Improvement Trust V. Commissioner of Income Tax, Aayakar Bhawan, Amritsar

ITA/73/2013

AI Insights

The case involves the Improvement Trust, which was initially constituted under the Punjab Town Improvement Trust Act, 1922, and sought registration as a charitable trust under Section 12AA of the Income Tax Act, 1961. The trust's registration was initially denied and later granted but was subject to review and ultimately cancelled by the Commissioner of Income Tax, Bathinda, due to the trust's activities being deemed as carrying out trade, commerce, or business with a profit motive. The Tribunal upheld this decision, leading to the current appeal. The main legal question revolves around the interpretation of 'charitable purpose' under the amended Section 2(15) of the Income Tax Act, 1961, and whether the trust's activities fall within this definition post-amendment.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 795362 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 06-08-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Punjab Town Improvement Trust Act, 1922
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: DENESH GOYAL
• Assessee Lawyers: K L GOYAL; RAJIV SHARMA
• Keywords: Charitable Trust; Income Tax; Legal provisions; Profit motive; Registration cancellation
• Section: 254(2); 12AA; 260A; 10(20A); 226(3)

Judgement Text

"ITA No.73 of 2013 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.73 of 2013(O&M) Date of decision: 06.08.2014 Improvement Trust through Shri APS Virk s/o Late Shri Kartar Singh Virk, Chairman, Dr. Mela Ram Road, Bathinda, Punjab. ....... Appellant Vs. Commissioner of Income Tax, Aayakar Bhawan, Amritsar .....Respondent CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE FATEH DEEP SINGH Present: Mr. K.L.Goyal, Sr. Advocate with Mr. Rajiv Sharma, Advocate for the appellant. Mr. Denesh Goyal, Advocate for the revenue Ajay Kumar Mittal,J. 1. This order shall dispose of ITA Nos.73 of 2013 and 22 of 2014 as according to the learned counsel for the parties, the issue involved in both these appeals is similar. However, the facts are being extracted from ITA No.73 of 2013. 2. ITA No.73 of 2013 has been preferred by the appellant Improvement Trust under Section 260A of the Income Tax Act, 1961 (in short, \"the Act\") against the order dated 18.12.2012, Annexure A.4 passed by Income Tax Appellate Tribunal, Amritsar (in short, “the Tribunal”) in ITA No.366(ASR)/2012, claiming following substantial question of law:- GURBAX SINGH 2014.11.11 12:33 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.73 of 2013 (O&M) 2 \"Whether on the facts and in the circumstances of the case and in view of legal provisions the ITAT was justified in confirming the order of CIT. Bathinda in cancelling the registration of appellant trust under section 12AA of the Income Tax Act, 1961 on the ground of its carrying out activities in accordance with a statute and thereby holding it to be carrying out activities of trade, commerce or business with a profit motive?\" 3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.73 of 2013 may be noticed. The appellant trust was constituted under the Punjab Town Improvement Trust Act, 1922 (in short, \"the 1922 Act\"). Income of the appellant trust was exempt under section 10(20A) of the Act upto assessment year 2002-03. However, the said section was omitted by Finance Act, 2002 w.e.f 2003. By way of notification dated 4.4.2002, the State Government dissolved appellant trust and renewed the same w.e.f 12.6.2003. The appellant applied for registration as charitable trust under section 12AA of the Act on 15.5.2005 seeking registration w.e.f 12.6.2003 as the trust was created again by the State Government with effect from the said date. However the application was rejected by Commissioner of Income Tax, Bathinda due to delay in filing application. The appellant filed appeal before the Tribunal which was dismissed vide order dated 19.9.2008. In the meantime, assessments for the assessment years 2005-06 to 2008-09 were completed creating demands of different amounts which were recovered by attachment. In furtherance of notices, the revenue passed orders dated 25.3.2009 under section 226(3) of the Act attaching the bank Accounts of the appellant. Thereafter, the Banks released payment to the revenue as per copies of letters by the banks to the revenue GURBAX SINGH 2014.11.11 12:33 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.73 of 2013 (O&M) 3 and to the appellant. The appellant filed application udner section 254(2) of the Act which was decided in favour of the appellant vide order dated 4.3.2010, Annexure A.1. Thereafter, registration under section 12AA of the Act was granted to the appellant w.e.f 13.6.2003 by the Commissioner of Income Tax vide order dated 13.8.2010 as per directions of the Tribunal. However, the registration was subject to review under section 12AA(3) of the Income Tax Act, 1961 in view of the amendment to the definition of 'charitable purpose' under section 2(15) w.e.f 1.4.2009. On 20.6.2012, the CIT issued show cause notice to the appellant as to why the registration granted be not cancelled under section 12AA(3) of the Act. The appellant explained that it was a trust constituted under the 1922 Act and was carrying on activities in accordance with law. The appellant also placed on record the audited accounts, reports etc. However, the CIT rejected the registration granted to the appellant holding that since the proviso to section 2(15) had been inserted w.e.f 1.4.2009 so the appellant trust could not draw benefit of registration w.e.f 1.4.2009 i.e. from assessment year 2009-10. The appellant filed appeal before the Tribunal which was also dismissed vide order dated 18.12.2012, Annexure A.4. Hence the instant appeals by the appellant trust. 4. We have heard learned counsel for the parties and perused the record. 5. Learned counsel for the appellant submitted that in view of the provisions of 1922 Act, the matter is required to be remanded to the Tribunal to adjudicate whether the activities of the appellant trust were covered within the meaning of charitable in nature or not even after the insertion of the proviso to Section 2(15) of the Act w.e.f 1.4.2009 i.e. in GURBAX SINGH 2014.11.11 12:33 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.73 of 2013 (O&M) 4 respect of assessment years 2009-10 onwards. No serious objection was raised by the learned counsel for the revenue to the aforesaid submission. 6. Accordingly, the impugned orders passed by the Tribunal in both the appeals are set aside and the matter is remanded to the Tribunal to decide the same afresh keeping in view the proviso to Section 2(15) of the Act inserted w.e.f April 1, 2009 with reference to the provisions of the 1922 Act after affording an opportunity of hearing to the parties in accordance with law. Needless to say, anything observed hereinbefore shall not be taken to be expression of opinion on the merits of the controversy. Sincere efforts shall be made to decide the matter expeditiously. As a result, all the appeals stand disposed of. (Ajay Kumar Mittal) Judge August 06, 2014 (Fateh Deep Singh) Judge ‘gs’ GURBAX SINGH 2014.11.11 12:33 I attest to the accuracy and integrity of this document High Court Chandigarh "