TMI Blog2021 (4) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... n Fee was collected by the assessee Trust. b) The funds of the Trust at least to the tune of ₹ 22 crores have been misused by the Trustees. c) The provisions of Tamil Nadu Educational Institutions [Prohibition of Capitation Fee] Act, 1992 have been grossly violated. d) The provisions of Section 11(2) of the I.T. Act, 1961, have not been adhered to. The reasons assigned for the purpose of cancellation are undoubtedly in consonance with the powers conferred on the Commissioner under sub-clause (3) to Section 12AA of the Act and therefore, the order of cancellation can at any stretch of time be stated as infirm or perverse. - WP No.7110 of 2008 And MP No.1 of 2008 And MP No.1 of 2012 - - - Dated:- 26-4-2021 - Honourable Mr. Justice S.M.Subramaniam For the Petitioner : Mr.R.V.Easwar, Senior Counsel assisted by Ms.Rubal Bansal and Mr.Suhrith Parthasarathy. For the Respondent : Mr.A.P.Srinivas, Senior Standing Counsel for Income Tax. ORDER The proceedings dated 13.03.2008, cancelling the registration made under Section 12AA(3) of the Income Tax Act is under challenge in the present writ petition. 2. The reasons furnished for cancellatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is untenable and without jurisdiction. In other words, on the date of passing of the impugned order, the respondent is not vested with any power or jurisdiction to cancel the registration made under Section 12A of the Act, granting exemption to the writ petitioner-Institution. 9. In this regard, the learned Senior Counsel for the petitioner, in nutshell, contended the facts by stating that Section 12A of the Act, provides for compulsory registration of a Charitable Trust under the Act as a condition for enjoying exemption from taxation under Sections 11 and 12 of the Act with effect from 01.04.1973. 10. The writ petitioner-Vellore Institution of Technology was created as a Charitable Trust by a registered document No.94/84 in the Office of SRO, Vellore on 08.05.1984. On 09.07.1984, the petitioner- Institution obtained registration under Section 12A(a) of the Act vide C.No.2039(18)/84. Section 11. Section 12AA was inserted by Finance (No.2) Act, 1996 with effect from 01.04.1997 to provide for a procedure for registration of Charitable Trusts under the Act. The said Section 12AA provides for the procedure for registration of a Trust or an Institution where an applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2010 with new words or has obtained registration at any time under Section 12A [as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996)] , was inserted in Finance Act 2010, which came into force with effect from 01.06.2010. 17. Circular No.1 of 2011 dated 06.04.2011, issued by the Central Board of Direct Taxes (hereinafter referred to as CBDT , in short), which contains 'Explanatory Notes to the provisions of the Finance Act, 2010, wherein paragraph-7 reveals that the amendment made by the Finance Act 2010 and paragraph 7.4 states that the amendment came into effect from 01.06.2010 and is applicable for the assessment year 2011-2012 and subsequent assessment years. The said proposition was considered by the Hon'ble Supreme Court in the case of K.P. Varghese vs. Income Tax Officer [(1981) 131 ITR 597] , wherein in paragraph-11, it has been held as under:- 11. There is also one other circumstance which strongly reinforces the view we are taking in regard to the construction of subsection (2). Soon after the introduction of subsection (2), the Central Board of Direct Taxes, in exercise of the power conferred under Section 119 of the Act, issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on January 14, 1974 whereby the Central Board, after reiterating the assurance given by the Finance Minister in the course of his speech, pointed out: It has come to the notice of the Board that in some cases the Income Tax Officers have invoked the provisions of Section 52(2) even when the transactions were bona fide. In this context reference is invited to the decision of the Supreme Court in Navnitlal C. Javeri v.K.K. Sen [AIR 1965 SC 1375 : (1965) 1 SCR 909 : 56 ITR 198] and Ellerman Lines Ltd. v. C.I.T. [(1972) 4 SCC 474 : 1974 SCC (Tax) 304 : 82 ITR 913] , wherein it was held that the Circular issued by the Board would be binding on all officers and persons employed in the execution of the Income Tax Act. Thus, the Income Tax Officers are bound to follow the instructions issued by the Board. and instructed the Income Tax Officers that while completing the assessments they should keep in mind the assurance given by the Minister of Finance and the provisions of Section 52(2) of the Income Tax Act may not be invoked in cases of bona fide transactions . These two circulars of the Central Board of Direct Taxes are, as we shall presently point out, binding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 12A of the Act. In the said case, the registration granted on 04.12.1974 under Section 12A was cancelled by order dated 23.03.2008, which was prior to conferment of cancellation of registration by Finance Act 2010 with effect from 01.06.2010. Thus, the very same point was decided by the High Court of Delhi also. 19. The facts as stated by the petitioner are not seriously disputed with reference to the registration done by the petitioner under Section 12A(a) of the Act on 09.07.1984. The power of cancellation under the Income Tax Act, 1961 is the only point which is disputed between the parties to the lis on hand. Thus, it is suffice to consider the provisions as it is with reference to the powers conferred to the Commissioner under the Act for cancellation of registration made under Section 12A of the Act. 20. The learned Senior Standing Counsel, appearing on behalf of the respondent, disputed the contentions raised on behalf of the petitioner, by stating that de hors the amendment made in Finance Act 2010, which came into force with effect from 01.06.2010, the Commissioner of Income Tax is vested with the power for cancellation. Admittedly, subclause (3) to Section 12A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being carried out in accordance with the objects of the Trust or Institution, as the case may be, he shall pass an order in writing cancelling the registration of such Trust or Institution. Provided that no order under this sub-section shall be passed unless such Trust or Institution has been given a reasonable opportunity of being heard. 23. The amended Section 12AA(3) of the Act after Finance Act 2010 with effect from 01.06.2010 reads as follows:- (3) Where a Trust or an Institution has been granted registration under clause (b) of subsection (1) or has obtained registration at any time under Section 12A [as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996] and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such Trust or Institution are not genuine or are not being carried out in accordance with the objects of the Trust or Institution, as the case may be, he shall pass an order in writing cancelling the registration of such Trust or Institution. Provided that no order under this subsection shall be passed unless such Trust or Institution has been given a reasonable opportunity of being hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under the provisions of the Income Tax Act, 1961, it is to be construed that the registration made under Section 12A of the Act alone is referred in the provisions under Section 12AA (3) of the Act, even prior to the insertion of Finance Act 2010 with effect from 01.06.2010. Thus, it is made clear that even prior to the Finance Act, 2010, the Principal Commissioner or Commissioner is empowered to exercise the power of cancellation by invoking sub-clause (3) to Section 12AA of the Act and the insertion made in Finance Act 2010 is only to clarify the provisions under which the registration is made i.e. under Section 12A and the said insertion would not affect the power of the Commissioner already existing. The insertion would have been made, since several Trusts or Institutions raised the ground of jurisdiction and the Legislators thought fit to clarify the same and accordingly, the provision was further clarified by way of insertion by the Finance Act, 2010 stating that the registration obtained at any time under Section 12A is also amenable to Section 12AA(3) of the Act. Thus, it is unambiguous that the insertion in Finance Act 2010 is only clarificatory in respect of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independently considered the facts and circumstances with reference to the provisions of the Income Tax Act. 34. The provisions of law, effect and implications of amendments are to be dealt independently with reference to the facts and circumstances of each case. Thus, the judgments relied upon by the parties in the present writ petition need not be applied with reference to the facts and circumstances of the present case. 35. In view of the elaborate discussions made with reference to the scope of Sections 11, 12, 12A and 12AA of sub-clause (3) in the aforementioned paragraphs, the Principal Commissioner or Commissioner was vested with the power even prior to 01.06.2010 to cancel the registraion made under Section 12A of the Act, if the Commissioner is satisfied that the activities of such Trust or Institution are not genuine or are not being carried out in accordance with the objects of the Trust or Institution, as the case may be, and he shall pass an order in writing cancelling the registration of such Trust or Institution. 36. In the present case, the Commissioner of Income Tax in impugned proceedings dated 13.03.2008 considered the merits and demerits of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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