TMI Blog2022 (3) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant s stand that there was no statutory requirement at the relevant time to intimate the amendment/ modification in the object of the institution claiming exemption u/s 11 of the Act.Since then there is no change in the facts and circumstances of the case, the fundamental facts accepted by the Department in past has to prevail as per principles of law laid down by the Hon'ble Supreme Court in Radhasoami Satsang vs CIT [ 1991 (11) TMI 2 - SUPREME COURT] . We agree with the argument of assessee that the Registration u/s 12AA of the Act, once granted, remains valid until it is cancelled by the Commissioner, by due process of law laid down u/s 12AA(3)/12AA(4) of the Act. It cannot cease to be operative unless order u/s 12AA(3)/12AA(4) of the Act is passed by the ld. CIT(E) in accordance with the law for cancellation of registration and that too on an application made by assessee for intimation of amendment in the object which was subsequently withdrawn. Thus, the order passed u/s 12A(1)(ab) is bad in law as well as on facts merely on a ground that the assessee is doing activities of the nature of business/commerce. Looking to ld.AR s submission on merits explaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is observed that the assessee is prevented by sufficient cause in not filing the appeal in time. The assessee also relied on the extension of limitation granted by the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020. 3.2 In respect of condonation of delay, the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji, 167 ITR 471 observed as under:- The Legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression sufficient cause in section 5 is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice--that being the life-purpose of the existence of the institution of courts. A justifiably liberal approach has to be adopted on principle. Every day's delay must be explained does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner. The doctrine of equality before law demands that all litigants, including the State as a litigan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion dated 13-09-2019 was filed to place on record the amendment made on 04-05-2013 in the objects of the society. 7. On realizing the fact that there was no need of making an application u/s 12A(1)(ab) which came subsequently but the amendment was made in 2013. Therefore, the assessee society filed a letter dated 06-03-2020 seeking permission to withdraw application made by the assessee society. 8.1 Even though the assessee society has withdrawn its application, ld. CIT(E) went on to examine the facts of the case and ultimately rejected the registration u/s 12AA of the Act vide order dated 20-09-2020 wherein he has observed that :- (a) The applicant society is already in receipt of 12AA certificate dated 20-03- 2001. Later on, the applicant society modified its objects on 04-05-2013. (b) Hence, the contention of the ld.AR in withdrawal application is not acceptable as per facts of the case. (c) The provision of Section 12AA stipulates the following conditions for registration u/s 12AA of the I.T. Act. (i) The object of the Trust should be for charitable purpose. (ii) The activities of the Trust should be genuine. (d) Section 2(15) defines cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different FYs. 8.6 Accordingly, information u/s 133(6) of the I.T. Act was sought from various deductors/ payers. The deductors furnished bill/ vouchers, MOU/Contract Agreement which are placed on records. In most of the cases, tenders were invited and thereafter agreements/MOUs were made and work orders were executed. The MOUs agreements specifically states about the work to be performed by the assessee society for which payments at a certain rate to be made by the deductors. It is an evident that the payers had made payments due to work performed by the assessee society as per conditions laid down in MOUs/ Agreements. Further, the Payers have also deducted TDS on such payments under section 194C of the I.T. Act which reveals that the payments are contractual payments after completion of work as desired by the payers. Since the work performed/ done by the assessee society is at the instance of conditions of MOU/Agreements only and not out of the society, the activities cannot be termed as charitable activities. Moreover, some of the payments are made as commission payments on account of life insurance and TDS u/s 194D has been deducted. Also, the assessee society is in recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htly found is engaged in a business and there can be no registration as a charitable institution. 8.9 Similar issue came up before ITAT, Jaipur Bench in the case of M/s. Eternal Foundation vs CIT (Exemptions), Jaipur in ITA No. 1504 1505/JP/2018 wherein the ITAT, Jaipur Bench has observed as under:- Thus the ld. CIT (Exemptions) has followed the decision of Hon'ble Kerala High Court in the case of CIT vs Annadan Trust (supra) which in our view is squarely applicable in the facts of the present case where the assessee is engaged in the activities which are sponsored by the Pharmaceutical Companies (MNCs) in their regular business activity. Accordingly, in view of the above facts, we do not find any error or illegality in the impugned order of the CIT (Exemptions) Tribunal has clearly held that the activities which have been performed by the applicant society wherein the payments have been received at the instance of fulfillment of the conditions as laid down in MOUs Agreements are business activities only and cannot be stated as charitable activity. Based on the above discussion, it is clear that the activities of the assessee society are not charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further observing that for most of the work, which the assessee society was doing, tenders were invited, MOU/Agreements were entered into, assessee society was performing works as specifically stated in the MOU/Agreements and TDS u/s 194C was deducted, ld. CIT(E) opined that the assessee society was carrying out activities of commercial nature i.e. activities in the nature of trade, commerce and business for consideration and with profit motive. 1.3 Income in Income and Expenditure Account from such commercial activities was calculated and it was observed that from F.Y. 2016-17 to F.Y. 2018-19 aggregate receipts from such activities exceeded 20% and, hence, as per the proviso to section 2(15) the activity of the assessee society were treated to be not for charitable purpose . 1.4 It is submitted that perusal of Income and Expenditure Account and Form 26AS for F.Y. 2016-17 to F.Y. 18-19 ( pages 6 to 32 of CIT(E) order) reveals that the assessee society received amounts from Government, Government Companies, Government Agencies etc for carrying out activities for implementation of various welfare scheme of Government like: i. Jan Aushadi Medical Store, ii. Sathi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning to combat child hunger and malnutrition Medical, Education and Relief of the Poor Deductor 7 - page 14, Deductor 6 - page 20, Rajasthan Forest Biodivercity Project Deputy Conservator of Forests, Jhunjhunu Conserving biodiversity by undertaking afforestation Preservation of Environment Deductor 8 - page 15, Deductor 3 page 26 GPF Jhunjhunu Deputy Director- State Insuarance Provident Fund Department, Jhunjhunu Proper functioning of General Provident Fund Any other object of general public utility Deductor 9 - page 16, Deductor 7 - page 21, Deductor 4 page 27 Mahila Suraksha Salah Kendra Jhunjhunu and Ajmer Programme Officer Women Empowerment (DWDA) Ensuring safety and security of the aggrieved women Any other object of general public utility Deductor 11 page 16, Mahila Adhikarita Churu and Amrita Haat Mahila Adhikarita Churu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9% Grand Total 1,76,29,061 100.00% 1.7 However, it is pertinent to note that all the activities including the activities which fall under the limb of general public utility are inseparably linked and purely connected to the welfare measures adopted by the Government. The assessee society worked as an extended arm of the Government. Funds were made available by the Government which were similar to grants or donations. These funds were applied by assessee society for charitable activities. Hence, the activities carried out were not in the nature of trade, commerce and business. 1.8 Ld. CIT(E) has failed to appreciate the changing landscape of the way the charitable activities are being carried out. Big charitable foundations like The Bill Melinda Gates Foundation, Azim Premji Foundation , etc are carrying out charitable activities by roping in, at ground level, the local NGOs. This combination of large trusts and local NGOs result into the most efficient and effective manner of achieving the desired results of charitable activities. Government of India and various State Government also functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary expense at the hands of the State. Looking at the nature of expenses met by the assessee one cannot escape the conclusion that similar expenses would have been incurred by the State, had it performed that work itself or though it's own agencies. 29. Thus, at the hands of the assessee, the payments received were utilized to defray the expenses met to perform the task of cooking and supplying the meals as directed by the State government. It is also not the case of the revenue that the assessee was in any manner free to utilize either the materials supplied to it or food cooked by it, as per it's own wish/discretion. The assessee appears to have acted merely as an agent of the State. 30. Therefore, on the basis of findings recorded by the Tribunal and the material examined by the Commissioner it would be wrong to conclude that because there existed a contract between the assessee the government therefore the assessee was not pursuing a charitable purpose . On the other hand the activity performed by the assessee clearly appears to be inseparably linked to the 'charitable purpose' of providing mid-day meals at village schools. Also, admittedly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be a basis for rejection of approval 2.1 Section 12AA(3) is the only section in the code of trusts which empowers ld. CIT(E) to cancel/withdraw the already granted registrations of the trusts/ societies on fulfilment of the following conditions and CIT(E) cannot go beyond the said conditions: i. The activities of such trust or institution are not genuine or ii. are not being carried out in accordance with the objects of the trust or institution, 2.2 In the case of the assessee society no such allegation has been made by ld. CIT(E). It is also not the case of ld. CIT(E) that the modification in the objects, carried out in the year 2013, led to assessee society being engaged in non-charitable activities. Hence, the withdrawal of registration is illegal. 2.3 Proviso to section 2(15) was invoked to withdraw registration which is not a ground specified in the Act for withdrawal/ cancellation. Reliance is placed on the following decisions: (i) Hon ble Gujarat High Court in the case of CIT vs Gujarat Maritime Board [2021] 123 taxmann.com 35 (Gujarat) (ii) Hon ble ITAT Jaipur Bench in the case of Rajasthan Housing Board vs CIT [2012] 21 taxmann. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken before ld. CIT (E). The law does not permit to withdrawn an application made it has to be decided. Earlier when registration was granted, there were 05 objects and now it has 13 objects. The withdrawal was filed much later and looking to the power of ld. CIT(E), if the assessee does not fulfill condition then the registration may be cancelled at any time. He relied para 6 7 of order of ld. CIT(E) and stated that the assessee is not doing charitable activities. Further, he relied on the decision of Hon'ble Kerala High Court and also submitted a copy of the decision in the case of Mahatma Gandhi Charitable Society vs CIT, 107 Taxmann.com 309 and relied upon para 9 of the order which is reproduced as under:-` 9. The appellant-trust obviously was engaged in executing contracts as awarded by the Indian Railways for cleaning train coaches and railway stations. The contention of the assessee was also that considering the work of cleaning, for which the contract was awarded, it should be assumed that the employment would only be of persons from the marginalised sections of society. The Tribunal considered the question elaborately. The specific objects as available in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust from the year to year it was granted since then. Therefore, action of the ld. CIT(E) passing an order u/s 12A(1)(ab) merely on a ground that the assessee is engaged in the business activities and thus the action of the ld. CIT(E) is bad in law as well as on facts. Even if the ld. CIT(E) wants to cancel the registration, he can invoke provision of Section 12AA(3)/ 12AA(4) of the Act and thus the order passed cancelling registration only on contravention of Section 2(15) of the Act is bad in law as well as on facts. 14. We have heard the rival contentions at length and appreciate the presentation of facts by both the parties. There is no dispute that the assessee is a registered society under Rajasthan Societies Registration Act. The assessee changed its object in 2013 and thereafter continued to enjoy the benefit of Section 12AA of the Act. Suddenly due to change in law on account of misconception, application was filed u/s 12A(1)(ab) of the Act which was ultimately withdrawn by the assessee. There is no dispute that after the amendment in law, there are no changes and the assessee continues to assist the Govt. of India as well as Govt. of Rajasthan in implementation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment in the object which was subsequently withdrawn. Thus, the order passed u/s 12A(1)(ab) is bad in law as well as on facts merely on a ground that the assessee is doing activities of the nature of business/commerce. 16. This view is also cleared by the CBDT vide Circular No. 21/2016 dated 27-05-2016, inter alia clarifying as under:- 4. In view of the aforesaid position, it is clarified that it shall not be mandatory to cancel the registration already u/s 12AA to a charitable institution merely on the ground that cut -off specified in the proviso to Section 2(15) of the Act is exceeded in a particular year without there being any change in the nature of activities of the institution. If in any particular year, the specified cut- off is exceeded, the tax exemption would be denied to the institution in that year and cancellation of registration would not be mandatory unless such cancellation becomes necessary on the ground (s) prescribed under the Act. 5.With the introduction of Chapter XII-EB in the Act vide Finance Act, 2016, prescribing special provisions relating to tax on accreted of certain trusts and institutions, cancellation of registration granted u/ ..... 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