TMI Blog2022 (11) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions stipulated at Sl No. 10 of Form 10AC had been placed and impliedly approved by the Parliament cannot be accepted. Even otherwise, if the said Form was indeed placed before the parliament, in view of case of Hukum Chand Vs UOI [ 1972 (8) TMI 130 - SUPREME COURT ] it cannot stipulate anything more than what is contained in the extant section/ provision of law as enacted by the Legislature [ie. in this case, Section 12AB of the Act]. We thus agree with the submissions of the Ld. Sr. counsel that the Ld. CIT(E) could not have been empowered to stipulate conditions while granting registration in Form 10AC, which is otherwise not expressly provided in provisions contained in Section 12AB of the Act. As relying on SAIFEE BURHANI UPLIFTMENT TRUST MUFADDAL SHOPPING ARCADE [ 2022 (5) TMI 768 - ITAT MUMBAI] CIT(E) could not have stipulated conditions on his own (other than what is stipulated in law) while granting registration under section 12AB of the Act as the scheme of the law does not visualize these conditions being part of granting of registration to charitable trusts. Accordingly, the grounds raised in the appeal by the assessee stands allowed. CIT(E) did not enjoy the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing registration to the application made u/s 12A(1)(ac) of the Act was impermissible and in excess of the jurisdiction vested in him. It is the case of the assessee that the provisions contained in Section 12AB of the Act is only procedural in nature in as much as the said provision lays down the procedure to be followed by the Ld. CIT while processing the application u/s 12A(1)(ac) of the Act within the limits of the law and therefore, the said section 12AB does not empower the CIT to impose any conditions while granting such registration. Aggrieved by the Ld. CIT(E) s action of stipulating several conditions while granting registration has been challenged by the assessee by preferring the present appeal. 4. In the present case, it is noted that the assessee trust was already enjoying registration under section 12A of the Act. By virtue of the amendment made by the Relaxation Act, the assessee had applied for registration to the Ld. CIT as prescribed u/s 12A(1)(ac)(i), in terms of which the Ld. CIT shall pass an order in writing registering the trust or institution for a period of five years. It is noted that the Ld. CIT has granted registration on 24.09.2021 u/s 12A for a peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2AB of the Act cannot be allowed by this Tribunal. He submitted that the Tribunal itself is a creature of statute (Income Tax Act, 1961) and therefore it cannot examine the vires of the Rules (Income tax Rules, 1962) and the Forms prescribed therein. Moreover, he submitted that the Rules the Forms are placed before the Parliament in terms of Section 296 of the Act and therefore the Form 10AC containing the stipulated conditions has been impliedly approved by the Legislature. Accordingly, the Ld. CIT-DR contended that this Tribunal doesn t have the power to examine the conditions prescribed by the Rules and the Form. So, the Ld. CIT-DR did not want us to interfere with the conditions prescribed by the Ld. CIT(E) in the impugned order passed in Form 10AC. 8. In his rejoinder, countering the contention of Ld. CIT-DR, the Sr. Counsel Pardiwala painstakingly explained the concepts of subordinate and (delegated) legislation and also elucidated the powers conferred upon this Tribunal to interfere with the prescribed Forms. Taking us through the legislative history of Sections 12A and 12AA of the Act, he first showed us that even under the erstwhile regime of registration of charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se may be, the society would be able to claim the exemptions under section 11 or 12. There is nothing in the language to suggest that an institution of a religious nature is precluded from getting registration under section 12A. The question of exemptions under sections 11 and 12 or, as the case may be, under section 80G, would come only when the said exemptions are claimed by the society at the time when it is assessed to tax. To consider whether the said society would be entitled to the benefits under sections 11 and 12 or, as the case may be, under section 80G would be pre-judging the issues before the grant of certificate. At the stage of grant of certificate under section 12A, the only enquiry which could possibly be made would be whether the society has actually made an application in time and whether the accounts of the society are maintained in the manner as suggested by the said section. Beyond that, the scope of enquiry would not go. In insisting upon the society in changing or amending its byelaws and in refusing to consider the application on the ground that those bye-laws have not been changed so as to exclude the religious aspect from those bye-laws, the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch conferred on the Commissioner the power to cancel registration, no such implied power could be inferred. The relevant extract of the judgment is as under- 21. In our considered opinion, the CIT had no express power of cancellation of the registration certificate once granted by him to the assessee under Section 12A till 01.10.2004. It is for the reasons that, first, there was no express provision in the Act vesting the CIT with the power to cancel the registration certificate granted under Section 12A of the Act. Second, the order passed under Section 12A by the CIT is a quasi judicial order and being quasi judicial in nature, it could be withdrawn/recalled by the CIT only when there was express power vested in him under the Act to do so. In this case there was no such express power. 22. Indeed, the functions exercisable by the CIT under Section 12A are neither legislative and nor executive but as mentioned above they are essentially quasi judicial in nature. 27. It is not in dispute that an express power was conferred on the CIT to cancel the registration for the first time by enacting sub-Section (3) in Section 12AA only with effect from 01.10.2004 by the Finance (No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution. 12. Therefore, according to Shri Pardiwala, the provision as it stood at the time of passing the impugned order contemplated only four conditions, the violation of which could be a ground for cancellation of registration. These four conditions were- i) the activities of the trust are not genuine; ii) the activities are not being carried out in accordance with the objects of the trust; iii) the activities are being carried out in a manner which attracts section 13(1) of the Act; and iv) the trust has violated the provisions of any other law and the order holding that such violation has occurred, has attained finality. 13. In the light of the above, according to Shri Pardiwala, where the Parliament has expressly provided for four (4) conditions, the violation of which can lead to cancellation of registration, it was not open to the Commissioner to, in effect, legislate and prescribe several other conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch it was registered; or (f) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality. 15. According to Shri Pardiwala, it is worth noting that even the Finance Act, 2022 has only amended the provisions dealing with cancellation of registration and the provisions dealing with granting of registration are not amended. Be that as it may, according to him, the amendments are prospectively introduced with effect from 1st April, 2022 and cannot have any bearing on the present proceedings which relate to the order passed by the Commissioner in September, 2021. 16. Shri Pardiwala further submitted that if one accepts the contention of the Ld. CIT-DR that, a Commissioner has an implied power to impose conditions while granting registration, then it would lead to absurd consequences. According to him, not only is there no provision granting such a power, but also there is no provision in the Act which would regulate such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed under the rules can never have any effect on the interpretation or operation of the parent statute. CIT vs. Hindustan Construction Co. Ltd. (1995) (211 ITR 535) (Bom) In any event, the language of the statute cannot be overridden by a form prescribed under the Rules framed under the Act. CIT vs. Apar Industries Ltd. (2010) (323 ITR 411) (Bom) 26. A form provided by a rule-making authority which is a delegate of the Legislature cannot override a statutory provision. Forms are subservient to legislation. Forms are intended to facilitate the implementation of legislation. Forms cannot supplant legislation. CIT vs. Bombay State Transport Corporation (1979) (118 ITR 399) (Bom) Now, it would be permissible for the rule-making authority to provide different percentages of depreciation on the four types of assets as are mentioned in section 10(2)(vi), viz., buildings, machinery, plant or furniture as the property of the assessee. But the question is whether it is permissible for the rule-making authority in view of the language of section 10(2)(vi) to provide for a nil rate of depreciation irrespective of whether this is for a class of asset or a class of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit within which the declaration is to be filed by the registered dear In Stroud's Judicial Dictionary it is said that the words manner and form refer only to the mode in which the thing is to be done, and do not introduce anything from the Act referred to as to the thing which is to be done or the time for doing it. Dr. Sri Jachani Rashtreeya Seva Peetha vs. State of Karnataka (2000 AIR (Karnataka) 91) 36. A reading of the provisions contained in Section 32 of the Central Act, makes it clear that the National Council has been empowered to frame regulations generally for the purposes of carrying out the provisions of the Act. Clause (e) of sub-section (2) of Section 32 specifically spells out that the regulations may provide for the form and the manner in which an application for recognition is to be submitted under sub-section (1) of Section 14 of the Central Act. 39. The question therefore is as to whether the National Council was within its statutory competence to prescribe a condition precedent like the requirement of obtaining 'No Objection Certificate' from the State Government even for maintaining an application for grant of recognition in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for grant of registration, which is not even provided in the Act. He rightly showed us that Rule 17A(5) of the Rules only provides for prescribing a Form to pass an order. The relevant portion of the Rule is reproduced hereunder- (5) On receipt of an application in Form No. 10A, the Principal Commissioner or Commissioner, authorised by the Board shall pass an order in writing granting registration under clause (a), or clause (c), of sub-section (1) of section 12AB read with sub-section (3) of the said section in FormNo.10AC and issue a sixteen digit alphanumeric Unique Registration Number (URN) to the applicants making application as per clause (i) of the subrule (1). 21. Thus, according to Shri Pardiwala, the above Rule does not empower the CIT to impose additional conditions while passing the order. Instead, the Rule only contains the machinery provision enabling the Commissioner to pass an order granting registration in terms of section 12AB of the Act. 22. Countering the submission of Ld. CIT-DR that the Rules Form are laid before Parliament, so the same have the approval of the Parliament and therefore the vires of the same cannot be entertained by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be valid' merely because such rules have been placed before the legislature and are subject to such modification, amendment or annulment, as the case may be, as the legislature may think fit. The process of such amendment, modification or annulment is not the same as the process of legislation and in particular it lacks the assent either of the President or the Governor of the State, as the case may be. We are, therefore, of opinion that the correct view is that notwithstanding the subordinate legislation being laid on the table of the House of Parliament or the State Legislature and being subject to such modification, annulment or amendment as they may make, the subordinate legislation cannot be said to be valid unless it is within the scope of the rule making power provided in the statute. Hukam Chand vs. Prithvi Chand (1972 AIR SC 2427) (SC) (Constitution Bench) 15. The fact that the rules framed under the Act have to be laid before each House of Parliament would not confer validity on a rule if it is made not in conformity with Section 40 of the Act. Regional Transport Officer vs. Associated Transport Madras (1980 AIR SC 1872) The second ground pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before the Legislature and are subject to such modification, amendment or annulment as the Legislature may think fit, and for certain purposes, including for purposes of construction, are to be treated as if contained in the Act, does not in any way detract from the position that they continue to be rules subordinate to the Act, as pointed out by the Supreme Court in Chief Inspector of Mines v. Karam Chand Thapar AIR 1961 SC 838 and Kerala State Electricity Board v. Indian Aluminium Co. [1976] 1 SCR 552. 23. Shri Pardiwala further countered the submissions of Ld. CITDR, that the Tribunal, being a creature of statute, cannot look into the vires of the subordinate legislation. He submitted that the Tribunal has the power to test the vires of subordinate legislations and the Rules. In this regard, he referred to the decision of the Constitutional Bench decision of Hon ble Supreme Court in L. Chandra Kumar (Infra) and Special Bench of the Tribunal in the case of Amar Dye Chem vs. ITO (1983) (3 SOT 384) wherein it was held as under- 21. If this be the legal position, a Tribunal constituted under the Act to administer it cannot also afford to suffer or yield to a rule tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efect by necessary amendment to make it consonant with the parent section and effect. Or with the necessary amendment to the parent section too, the rule can once again be invigorated. Once the defect is cured and it is brought in line with the statute, it becomes effective again. In the former case the declaration erases the provision completely out of the book. In the latter case it is only silenced so long as it utters against the parent statute. That the Tribunal, even as a creature of the statute, has not only the right to do the latter but is even bound to do it is amply made clear by the Supreme Court in Venkatraman s case (supra) when it observed that an authority created by a statute bound to act under the statute would be acting outside the statute if it acts on the basis of a provision that is ultra vires. In other words, it would be the duty of the Tribunal to uphold and act under the statute by ignoring any rule framed in delegated legislation which strikes a contrary or repugnant note to the statute. 24. Reliance was also placed on the decision of this Tribunal in the case of Ginners Pressers vs. DCIT (1993) (46 ITD 185) (Mum), wherein it was held as follows- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred such a power, which was not granted by the statute, on itself, that too while prescribing a Form in which an order was to be passed under Rule 17A of the Rules. 27. Without prejudice to any of the above contentions, the Ld. Sr. counsel submitted that even if it is to be held that the Commissioner does have the power to impose conditions while granting registration, then also he could have only imposed one or more of those conditions which are specifically provided for under the Act. In this regard, he submitted that only one of the conditions imposed in the impugned order, i.e. condition at para 10(m), is a condition prescribed in the Act, which reads as under- The registration so granted is liable to be cancelled at any point of time if the registering authority is satisfied that activities of the Trust/Institution/Non Profit Company are not genuine or are not being carried out in accordance with the objects of the Trust/Institution/Non Profit Company. 28. The Ld. AR submitted that none of the other conditions are in conformity with what is prescribed in the Act and are, therefore, liable to be struck down. 29. It was further brought to our notice that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of the said adoption or modification. 30. To this, the Ld. Sr counsel submitted that, while the Board has, by way of the above Circular, expressly mandated the conditions that can be imposed by the Ld. CIT/ PCIT, the Board has continued to propose conditions which are not provided in the Act and therefore the said Circular was ultra vires the provisions of the Act. He pointed out that, out of the above eleven (11) conditions, only the conditions mentioned in Sr Nos. 6 8 find a reference in section 12AB(4) and (5) of the Act as it then stood then. The assessee therefore urged that all the other conditions must be struck down. 31. We have heard both the parties and perused the relevant provisions of law and the judicial decisions cited before us. Let us first address the initial objection of the Revenue that this Tribunal is not empowered to look into the vires of the conditions stipulated in Form 10AC notified in terms of Rule 17A of the Rules. As held by the Hon ble Supreme Court (Constitutional Bench) in the case of L Chandra Kumar Rao vs. UOI (1997 AIR SC 1125), that even though this Tribunal is indeed a creature of the Statute, it is empowered to test the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the Ld. CITDR, that the conditions stipulated at Sl No. 10 of Form 10AC had been placed and impliedly approved by the Parliament cannot be accepted. Even otherwise, if the said Form was indeed placed before the parliament, in view of Hon ble Supreme Court decision in the case of Hukum Chand Vs UOI (supra), it cannot stipulate anything more than what is contained in the extant section/ provision of law as enacted by the Legislature [ie. in this case, Section 12AB of the Act]. We thus agree with the submissions of the Ld. Sr. counsel that the Ld. CIT(E) could not have been empowered to stipulate conditions while granting registration in Form 10AC, which is otherwise not expressly provided in provisions contained in Section 12AB of the Act. 33. Further, It is noted that this issue at hand, stands covered in favour of the assessee by the decision of the co-ordinate bench of this Tribunal in the case of Saifee Burhani Upliftment Trust vs. CIT (supra). In the said decision, two grounds, as extracted herein-below were raised before the Tribunal- 1. That appellant is entitled to Regular Registration for 5 years as mandated under section 12 AB and DIT was wrong in granting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects . Once he does so, he may take a call on grant of registration, or decline to grant the registration, (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i) . The Commissioner has the authority to, upon such exercise being completed, to (A) pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard . So far as the questions of objects of the trust and genuineness of activities are concerned, these are subjective calls, and obviously, there cannot be any conditions attached to the findings thereto; either one is satisfied with the objects of the trust and about the genuineness of the activities, or one is not. The finding on this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot simply be, or confined to be, cancellation of the registration, as is stated in the impugned, unless the law specifically so provides. To give a simple example, learned Departmental Representative cannot even seriously argue that if the appellant fails to quote PAN in its communication with the income tax department, this lapse per se can be reason enough for the cancellation of registration under section 12A, but then, going by the words of the impugned order, that is what the impugned order states. That brings home the short point that no matter what the conditions attached to the registration granted under section 12A state, these conditions are to be tested on the scheme of the law, and, if that be so- as indeed is the case, these conditions serve no purpose in law. We are therefore unable to see any legally sustainable merits in the approach adopted by the learned Commissioner. 10. Learned Commissioner's guidance about the conduct of the assessee- which is what in substance, the conditions attached to the registration, signify, cannot be treated, no matter how well intended is it, as a condition attached to the registration, nor this fact per se will govern, or l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the PCIT or CIT. He thereafter invited our attention to the provisos the said Section which lays down the form and manner for the PCIT or CIT for granting of approval. Taking us through the same, the Ld. AR submitted that the Ld. PCIT / CIT were not conferred with any powers to impose conditions while granting provisional approval u/s 80G and therefore urged that these conditions be struck down. He pointed out that, similar to section 12AB, the second proviso to section 80G(5) only grants the Commissioner the power to grant registration. And no power to impose any conditions has been conferred on the Commissioner. For this, Shri Pardiwala invited our attention to clause (iii) of the second proviso, which reads as under- (iii) where the application is made under clause (iv) of the said proviso, pass an order in writing granting it approval provisionally for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the institution or fund 40. For completeness, Shri Pardiwala further showed us that section 80G lays down six (6) conditions, the violation of which can lead to the cancellation of the approval. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommunity or caste; (iv) the institution or fund maintains regular accounts of its receipts and expenditure; (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 253 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority; 42. Referring to the above, Shri Pardiwala submitted that, in law, an approval under section 80G can only be cancelled if the activities of the Trust are not genuine or the conditions specified in clauses (i) to (v) above are violated. He pointed out that none of the conditions imposed in the impugned order are in conformity with the six (6) conditions mentioned in the second proviso to section 80G(5) of the Act. 43. It was submitted that Circular no. 11 of 2022 has also retrospectively modified the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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