TMI Blog2020 (2) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... he proviso to Section 2(15) of the said Act as amended. This is because we are satisfied that the substantial question of law at (b) is required to be answered in the favour of the appellant and against the Respondent Revenue. Once this is done, there is really no necessity to go into the other issue as is reflected in the substantial question of law at (a). We also add that the Circular No.21/2016 also, supports the contentions of Mr. Vaidya, inasmuch as it reiterates that the process of cancellation of registration has to be initiated strictly in accordance with the provisions under Section 12AA(3) and after carefully examining the application of the said provisions. The Circular, in the context of income limits under the proviso also explains that merely because in a particular year the limits may be exceeded is not a good ground to cancel the registration itself, though, all these aspects, can be taken into consideration at the stage of assessment. In fact in case of Khar Gymkhana [2016 (6) TMI 489 - BOMBAY HIGH COURT ] as also in Karnataka Industrial Area Development Board [ 2015 (7) TMI 169 - KARNATAKA HIGH COURT ] the Division Benches of our Court have taken the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eas and industrial estates and industries so that it results in the rapid and orderly establishment, growth and development of industries in Goa. 6. The appellant, was granted registration under Section 12A of the said Act, which registration, is necessary where exemptions are to be claimed on the ground that the income is expended for charitable purposes. Such registration was in fact granted to the appellant way back on 16.12.1983 and the same continued until the making of the impugned orders in these appeals. 7. On 12.12.2011 a show cause notice was issued to the appellant to show cause as to why such registration should not be cancelled by invoking the provisions under Section 12AA(3) on the ground that the appellant has not fulfilled the conditions laid down under Section 2(15) of the said Act. This show cause notice was obviously, in the context of the proviso to Section 2(15) of the said Act which was introduced with effect from 01.04.2009. 8. The appellant furnished a detailed response to the show cause notice, wherein, the appellant raised several grounds in order to urge that the show cause notice be discharged. Amongst other grounds, the appellant urged that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elt out under the GIDC Act. He however urged that the activities of the appellant are not genuine because such activities do not partake any charitable purpose as defined in Section 2(15) of the said Act, particularly, if the provisions in the proviso are to be taken into account. Mr. Kalburgi submitted that there are findings of fact recorded by both the CIT as well as the ITAT that the activities undertaken by GIDC are in the nature of trade, commerce or business or in any case, the activities for rendering services in terms of trade, commerce or business and that too for a fee and other consideration. Mr. Kalburgi therefore submits that the activities undertaken by GIDC can hardly be styled as genuine activities. He submits that since this is one of the grounds to invoke the provisions of Section 12AA(3), there is absolutely no error in the view taken by the CIT and ITAT. 15. Mr. Vaidhya contests the aforesaid submissions made by Mr. Kalburgi. He points out that the GIDC is a statutory corporation and there is absolutely nothing non-genuine about the activities undertaken by it. He points out that the impugned orders almost entirely proceed on the basis of the amendment to Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case may be, will not have any jurisdiction to invoke the provisions of Section 12AA(3) of the said Act. 19. The relevant discussion on the aforesaid aspects is to be found in paragraphs 8 and 11 which read as follows:- 8. The jurisdiction to cancel the Registration would only arise if there is any change in the nature of activities of the institution. The above Circular clearly directs the authorities not to cancel the Registration of the charitable institution just because the proviso to section 2(15) of the Act comes into play as receipts are in excess of ₹ 25 lakhs in a year. It also refers to Section 13(8) of the Act which provides that where the receipts on account of commercial activities is in excess of the limit of R.25 lacs provided in second proviso to section 2(15) of the Act, then the Assessing Officer would deny the benefit of registration as a Trust for the subject Assessment Year while framing the Assessment. 11. The submission made on behalf of the Revenue that the Circular No.21 of 2016 would have only prospective effect in respect of Assessment made subsequent to the amendment under Section 2(15) of the Act w.e.f. 1st April, 2016 is also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided in Circular No.21 of 2016 dated 27th May, 2016. Accordingly, the issue stands covered in favour of the Revenue by virtue of Circular No.21 of 2016. (Emphasis supplied) 20. In the case of Maharashtra Housing Area Development Authority (MHADA) (supra), yet another Division Bench of this Court upset the view taken by the Director in cancelling the registration by reference to the amended provisions under Section 2(15) of the said Act. The Division Bench observed that since nothing was found to indicate that the assessee was undertaking any activities to demonstrate that it was not a genuine institution and further, there was nothing to indicate that the assessee or its affairs are not being carried out in accordance with the object of the institution, there was no reason for the Director to exercise the power to withdraw registration granted to the assessee. 21. The relevant discussion is to be found in paragraph 7 which reads as follows:- 7. We have referred to the order passed by the Director and impugned before the Tribunal in great detail with the assistance of Mr. Malhotra. We do not find anything in the matter referred by the Director which could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers the authority to cancel registration, do not exists in this case. The registration granted is cancelled in view of the amendment of first proviso to Section 2(15) of the Act. That is not a ground specified in the Statute for cancellation of the registration. In fact, sub-section (8) to Section 13 which is introduced by Financial Act, 2012 which came into effect from 1.4.2009 categorically provides that, nothing contained in Section 11 or Section 12 shall operate so as to exclude any income from the total income of the previous year or any receipt there of. If the provisions of the first proviso to Clause (15) of Section 2 becomes applicable in the case of such person in the said previous year, the Statute has protected the interest of revenue. Not-withstanding the fact that the assessee is conferred registration under Section 12A of the Act, unless the assessee falls within Section 2(15) of the Act, excluding the first proviso, the assessee would not be entitled to the benefit of exemption from the tax. If the case of the assessee falls with first proviso to Section 2(15) of the Act, the benefit of registration which flow from Section 12A of the Act is not available. Anyhow, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities are genuine or carried on in accordance with the objects of the Association. We can only say that the Income Tax Appellate Tribunal rested its decision on consideration which are not relevant for considering the test specified under Section 12AA(3) to impose commercial character to the activity of the Association. In the circumstances, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under Section 12AA(3) of the Act. (Emphasis supplied) 26. Upon perusal of the impugned orders we find that there are no categorical findings that the activities of GIDC are not genuine or are not in accordance with the objects of the trust or the institution. Merely because, by reference to the amended provisions in Section 2(15), it may be possible to contend that the activities of GIDC are covered under the proviso, that, by itself, does not render the activities of GIDC as non-genuine activities so as to entitle the CIT to exercise powers under Section 12AA(3) of the said Act. We however clarify that we have really not gone into the question as to whether the activities of GIDC are indeed covered under the proviso to Section 2(15 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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