee. First of all, the ld. counsel submitted that this report was never confronted to the assessee by the CIT (E) and it was for the first time, such a report has been shown in this court. Secondly, the said document itself states that the information shared therein may be used for intelligence purposes only and should not be used or disseminated for evidential or judicial purposes. Further, this document cannot be taken into account as evidence in any proceedings. In any case, the loan taken by the assessee is part of the objects (clause 18 of its MoA), hence, there is no merit that the loan does not appear to be in line with the stated objects of the entity. The payment of ₹ 50 lakhs for consideration of assigning of loan was duly disclosed in the audited accounts for the year ending 31.03.2011 by disclosing the conversion of shares of AJL and this exercise is in pursuance to the main objects of Young Indian. The STR report is dated 07.02.2011 and the assessee has disclosed the transaction in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble High Court. He submitted that the whole argument of lifting the corporate veil in the case before the Hon'ble High Court is to buttress the point that by acquiring the shares of AJL, the Appellant has acquired the properties of AJL and such acquisition amounts to transfer of the property by AJL, though not by way of sale or mortgage or gift, but otherwise . This is interpretation of clause 111(13) of the lease deed. However, for the language in the said lease deed, the question of invoking the principles of lifting of corporate veil would not have arisen even before the Hon'ble High Court. The issue in the present case is under the provisions of Income tax Act, 1961 and there is no similar language in the Act as in the lease deed interpreted by the Hon'ble High Court. Accordingly, in the present appeal, reliance on the Delhi HC order for arguing lifting of corporate veil is completely misplaced. 83 Ld. Counsel submitted that what is to be considered is: as to who is being taxed under the provisions of the Income tax Act, 1961 on the rental income, AJL or the Appellant; as to who is being gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e used for newspaper activities. Further, the company has subsequently amended its MOA to align its object with that of a not for profit company and thus, cannot given any benefit to its shareholder in form of dividend, bonus etc. due to which too, its shares do not carry any significant value. Be that as it may, even if it is assumed that the shares of AJL are worth ₹ 90 crores which was acquired by the Appellant at a discounted price of ₹ 50 lakhs, the Appellant fails to understand, how this can be a reason to lift the corporate veil of the companies and consider them as one. It is submitted that the Appellant is a charitable organization. The Appellant is a section 8 company. This is not in dispute, whether or not it has section 12AA registration. It is not uncommon for such organizations to receive donations. When receipt of donations by charitable organizations are not considered to be wrong, how receiving something at an alleged discounted value be considered to be so wrong so as to lift the corporate veil of the company or to state that the activity of Appellant is not genuine? He thus submitted that there is no logic in such allegation. 84 Durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of 80IA deduction, the assessee would claim double benefits and revenue would bear double loss. Therefore, option theory is referred to as anathema and a device . Here, on surrender of registration, there is no benefit to the assessee albeit surrender would mean additional tax revenues in case of profits. Therefore, rejection of option theory in the context of not claiming depreciation for 80IA units cannot be extended for rejecting the option of claiming an exemption u/s. 11. 87 In so far as contention raised by the Revenue that surrender is not permissible and there is no process of law, it is submitted that there is no provisions under the Act to deny the power of voluntary surrender of the registration under the Act and therefore, the argument based on 'process of law' is unsustainable as the law does not prohibit the voluntary surrender. In any case, the decisions on surrender of Excise registration cited by the Appellant in its earlier arguments lay down the 'process of law' that the surrender should be acted upon by the department in a reasonable period or else such surrender is deemed effective after such reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments raised by the ld. DR was that the rental income amounts to real estate business, which cannot be appreciated in view of the law under the IT Act and reference of any dictionary meaning taken by the ld. DR should not be taken into cognizance. For example, many government owned companies like Air India and another such companies who own hundreds of buildings in the country have leased out some of the premises that does not make them Real Estate Company. Even the Company Identification Number issued by the Registrar of Companies to AJL refers to Industry Code pertaining to publishing of periodicals and journals and not that of operating of real estate business. 91 Another argument taken by the DR was that AJL stopped business and all employees were discharged and what was left was properties only and therefore, by acquiring the shares of AJL the assessee has acquired the properties which is not the object of the assessee. Such proposition is not correct on the facts and material on record because AJL did not stop the business, but there was a temporary suspension. Even otherwise, also, any person who acquires the share of a company whose predominant assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case at hand, it is evident that the said TV Channel was acquired by the petitioner Trust for educational training in 'Journalism' and 'Mass Communication', as it was offering courses for graduation and post-graduation in 'Mass Communication' and 'Journalism'. ... Applying the principle aforesaid, it is evident that education cannot be confined to the meaning of one subject only and keeping this precedent in mind, it is concluded that the said investment in TV Channel shall be considered to be in consonance with the objectives and in the purview of the objects of the Trust. Besides, acquisition of shares of a company can only trigger section 12AA(4) and cannot trigger section 12AA(3) and since section 12AA(4) was not on the statute book in AY 11-12, the year with effect from which the Id. CIT has passed the order cancelling the registration, the order passed by the CIT(E) is bad in law. In this regard, reliance is placed on the decision of the Mumbai Tribunal in Lilavati Kirtilal Mehta Medical Trust v. CIT [2019] 108 taxmann.com 272 (Mumbai - Trib.) wherein it is held that violation of provisions of section 13 can be a ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at case contrary to the finding of the ld AO. Thus, this case does not support the argument of the assessee. DECISION AND REASONS : 96 We have heard the rival submissions, perused entire gamut of facts placed on record and the material referred to by the parties at the time of hearing. From the discussions made above, the core issue as it culls out is, whether the ld. CIT (E) was justified in law and on facts in cancelling the registration granted to the assessee u/s. 12A r.w.s. 12AA vide certificate dated 09.05.2011 w.e.f. assessment year 2011-12, that is, retroactively. It is indubitable that the assessee itself had written a letter to the ld. CIT (E) dated 21.03.2016 filed on 22.03.2016, wherein it has offered to surrender the registration granted u/s. 12A r.w.s. 12AA with immediate effect. Ergo, the assessee company on its own volition has ceded the registration and any benefit of being a charitable entity under the Income Tax Act from March 2016. However, the bone of contention and the assessee s main objection is that, the registration could not have been cancelled prior to 21.03.2016 w.e.f. 2011-12. Succinctly put, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above, the undisputed facts are reiterated in a succinct manner: The appellant, Young Indian was incorporated as a company on 23.11.2010, for which it was granted license u/s. 25 of the Companies Act, 1956 on 18.11.2010 The application for registration was made by the appellant company on 31.03.2011 in form No. 10A along with following annexure: ANNEXURE 1 List of Names of Founder Members ANNEXURE 2 List of Names of Managing committee ANNEXURE 3(A)- Memorandum of Association ANNEXURE 3(B)- Articles of Association ANNEXURE 4(A)- Certificate of Incorporation ANNEXURE 4(B)- License u/s. 25 of the Companies Act ANNEXURE 5(A) - Future Annual Income Expenditure Estimates. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from M/s. Dotex Merchandise Pvt. Ltd., Kolkata and out of the said loan, the amount of ₹ 50 lakhs was paid to AICC. AJL had allotted 9,02,16,898 shares which was more than 99.99% of the holding to Young Indian in lieu of loan of ₹ 90 crores by increasing the share capital. This fact was also not disclosed to the ld. DIT (E) nor was it stated or mentioned that entire holding of AJL went to the assessee company. The purpose and the object for acquiring entire share holding of AJL was neither brought to the notice of ld. DIT (E) nor explained at the time of registration, which is now being canvassed. When the ld. DIT(E) specifically asked to give note on activities carried out since inception with supporting documents and to justify the claim of registration, the assessee should have mentioned all the events before the DIT(E), because acquisition of entire holding of a company, assigning of loan of ₹ 90 crores for a consideration of ₹ 50 lakhs only and taking of loan of ₹ 1 crore from M/s. Dotex Merchandise Pvt. Ltd., Kolkata were not some insignificant events which do not require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to explain whether such activities of AJL are covered within the aims and objects of Young Indian; and lastly , whether these activities were in conformity with the terms and conditions of the registration granted u/s. 12AA to Young Indian, the assessee nowhere had clarified or sated that the purpose of acquiring AJL and its activities, except for reiterating that as a shareholder, Young Indian does not have any ownership interest, whatsoever, in the properties owned by AJL as it is a separate legal entity. 102 Now, what has been canvassed before us is entirely a new argument that the sole aim and objective of acquiring the entire stake holding in AJL was to carry out charitable activities for its objects, i.e., to spread democratic and secular values to the Youths of India through the medium of newspapers published by AJL. Now, in support of such newline plea, voluminous additional evidences have been filed before us on the ground that the ld. CIT (E) has wrongly held that AJL was into the Real Estate business and was carrying out commercial activities of construction and sale of properties. In order to controvert such a finding, assessee has filed hundreds of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Copies of various reports, photographs of: a. Launch of Commemorative Edition of National Herald (Publication) in New Delhi on 1 July 2017 154-156 b. ABP 157-158 c. DNA 159-162 d. Dainik Bhaskar 163 e. Financial Express 164-165 f. Hindustan Times 166-168 g- Mint 169-172 h. Copy of National Herald Commemorative Edition 173-185 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. United News of India 237-238 9. Registration Certificate of National Herald Newspaper with Registrar Office of Newspapers for Indian, Ministry of Information and Broadcasting dated 23 June 2017 and 24 Nov 2017 239-241 10. Registration Certificate of Sunday Navjivan with Registrar Office of Newspapers for Indian, Ministry of Information and Broadcasting dated 20 Feb 2018, 11 Jan 2019 242-244 11. Agreement of AJL with Press Trust of India for Wire News Services dated 15 November 2016 245-249 12. Certificate issued by Audit Bureau of Circulations certifying the number of Newspapers sold by AJL dated 7 September 2018 and 11 March 2019 250-254 13. Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the ld. counsel for the assessee, there was temporary lull in the business for the period 2008 to 2016. Neither between the periods 2011 to 2016, any such publication business had started nor has it been brought on record before the ld. DIT (E) either at the time of grant of registration or at the time of its cancellation. As far as the documents, like resolution passed by the board of directors of AJL on 26.09.2016; letter written to Registrar, Newspapers of India dated 23.01.2014; Form No. 23 submitted by AJL to ROC on 29.09.2011 along with amended MoA and Form-14 etc., though indicate that AJL may had some kind of intention to start the publication business, but such an intention was never stated or canvassed before the departmental authorities in the course of cancellation proceedings. It is only when the ld. CIT (E) had made certain allegations in the impugned order that the AJL had carried out some activities of Real Estate, the assessee has taken this plea before us to justify that it intended to carry out the activities by acquiring AJL in furtherance of its main objects. Great deal of arguments have been made by the Ld. Counsel that publication business of AJL was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sequel to investigation by Investigation Wing since 2014 and based on these findings and detailed discussion, he has held that he is not satisfied that the activities of the assessee are genuine or not carried out in accordance with its objects. 105 One of the key contentions raised and harped upon at length on behalf of the assessee, supported with catena of documents that AJL was never into Real Estate business, for which we have already discussed in detail the relevant arguments placed by the ld. counsel. Even if we agree, with the ld. counsel that AJL was not carrying out systematic commercial real estate business of construction and sale of shops or properties during the relevant period, but there is no denying fact that AJL had large number of properties worth hundreds of crores of rupees across the country and had huge rental income from such properties held from time to time. Though one of the main points harped upon by the ld. CIT (E) is that AJL is Real Estate Company may not be technically correct, but the ld. CIT (E) has not confined his finding merely that AJL is Real Estate Company and by acquiring AJL, the assessee company also acquired Real Estat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intent of the transaction. Not all these facts indicate that the assessee company had any clear conscience or intent for acquiring the AJL to carry out the charitable activities. Not a single such instance have been demonstrated that it had carried out any activity in furtherance of its objects, nor any such thing has been placed before us that it had carried any activity between the years 2011 to 2016 or up to the date of cancellation of registration. Even as noted by the ld. CIT (E) that the Income-tax returns do not indicate that any expenditure has been incurred in furtherance of the objects except for payment of interest on loan borrowed from a Kolkata based company. Once, AJL was not in publication of any kind of newspaper in print or digital form during the entire period, then it can be easily deduced that the intention was never to carry out any charitable activity by acquiring AJL. Even after takeover of AJL, no activity has been done by AJL at least for a period of 5 years. One of the main allegation of the ld. CIT (E) and ld. Special counsel was that, it was in wake of certain enquiries conducted by the Income Tax Department and proceedings of eviction initiated by the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se admittedly, such an intention remained on paper and nothing had started prior to the year 2016-17 by that time the assessee had already forgone its claim for registration u/s. 12AA. Acquiring and construction of various buildings of AJL at Panchkula, Mumbai etc. does not prove that the publication activities were carried out and even if there was some kind of future intent to do so, then also, it does not make AJL a newspaper publication company between 2008 to 2016, because not a single activity was carried out through which it can be inferred that AJL was acquired by YI to use the platform of newspaper publication, albeit entire conduct of the assessee company shows that AJL has been acquired for such nominal amount of ₹ 50 lakhs, to control and have interest in huge immovable assets of AJL throughout the country which were earning huge rental income, which was never the object of YI for which it was granted registration. 110 At the stage of hearing of this appeal, one very important material fact, which has been brought on record by the Revenue before us, are the judgments of Hon ble Delhi High Court. This judgment of the Hon ble Jurisdictional High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters which were filed by the shareholders of Young India while challenging the action taken by the Income Tax authorities. There is no whisper or serious challenge to these factual aspects by the appellant. They do not say, even orally, that these facts stated and relied upon by the respondents are false, incorrect, fabricated, untrue etc. They only say that certain facts have been stated without filing a counter affidavit. If the facts so stated, cognizance of which have been taken by the writ Court, are based on materials available in proceedings held before the L DO and by a coordinate Bench of this Court in a writ petition, we see no reason as to why we cannot take cognizance or judicial notice of these facts and proceed to consider them for deciding the lis in question, particularly, when there is no specific or categorical denial of them even orally before us at the time of hearing. Xxxxxxxxxxxxxxx 48. The first objection of the appellants were to the finding recorded by the learned writ Court in the impugned order passed on 22nd December, 2018 pertaining to there being no press activity in the premises in question, that is, finding in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an attempt by the appellants and, in fact, an admission by them that no printing activity was being carried out in the premises at that point of time. That apart, when we go through the four show cause notices available on record issued on 10th October, 2016, 5th April, 2018, 18th June, 2018 and 24th September, 2018 and the reply filed thereto, we find that various breaches were pointed out in all these show cause notices and they were replied to by the appellant company and the cumulative admitted position that can be made out from the reading of these documents are as under. Xxxxxxxxxxxxxxxx 50. When the premises was inspected on 26th September, 2016, no press activity was being carried out in the area. Press activity and publication of the newspaper was suspended right from the year 2008 and all the employees were granted VRS. After the communication dated 26th September, 2016 was made by Sh. Motilal Vohra digital publication of the English Versions of the newspaper, National Herald commenced from 4th November, 2016. 51. Digital version of Urdu edition Qaumi Awaz commenced on 12th August, 2017. Digital version of Navjiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight to participate in the profit of the company. He gets no interest in the property of the company and even if the shareholders of the company do have some voice in administering the affairs of the company, but their interest is limited to sharing the profits of the company and the company, a juristic person, which is distinct from the shareholders still owns the property. It is argued that in the backdrop of this legal position even if some of the shares of the company have been transferred that would not mean that the ownership of the leased premises also get transferred to Young India Ltd. It was emphasized that the ownership still remains even on such transfer with AJL and the said transfer would not have any effect on the ownership or transfer of the leased premises. To consider this aspect of the matter, we are required to take note of the shareholding pattern of both the companies and the manner in which the transactions have taken place and further in case the lifting of the veil theory is applied, what would be its effect with regard to the issue in question. 58. Indian National Congress sometimes referred to as AICC had advanced a loan of ₹ 90 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary, 2011, an EGM of Associated Law Journal was held approving fresh issue of 9.021 crores shares to Young India and on 22nd January, 2011 i.e. on the next day the second Managing Committee of Young India was held in which Smt. Sonia Gandhi, Mr. Motilal Vohra and Mr. Oscar Fernandes were appointed as Directors and the 550 shares of the existing shareholders of Young India - Suman Dubey and Sam Pitroda were transferred to Smt.Sonia Gandhi and Mr.Oscar Fernandes and on the same day fresh allotment of Young India shares were made in the following manner: (a) 1,900 shares having paid up value of ₹ 1,90,000/- to Shri Rahul Gandhi, (b) 1,350 shares with a paid up amount of ₹ 1,35,000/- in the name of Smt. Sonia Gandhi, (c) 600 shares with a paid up value of ₹ 60,000 in the name of Sh. Motilal Vohra and (d) 50 shares with a paid up value of ₹ 5,000 in the name of Sh.Oscar Fernandes and after issuance of PAN by the Income Tax Department a bank account was opened by Young India with Citibank on 14th February, 2011 and the cheque issued by M/s Dotex for ₹ 1 crore was deposited in the Young India Bank account on the said day and on 26th February, 2011 Young Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Association to declare the dividends and distribute the profits of the company but their right individually or collectively is nothing more than participating in the profits of the company, it is held that the company is a juristic person and is distinct from the shareholders. In fact, it is the company which owns the property and not the shareholder. The judgment further goes to say that there is nothing in the Indian Law to warrant the assumption that the shareholder who by his share buys any interest in the property of the company which is a juristic person entirely different from the shareholder. This in fact is the law laid down by the Constitution Bench of the Supreme Court in the aforesaid case. 61. It was vehemently argued by Dr. Singhvi that once this is the accepted legal position that is culled out on a perusal of the law laid down by the Constitution Bench, then by no stretch of imagination can it be argued that on transfer of shares of AJL to Young India Ltd., there is transfer of ownership or lease or property as contemplated in clause 13(3) of the lease in question. By referring to the judgment in the case of Monsanto Manufacturers (supra) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness without any transfer for consideration being involved can be taken as unauthorised transfer of lease which could be declared void. 63. Thereafter, the learned Court proceeds to discuss various issues and takes note of the fact that the transaction in fact technically does not sell the lease right but only shares are transferred and in para 24, it has been held that the principle of lifting of corporate veil as an exception to the distinct corporate personality of a company and its member is recognized not only to unravel tax evasion but also to protect public interest which is of paramount importance and to prevent a corporate entity in attempting to evade legal obligation. It has been held by the Hon ble Supreme Court after relying upon an earlier judgment in the case of Workmen vs. Associated Rubber Industries, (1985) 4 SCC 114 that this doctrine is employed to prevent device and to avoid welfare legislation. After observing so, various judgments of this Court including Skipper Construction (supra) and the judgment of the House of Lords in the case of Salomon v. Salomon, 1897 AC 22 is taken note of and the cardinal principle laid down in the case of Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 333] (Balco case) and Vodafone International Holdings BV v. Union of India[Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 : (2012) 3 SCC (Civ) 867] cited by the learned counsel for the respondent have no application to the present case once real transaction is found to be different from the apparent transactions. In fact, the principle of law laid down in Vodafone case [Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 : (2012) 3 SCC (Civ) 867] that the court can look to the real transaction goes against the respondent. 64. Finally in para 31, it is held by the Hon ble Supreme Court that while discerning the true nature of the entire transaction, the Court is not to merely see the form of the transaction which is of sale of shares but also the substance which is the private sale of a mining right avoiding legal bar against transfer of sale rights. In fact, the learned Court deals with the issue in para 31 in the following manner: 31. ....Thus, while discerning the true nature of the entire transaction, the court has not to merely see the form of the transaction which is of sale of shares but also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferring the shares of AJL to Young India was nothing but, as held by the learned writ Court, a clandestine and surreptitious transfer of the lucrative interest in the premises to Young India. In fact, the contention of Dr. Singhvi has to be rejected and rightly so was rejected by the Single Judge even though without applying the principle of lifting of the corporate veil. In case the theory of lifting of the corporate veil, as discussed hereinabove, is applied and the transaction viewed by analyzing as to what was the purpose for such a transaction, the so called innocent or legal and permissible transaction as canvassed before us, in our considered view, is not so simple or straight forward as put before us, but it only indicates the dishonest and fraudulent design behind such a transaction as laid down in various judgments referred to not only in the case of Gotan Lime Stone Khanij Udyog (P) Ltd. (supra) but also in the case of Union Territory of Estate Officer, UT, Chandigarh vs. S.C. Information Technologies, (2016) 12 SCC 582, Skipper Construction (supra), wherein also the theory has been applied after considering the principle laid down in Salomon (supra) and in para 28, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which entire transaction was done has been frowned upon by the Hon ble Court as a clandestine and surreptitious transfer of the lucrative interest in the premises to Young India . After applying the principle of lifting of the corporate veil , their Lordships have held that the transaction viewed by analyzing as to what was the purpose for such a transaction, the so called innocent or legal and permissible transaction as canvassed before us, in our considered view, is not so simple or straight forward as put before us, but it only indicates the dishonest and fraudulent design behind such a transaction . 113 The sequitur of the findings and observations of Hon ble High Court in the case of AJL clearly clinches the issue in hand wherein the court has taken note of identical facts as discussed here in this order and have categorically held that; The share holding pattern of both the companies, i.e., AJL YI and the manner in which the transaction has taken place, principle of lifting of corporate veil is clearly applicable; Their Lordships have narrated the entire factum of advancing of loan of ₹ 90 crores by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. The Hon. court has come down very heavily in stating that the entire transaction is not only dishonest, but also fraudulent design. 114 The aforesaid observations and findings of the Hon ble jurisdictional High Court clearly have a binding precedence because not only it proves that the conduct of the assessee company right from the incorporation of YI till the application for registration u/s. 12AA before the DIT (E), was not to carry out any charitable activity, but to acquire huge assets of hundreds crores of Rs for a negligible amount. Seeking a status of charitable institution and to get registered under welfare legislation like section 12A/12AA, with such kind of conduct clearly indicates that it is a misuse of law and some kind of colourable device. This is perpetuated by the fact that all these transactions were completely hidden from the Income-tax Department and DIT (E) while seeking the registration u/s. 12AA. If all these things are put in perspective, then the contention of the ld. Special Counsel and ld. CIT (E) is to be believed that it is only when the Investigation Wing and Income-tax Department started making certain investigati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peration of order because quashing of order results in restoration of position as it stood on the date of passing of the order whereas the stay of operation only means that it would not be operative on the date of passing of the stay order, but it does not mean that the said order has been wiped out from existence. The relevant observations read as under: 10. In the instant case, the proceedings before the Board under ss. 15 and 16 of the Act had been terminated by order of the Board dated April 26, 1990 whereby the Board, upon consideration of the facts and material before it, found that the appellant-company had become economically and commercially non-viable due to its huge accumulated losses and liabilities and should be wound up. The appeal filed by the appellant-company under Section 25 of the Act against said order dated January 7, 1991. As a result of these orders, no proceedings under the Act was pending either before the Board or before the Appellate Authority on February 21, 1991 when the Delhi High Court passed the interim order staying the operation of the Appellate Authority dated January 7, 1991. The said stay order of the High Court cannot have th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge dated August 14, 1991. Section 22(1) of the Act could not, therefore, be invoked and there was no impediment in the High Court dealing with the winding up petition filed by the respondents. This is the only question that has been canvassed in Civil Appeal No. 126 to 1992, directed against the order for winding up of the appellant-company. The said appeal, therefore, fails and is liable to be dismissed. [Emphasis in bold is ours] 117 Thus, it has been clearly held that staying the operation of the order of the Court does not mean that the said order does not exist in law. Hon ble Bombay High Court in Nilkamal Limited vs. Union Territory of Dadar Nagar Haveli, in criminal writ petition No. 3794 of 2014, after referring to various judgments including that of Shree Chamundi Mopeds Ltd. (supra) held that even if a decision of the High Court is stayed by the Apex Court, the subordinate courts are bound by the same unless the decision is set aside by the Apex Court. Accordingly, the High Court directed the Magistrate to follow the judgment of High Court unless and until it is set aside by the Hon ble Apex Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Application filed with the Registrar of Companies for license u/s. 25 of the Companies Act, 1956 387-436 2. Printed Booklet containing copy of the printed MoA and AoA along with the incorporation certificate and other relevant documents 437-467 3. Assignment Agreement dated 28.12.2010 468-474 4. Assessment Order of AJL for AY 2011-12 475-481 5. Order of the Election Commission of Income dated 06.11.2012 in relation to loan given AICC to AJL and its assignment 482-485 6. Relevant Extract of Annual accounts of RPG Life science Ltd. for Financial Year 2010-11 486-489 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. Relevant Extract of Approved Building plan for Mumbai Building dated 3.11.2016 533-538 19. Relevant extract of minutes of the Board of Directors of AJL held on February 22, 2013 wherein it was noted that the publication of National Herald would be considered on web-site. 539 20. Invoice of purchase of internet / web domain name www.nationalherald.com by AJL on September 12, 2014 540 21. Relevant extract of minutes of the Board of Directors of AJL held on February 24, 2016 wherein it was noted that the rough estimates of monthly expenditure for publishing the news papers 541 22. Relevant extract of minutes of the Board of Directors of AJL held on June 28, 2016 discussing that the newspaper business shall be resum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 577-579 33. Letters written to Chairman, CBDT in December 2017, January 2018 and July 2018 pointing out various violations u/s. 138 of the Act in the Appellant s case and requesting to take necessary actions 580-592 34. Classification of AJL as a Newspaper Company by ROC as per its CIN Numbers 593-600 120 Most of these documents, though submitted at the rejoinder stage, are in nature of clarifications to the submissions made by the ld. DR and the letters written to DDIT in 2014 and certain notices issued by LDO, but none of the documents filed impinge upon our finding in any manner as given above, because none of these documents prove that acquisition of AJL by the assessee company was for carrying out any charitable activities in pursuance of its objects nor any such activity was carried during the relevant period. Accordingly, these additional evidences, as filed by the assessee, though are taken on record, but we do not deem fit to ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date or period when such non genuineness is found. Hon ble Madras High Court in the case of Prathyusha Educational Trust (supra) have clearly reiterated this proposition, relevant text of which has been already incorporated above, wherein their Lordships have held that it a misnomer to sate that the order is retrospective or retroactive and the order of the cancellation of registration even passed on subsequent date would take effect from the year when cause of action arose. 122 Here, in this case, as we have gathered from the material facts on record and discussed in detail, the assessee at the time of seeking registration itself has concealed the material facts and not disclosed the entire events of transactions which had undergone from the date of inception of assessee company till the grant of registration and one of the conditions on which the registration has been granted stood violated from the day one and therefore, under these circumstances, the ld. CIT(E) was fully justified in law and on facts in cancelling the registration from the date of granting of registration itself, i.e., from the assessment year 2011-12. Secondly, here in this case it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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