The Patiala Improvement Trust, Patiala V. CIT, Patiala

ITA 1135/CHANDI/2014

• Counselvise Citation: [2016] 128 COUNSELVISE.COM (IT) 9769 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-11-2015
• Assessment Year: 2015-2016
• Appeal Filed On: 22-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Earning of tax free income; Retrospective amendment; Benefit of exemption; Cancellation of registration; Set aside
• Section: 12; 12A; 12AA; 250; 13

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1135/CHD/2014 ASSESSMENT YEAR :2015-16 THE PATIALA IMPROVEMENT TRUST VS. THE CIT PATIALA PATIALA PAN NO.AAAJI0034L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. Y.K. SUD RESPONDENT BY : SH. SUSHIL KUMAR DATE OF HEARING : 28/04/2016 DATE OF PRONOUNCEMENT : 17/06/2016 ORDER PER ANNAPURNA GUPTA, A.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF LD. CIT, PATIALA, DATED 13.10.2014 PASSED U/S 12 AA(3) OF THE INCOME TAX ACT, 1961 CANCELING THE REGISTRATION GRANTED U/S 12AA OF THE ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE CIT WAS NOT JUSTIFIED IN CANCELLING THE RE GISTRATION OF THE TRUST GRANTED U/S 12AA ON INVOKING THE PROVISIONS OF SECTION 12AA (3). 2. THAT THE ACTION OF THE CIT OF CANCELLATION OF THE R EGISTRATION AMOUNTS TO CONTEMPT OF THE PB. & HARYANA HIGH COURT WHO HAVE A PPROVED AND DECLARED THE OBJECTS OF THE IMPROVEMENT TRUSTS IN PUNJAB AS CHARITABLE AND OF GENERAL PUBLIC UTILITY IN THE CASE OF MOGA IMPROVEMENT TRUS T. THE CIT FAILED TO APPRECIATE THAT THE ORDER OF THE HIGH COURT WAS BINDING TOOTH & NAIL AND NO FINDING ON THE OBJECTS COULD HAVE BEEN GIVEN. 3. THAT THE CIT HAS FAILED TO RECORD HIS SATISFACTION ON THE TWO CONDITIONS PRESCRIBED IN SECTION 12AA(3) REGARDING ITS VIOLATI ON AND HAS CLEARLY EXCEEDED HIS POWERS IN THE CANCELLATION OF THE REGISTRATION. 4. THAT THE CIT FAILED TO APPRECIATE THE AMENDMENT IN LAW IN SECTION 13(8) AND 143 B PROVISO MADE BY THE FINANCE ACT 2012 W.E.F. 1 .4.2009 AND ALSO THE BOARD CIRCULAR NO. 11 OF 2880 DATED 19.12.2008 WHICH WAS BINDING UPON HIM. 5. THAT THE ORDER OF THE CIT IS AGAINST THE LAW AND FA CTS OF THE CASE. 3. BRIEF FACTS RELATED TO THE ISSUE ARE THAT THE AS SESSEE IS A SOCIETY CREATED BY THE STATE GOVERNMENT U/S 3 OF THE PUNJAB TOWN IMPRO VEMENT ACT, 1922 TO CARRY OUT DEVELOPMENT OF PATIALA CITY. THE MAIN OBJECTS O F THE ASSESSEE WAS: 2 - UTILISATION OF LAND & ALLOTMENT OF PLOT AND FLATS A ND MULTI STOREYED HOUSE BY DRAW OF LOTS AND SELL THE COMMERCIAL PLOTS / SHOPS BY AUCTION. - CONSTRUCTION OF ROADS AND PARKS - PROVIDED PLOTS FOR HOUSING TO LOWER INCOME GROUP PE RSONS POOR AND DOWN TRODDEN SECTIONS OF THE SOCIETY AT SUBSIDIZED RATES . - SHIFTING OF KABARI MARKET OUT OF PATIALA CITY. - ESTABLISH OF TRANSPORT NAGAR FOR TRUCKS. - PROVIDING DRINKING WATER AND SEWERAGE FACILITIES IN AND AROUND CITY. 4. THE ASSESSEE HAD BEEN GRANTED REGISTRATION U/S 1 2AA OF THE ACT VIDE ORDER DATED 26/28-04-2006 W.E.F. 12.06.2003. THEREA FTER, A SHOW CAUSE NOTICE DATED 14.03.2014 REPRODUCED AT PARA3 OF THE ORDER OF CIT WAS ISSUED BY THE COMMISSIONER OF INCOME TAX PROPOSING TO CANCEL THE REGISTRATION GRANTED. DUE REPLY WAS FILED BY THE ASSESSEE WHICH IS REPRODUCED AT PARA 4 OF THE ORDER OF THE CIT. AFTER CONSIDERING THE SAME, THE LD. CIT HELD T HAT THE ACTIVITIES OF PURCHASE, DEVELOPMENT AND SALE OF PROPERTIES CARRIED OUT BY T HE ASSESSEE WERE IN THE NATURE OF TRADE AND COMMERCE SINCE THE MAIN INTENTI ON OF THE TRUST APPEARED TO BE EARNING HUGE PROFITS. ELABORATE DISCUSSION WA S MADE BY THE LD. CIT ON THIS ASPECT THAT THE ACTIVITY OF THE ASSESSEE DID NOT FA LL UNDER THE PURVIEW OF GENERAL PUBLIC UTILITY UNDER THE AMENDED SECTION 2(15) OF T HE IT ACT, 1961. IN VIEW OF THE FINDINGS, THE LD. CIT CANCELLED THE REGISTRATION GR ANTED TO THE ASSESSEE U/S 12A OF THE ACT. AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE PRESENT APPEAL BEFORE US, TAKING THE ABOVE MENTIONED GROUNDS. 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THIS ISSUE ON IDENTICAL SET OF FACTS HAS BEEN DECIDED IN FAVOUR O F THE ASSESSEE BY THE AMRITSAR BENCH OF ITAT IN THE CASE OF KAPURTHALA DEVELOPMENT TRUST VS. CIT 60 TAXMANN.COM 301 FOLLOWING WHICH THE CHANDIGARH BENC H OF THE ITAT HAS ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF M/S PATIALA URBAN PLANNING AND DEVELOPMENT AUTHORITY VS. CIT IN ITA N O. 775/CHD./2014 DT.04/12/2015. 3 6. ON THE OTHER HAND, LD. CIT DR RELIED UPON THE OR DER CANCELLING THE REGISTRATION PASSED U/S 12AA(3). LD. CIT DR FILED A WRITTEN NOTE DATED 27.04.2016 BEFORE US WHICH IS REPRODUCED AS UNDER:- THE ONLY ISSUE INVOLVED IN THIS YEAR AND WHICH HAS BEEN RAISED BY THE ASSESSEE IS THAT LD CIT HAS ERRED IN CANCELLING THE REGISTRATIO N OF THE TRUST GRANTED U/S 12AA ON INVOKING THE PROVISION OF SECTION 12AA(3). 2.1. THE LD CIT HAS DISCUSSED IN DETAILS AT PARAS 5 TO 17 AS TO WHY THE ACTIVITIES OF THE ASSESSEE ARE NOT CHARITABLE AND THEREFORE THE R EGISTRATION GRANTED U/S 12AA(1) DESERVES TO CANCELLED U/S 12AA(3) OF THE AC T. 2.2 WHILE COMING TO THE ABOVE CONCLUSION THE LD CIT HAS RELIED ON A HOST OF JUDICIAL PRONOUNCEMENTS WHICH ARE SQUARELY APPLICAB LE TO THE FACTS OF THE CASE OF THE ASSESSEE. IN THIS REGARD RELIANCE IS FURTHER PLACED ON THE FOLLOWING CASE LAWS: I. DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COUR T IN THE CASE OF BHATINDA IMPROVEMENT TRUST (COPY ENCLOSED VIDE THE PAPER BOO K SUBMITTED BY THE ASSESSEE ON 18.11.2015) IN THIS DECISION THE HON'BL E COURT HAS DIRECTED THE HON'BLE TRIBUNAL, AMRITSAR VIDE PARA 5 OF THE ORDER TO: 'ADJUDICATE WHETHER THE ACTIVITIES OF THE APPELLANT TRUST WERE COVERED WITHIN THE MEANING OF CHARITABLE IN NATURE OR NOT EVEN AFTER T HE INSERTION TO SECTION 2(15) OF THE ACT W.E.F.1.4.2009 IN RESPECT OF YEARS 2009-10 ONWARDS' THE ABOVE OBSERVATION OF THE HON'BLE HIGH COURT LEA VES NO DOUBT AS TO THE APPLICABILITY OF FIRST PROVISO TO SECTION 2(15) TO THE CONDITIONS LAID DOWN IN SECTION 12AA(3). IN FACT THIS IS SUBJECT MATTER OF CONSIDER ATION BEFORE THE HON'BLE SUPREME COURT AS DISCUSSED BELOW. II. DECISION OF CHENNAI TRIBUNAL IN THE CASE OF TAM IL NADU CRICKET ASSOCIATION [2013] 32 TAXMANN.COM 50 (CHENNAI - TRIB.) WHEREIN THE HON'BLE TRIBUNAL HAS OBSERVED THAT - '56. THERE CANNOT BE A CONFLICT BETWEEN THE FIRST P ROVISO INSERTED UNDER SECTION 2(15) AND THE CONDITIONS LAID DOWN IN SECTION 12AA( 3) FOR CANCELLING THE REGISTRATION. IF THERE IS A CONFLICT BETWEEN THE TW O. THE LAW STATED IN THE PROVISO WILL BE DEFEATED. SO ALSO THE LAW STATED IN SECTION 12AA (3) WILL BE DEFEATED THEREFORE, WHEN THE ASSESSEE IS HIT BY THE PROVISO TO SECTION 2(15), ITS CONSEQUENTIAL REFLECTION IS AUTOMATIC ON SECTION 12 AA(3). WHICH PRIMA FACIE ESTABLISHES THAT THE ACTIVITIES CARRIED ON BY THE A SSESSEE ARE NOT GENUINE, INASMUCH AS IT IS NOT FOR ADVANCEMENT OF ANY OBJECT OF PUBLIC UTILITY. THE TWO CONDITIONS LAID DOWN IN SECTION 12AA(3) CANNOT BE R OAD ANA UNDERSTOOD IN DISREGARD OF THE PROVISO TO SECTION 2(15).' THIS DECISION OF THE HON'BLE TRIBUNAL WAS REVERSED BY THE HON'BLE CHENNAI HIGH COURT. HOWEVER. SLP AGAINST THE DECISION OF THE CHE NNAI HIGH COURT HAS SINCE BEEN ADMITTED BY THE HON'BLE SUPREME COURT - DIT VS . TAMILNADU CRICKET ASSOCIATION (COPY ENCLOSED): SECTION 12AA, READ WITH SECTIONS 2(15), 11. 12. 12A AND 13, OF THE INCOME-TAX ACT. 1961 - CHARITABLE OR RELIGIOUS TRUST - REGISTRATION PROCEDURE (CANCELLATION OF REGISTRATION) - COMMISSIONER AFTER SATISFYING HIMSE LF ABOUT GENUINENESS OF OBJECTS OF ASSESSEE. A CRICKET ASSOCIATION, GRANTED REGISTR ATION TO IT UNDER SECTION 12AA ON 28-3-2003 - LATER ON 19-7-2011 HE HAVING NOTICED TH AT ASSESSEE WAS RECEIVING INCOME FROM HOLDING OF CRICKET MATCHES, HELD THAT A CTIVITIES OF ASSESSEE NOT BEING CHARITABLE AS PER SECTION 2(15) - HE. THEREFORE, CA NCELLED REGISTRATION GRANTED TO ASSESSEE - HIGH COURT BY IMPUGNED ORDER HELD THAT S INCE OBJECTS REMAINED AS THEY WERE IN YEAR 2003. CANCELLATION OF REGISTRATIO N WAS NOT JUSTIFIED - WHETHER SPECIAL LEAVE PETITION FILED AGAINST IMPUGNED ORDER WAS TO BE GRANTED - HELD, YES [IN FAVOUR OF REVENUE] CASE REVIEW 4 TAMIL NADU CRICKET ASSOCIATION V. DIT (EXEMPTIONS) (2013] 40 TAXMANN.COM 250 (MAD.) [SLP GRANTED] N.K. KAUL. ASG, ARIJIT PRASAD. D.L. CHIDANAND AND M RS. ANIL KATIYAR. ADVS. FOR THE APPELLANT. KAPIL SIBAL. SR. ADV.. MS. RADHA RANGASW AMY AND RUPENDRA SINGH. ADVS. FOR THE RESPONDENT. ORDER I DELAY CONDONED. 2. LEAVE GRANTED. ' 3. IN VIEW OF THE ABOVE IT IS SUBMITTED THAT THE OR DER OF THE LD CIT IS FORTIFIED BY THE DECISION OF THE HON'BLE PUNJAB AND HARYANA HIGH COU RT ALSO THE SLP ADMITTED BY THE HON'BLE SUPREME COURT (SUPRA) 7. HAVING HEARD THE RIVAL SUBMISSIONS AFTER CONSIDE RING THE ENTIRE MATERIAL ON RECORD AND AFTER GOING THROUGH THE ORDER PASSED U/S 12AA(3), WE FIND THAT REGISTRATION U/S 12AA WAS GRANTED IN THIS CASE VIDE LETTER DATED 26/28.04.2006, WHICH WAS WITHDRAWN U/S 12AA(3) BY LD. CIT IN VIEW OF THE AMENDMENT TO SECTION 2(15). THIS ISSUE THAT WHETHER REGISTRATION GRANTED U/S 12AA CAN BE CANCELLED UNDER SUB-SECTION 3 OF THAT SECTION IN VI EW OF THE SECTION 2(15) WAS CONSIDERED EXPANSIVELY BY AMRITSAR BENCH OF ITAT IN THE CASE OF KAPURTHALA IMPROVEMENT TRUST VS. CIT 60 TAXMANN.COM 301 (AMRIT SAR-TRIB) SUPRA, WHEREBY THE AMRITSAR BENCH OF THE TRIBUNAL HELD THAT THE PR OVISO TO SECTION 2(15) OF THE ACT HAS NO ROLE TO PLAY IN MATTER RELATING TO REGIS TRATION OF THE TRUST UNDER SECTION 12A OF THE ACT IN RESPECT OF GRANTING OR DECLINING OR CANCELLING REGISTRATION. THE RELEVANT FINDINGS OF THE ITAT AMRITSAR BENCH ARE AS FOLLOWS:- 9. WE FIND THAT, AS LEARNED COUNSEL RIGHTLY POINTS OUT. THE SCOPE OF POWERS OF THE COMMISSIONER UNDER SECTION 1 2AA(3) FOR CANCELLATION OF REGISTRATION ALREADY GRANTED IS VERY LIMITED IN SCOPE IN AS MUCH AS IT CAN ONLY BE INVOKED ONLY WHE N (I) THAT THE ACTIVITIES OF THE TRUST ARE NOT GENUINE, AND(II )THAT THE ACTIVITIES OF THE TRUST OR THE INSTITUTION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION. SECTION 12AA(3) SPECIFICALLY PROVIDES THAT WHEN THE CIT 'IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDA NCE 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'. IT IS NOT EVEN THE CASE OF THE CIT THAT THE ACTIVITIES OF THE ASSESSEE TRUST ARC 'NOT GENUI NE' OR THAT THE 'ACTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WI TH THE OBJECTS' OF THE ASSESSEE TRUST. THE CASE OF THE CIT RESTS ON THE FI RST PROVISO TO SECTION 2(15) COMING INTO PLAY ON THE FACTS OF THIS CASE BUT THEN SUCH A FACTOR CANNOT WARRANT OR JUSTIFY THE POWERS UNDER SECTION 12AA(3)BEING INVOKED. WE, THEREFORE, UPHOLD THE GRIEVANCE OF THE ASSESSEE THAT THE ACTION OF THE LE ARNED COMMISSIONER, IN WITHDRAWING THE REGISTRATION UNDER SECTION 12AA(3), WAS WELL BEYOND THE LIMITED 5 SCOPE OF THE POWERS CONFERRED ON HIM BY THE STATUTE . THE ASSESSEE, THEREFORE, MUST SUCCEED IN THE APPEAL FOR THIS SHORT REASON AL ONE. 10. THERE IS, HOWEVER, A MUCH MORE FUNDAMENTAL A RE ASON FOR THE ASSESSEE SUCCEEDING IN THIS APPEAL. IN OUR CONSIDERED VIEW, THE CONSIDERATIONS WITH RESPECT TO THE-FIRST PROVISO TO SECTION 2(15) COMIN G INTO THE PLAY AND, FOR THAT REASON, THE OBJECTS OF AN ASSESSEE TRUST OR INSTITU TION BEING HELD TO BE NOT COVERED BY THE DEFINITION OF CHARITABLE PURPOSES', HAVE NO ROLE TO PLAY IN THE MATTERS RELATING TO REGISTRATION OF A TRUST OR INSTITUTION UNDER SECTION 12A OR 12AA - WHETHER IN RESPECT OF GRANTING OR DECLINING OF A REGISTRATI ON OR IN RESPECT OF CANCELLATION, EVEN IF OTHERWISE PERMISSIBLE, OF A REGISTRATION. A CLOSE LOOK AT THE SCHEME OF THE ACT WOULD UNAMBIGUOUSLY SHOW THIS ASPECT OF THE MAT TER.' 11. LET US BEGIN BY TAKING A LOOK AT SECTION 2(15) WHICH DEFINES CHARITABLE ACTIVITIES AND FIRST AND SECOND PROVISOS THERETO. T HESE STATUTORY PROVISIONS ARE AS FOLLOWS: (15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATE RSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR F EE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY; PROVIDED FURTHER THAT THE FIRST PROV ISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY-FIVE LAKH RUPEES OR LESS IN THE PREVIOUS YEAR; (EMPHASIS BY U NDERLINING SUPPLIED BY US) 12. WHAT IS CLEAR FROM THE RIDERS IN THE ABOVE DEFI NITION OF CHARTABLE PURPOSES IS THAT RIDER SET OUT THEREIN, UNDER FIRST PROVISO TO SECTION 2(15), CAN ONLY COME INTO PLAY ON YEAR TO YEAR BASIS AND NOT IN ABSOLUTE TERM S. THE SAME ACTIVITY CAN BE HIT BY THIS RIDER IN ONE YEAR AND THUS THE ASSESSEE TRU ST OR INSTITUTION MAY NOT QUALIFY TO BE EXISTING FOR CHARITABLE PURPOSES, AND THAT VER Y ACTIVITY OF THE ASSESSEE TRUST OR INSTITUTION MAY REMAIN UNAFFECTED BY THE SAME DISAB LING PROVISION FOR ANOTHER YEAR. THE REASON IS THAT IT IS NOT ONLY THE NATURE OF THE ACTIVITY BUT ALSO THE LEVEL OF ACTIVITY WHICH, TAKEN TOGETHER, DETERMINE WHETHER T HIS DISABLING CLAUSE CAN COME INTO PLAY. THE SAFEGUARD AGAINST THE OBJECTS OF THE TRUST BEING VITIATED INSOFAR AS THEIR CHARACTER OF CHARITABLE ACTIVITIES IS CONCE RNED, IS INBUILT IN THE PROVISIONS OF SECTION 13(8) WHICH WAS BROUGHT INTO EFFECT WITH EF FECT FROM THE SAME POINT OF TIME WHEN PROVISO TO SECTION 2(15) WAS INTRODUCED I.E. WITH EFFECT FROM 1ST APRIL 2009. SECTION 13(8) PROVIDES AS FOLLOWS: SECTION 13 - SECTION 11 NOT TO APPLY IN CERTAIN CASES. . (8) NOTHING CONTAINED IN SECT ION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE ANY INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF IF THE PROVISIONS OF THE FIRST PROVISO TO CLAUSE (15) OF SECTION 2 BECOME APPLICABLE IN THE CASE OF SUCH PER SON IN THE SAID PREVIOUS YEAR. 13. WHILE INTRODUCING THIS AMENDMENT, EXPLANATORY M EMORANDUM TO THE FINANCE BILL 2012 (HTTP://INDIABUDGET.NIC.IN/BUDGET2012-201 3/UB2012-13/MEM/MEM1.PDF) EXPLAINED THE REASONS AND BACKDROP OF THIS LEGISLAT IVE AMENDMENT AS FOLLOWS: ASSESSMENT OF CHARITABLE ORGANIZATION IN CASE COMME RCIAL RECEIPTS EXCEED THE SPECIFIED THRESHOLD SECTIONS 11 AND 12 OF THE ACT E XEMPT INCOME OF ANY CHARITABLE TRUST OR INSTITUTION, IF SUCH INCOME IS APPLIED FOR CHARITABLE PURPOSES IN INDIA AND SUCH INSTITUTION IS REGISTERED UNDER SECT ION 12AA OF THE ACT. ... SECTION 2(15) OF THE ACT PROVIDES DEFINITION OF CHA RITABLE PURPOSE. IT INCLUDES ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS CHARITABLE PURPOSE PROVIDED THAT IT DOES NOT INVOLVE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. 2ND PROVISO TO SAID SECTION PROVIDES THAT IN CASE WHERE THE ACTIVITY OF ANY TRUST OR INSTITUTION IS O F THE NATURE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, AND IT INVOLVES CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS; BUT THE AGGREGATE VALUE OF RECEIPTS FROM THE COMMERCIAL ACTIVITIES DOES NOT EX CEED RS. 25,00,000 IN THE PREVIOUS YEAR, THEN THE PURPOSE OF SUCH INSTITUTION SHALL BE CONSIDERED AS CHARITABLE, AND ACCORDINGLY, THE BENEFITS OF EXEMPT ION SHALL BE AVAILABLE TO IT. THUS, A CHARITABLE TRUST OR INSTITUTION PURSUING AD VANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY MAY BE A CHARITABLE TRUST IN ONE YEA R AND NOT A CHARITABLE TRUST IN ANOTHER YEAR DEPENDING ON THE AGGREGATE VALUE OF RE CEIPTS FROM COMMERCIAL 6 ACTIVITIES. THERE IS, THEREFORE, NEED TO EXPRESSLY PROVIDE IN LAW THAT NO EXEMPTION WOULD BE AVAILABLE FOR A PREVIOUS YEAR, TO A TRUST OR INSTITUTION TO WHICH FIRST PROVISO OF SUBSECTION 2(15) BECOME APPLICABLE FOR THAT PART ICULAR PREVIOUS YEAR. HOWEVER, THIS TEMPORARY EXCESS IN ONE YEAR MAY NOT BE TREATED AS ALTERING THE VERY NATURE OF THE TRUST OR INSTITUTION SO AS TO LE AD TO CANCELLATION OF REGISTRATION OR WITHDRAWAL OF APPROVAL OR RESCINDING OF NOTIFICATIO N ISSUED IN RESPECT OF TRUST OR INSTITUTION. THEREFORE, THERE IS NEED TO ENSURE THA T IF THE PURPOSE OF A TRUST OR INSTITUTION DOES NOT REMAIN CHARITABLE DUE TO APPLI CATION OF FIRST PROVISO ON ACCOUNT OF COMMERCIAL RECEIPT THRESHOLD PROVIDED IN SECOND PROVISO IN A PREVIOUS YEAR. THEN, SUCH TRUST OR INSTITUTION WOUL D NOT BE ENTITLED TO GET BENEFIT OF EXEMPTION IN RESPECT OF ITS INCOME FOR THAT PREVIOU S YEAR FOR WHICH SUCH PROVISO IS APPLICABLE. SUCH DENIAL OF EXEMPTION SHALL BE MANDA TORY BY OPERATION OF LAW AND WOULD NOT BE DEPENDENT ON ANY WITHDRAWAL OF APP ROVAL OR CANCELLATION OF REGISTRATION OR A NOTIFICATION BEING RESCINDED. IT IS, THEREFORE, PROPOSED TO AMEND . SECTION 13.. OF THE ACT TO ENSURE THAT SUCH O RGANIZATION DOES NOT GET BENEFIT OF TAX EXEMPTION IN THE YEAR IN WHICH ITS RECEIPTS FROM COMMERCIAL ACTIVITIES EXCEED THE THRESHOLD WHETHER OR NOT THE REGISTRATION OR APPROVAL GRANTED OR NOTIFICATION ISSUED IS CANCELLED, WITHDR AWN OR RESCINDED. THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FROM 1ST APRIL, 2009 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2009-10 AND SUBSEQUENT ASSESSMENT YEARS. (EMPHASIS BY UNDERLING SUPPLIED B Y US) 14. IT IS THUS CLEAR THAT THE IMPACT OF THE PROVISO TO SECTION 2(15) BEING HIT BY THE ASSESSEE WILL BE THAT, TO THAT EXTENT, THE ASSESSEE WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THE MERE FACT THAT THE ASSESSEE IS GRANTED REGISTRATION UNDER SECTION 12 A OR 12AA AS A CHARIT ABLE INSTITUTION WILL HAVE NO BEARING ON THIS DENIAL OF REGISTRATION. AS A COROLL ARY TO THIS LEGAL POSITION, THE FACT THAT THE OBJECTS OF THE ASSESSEE MAY BE HIT BY THE PROVISO TO SECTION 2(15) CANNOT HAVE ANY BEARING ON THE GRANT, DENIAL OR WITHDRAWAL OF THE REGISTRATION UNDER SECTION 12AA. 15. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT T HAT IN TERMS OF THE SECOND PROVISO TO SECTION 2(15), WHICH WAS INTRODUCED BY THE FINAN CE ACT 2010 WITH RETROSPECTIVE EFFECT FROM 1ST APRIL 2009, THE LEGAL PRESCRIPTION SET OUT IN FIRST PROVISO TO SECTION 2(15) CANNOT COME INTO PLAY IF THE AGGR EGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY-F IVE LAKH RUPEES OR LESS IN THE PREVIOUS YEAR. CLEARLY, THEREFORE, IN ORDER THAT T HE BENEFITS UNDER SECTION 11 ARE DECLINED TO THE ASSESSEE ON THE GROUND THAT IT IS E NGAGED IN SUCH ACTIVITIES AS MAY BE HIT BY THE FIRST PROVISO TO SECTION 2(15), N OT ONLY THE ASSESSEE MUST BE ENGAGED IN CARRYING OUT SUCH ACTIVITIES AS MAY HIT THE FIRST PROVISO TO SECTION 2(15) BUT ALSO THE RECEIPTS OF THE ASSESSEE FROM SUCH ACT IVITIES MUST EXCEED A SPECIFIED LIMIT. THE SECOND LIMB OF THIS DISABILITY CLAUSE NE EDS TO BE SATISFIED WITH RESPECT TO EACH ASSESSMENT YEAR. OBVIOUSLY, THEREFORE, THIS AS PECT OF THE MATTER CANNOT BE EXAMINED AT THE STAGE OF THE GRANT OR WITHDRAWAL OF REGISTRATION SINCE THE REGISTRATION EXERCISE IS A ONE TIME EXERCISE AND NO T SOMETHING WHICH MUST BE DONE FOR EACH ASSESSMENT YEAR SEPARATELY. THAT IS P RECISELY THE REASON, AS NOTED IN THE EXPLANATORY MEMORANDUM, AS TO WHY THE REMEDY FOR THE ACTIVITIES BEING HIT BY THE FIRST PROVISO TO SECTION 2(15) LIES NOT IN G RANT, DECLINE OR WITHDRAWAL OF REGISTRATION BUT IN DECLINING THE BENEFITS OF EXEMP TION UNDER SECTION 11 ON THAT COUNT, ON YEAR TO YEAR BASIS, NOTWITHSTANDING THE S TATUS OF REGISTRATION. 16. THE SCHEME OF THE ACT, IN THIS RESPECT, IS THUS CLEAR. THE STATUS OF REGISTRATION UNDER SECTION 12A OR 12AA HAS NO BEARING, AS RECOGN IZED IN SECTION 13(8), ON THE AVAILABILITY OF EXEMPTION UNDER SECTION 11. TO THE EXTENT INCOME OF THE ASSESSEE ARISES FROM THE ACTIVITIES HIT BY THE FIRST PROVISO TO SECTION 2(15) IN ANY ASSESSMENT YEAR, THE ASSESSEE WILL BE DISENTITLED FOR EXEMPTIO N UNDER SECTION 11 TO THAT EXTENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FA CT THAT THE DISENTITLEMENT FOR EXEMPTION UNDER SECTION 11, AS A RESULT OF THE ACTI VITIES OF AN ASSESSEE BEING HELD TO BE NOT FOR CHARITABLE PURPOSES UNDER SECTION 2(1 5) READ WITH PROVISOS THERETO, IS IN RESPECT OF ENTIRE INCOME OF THE ASSESSEE TRUST O R INSTITUTION BUT ONLY FOR THE ASSESSMENT YEAR IN RESPECT OF WHICH THE FIRST PROVI SO TO SECTION 2(15) IS TRIGGERED. 17. IF THE STATUS OF REGISTRATION IS TO BE DECLINED TO AN ASSESSEE ONLY ON THE GROUND THAT SOME OF THE OBJECTS MAY BE HIT BY THE FIRST PR OVISO TO SECTION 2(15) BUT THE ASSESSEES RECEIPTS FROM SUCH ACTIVITIES DONOT EXCE ED SPECIFIED THRESHOLD IN A PARTICULAR ASSESSMENT YEAR, THE ASSESSEE WILL BE SU BJECTED TO UNDUE HARDSHIP IN THE SENSE THAT WHILE THE ASSESSEE WILL BE DISENTITL ED TO EXEMPTION UNDER SECTION 11 7 DUE TO DENIAL OF REGISTRATION UNDER SECTION 12 A OR 12AA WHICH IS SINE QUA NON FOR ADMISSIBILITY OF EXEMPTION UNDER SECTION 11. ON THE OTHER HAND, IF THE STATUS OF REGISTRATION IS GRANTED TO THE ASSESSEE EVEN WHEN S OME OF THE OBJECTS MAY BE HIT BY THE FIRST PROVISO TO SECTION 2(15) AND THE ASSES SEES RECEIPTS FROM SUCH ACTIVITIES DO EXCEED SPECIFIED THRESHOLD, NO PREJUDICE WILL BE CAUSED TO THE LEGITIMATE INTERESTS OF THE REVENUE BECAUSE, NOTWITHSTANDING T HE STATUS OF REGISTRATION AND BY THE VIRTUE OF SECTION 13(8), THE ASSESSEE WILL N OT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 IN RESPECT OF SUCH INCOME. IT IS ONLY EL EMENTARY THAT A STATUTORY PROVISION IS TO BE INTERPRETED UT RES MAGIS VALEAT QUAM PEREAT, I.E., TO MAKE IT WORKABLE RATHER THAN REDUNDANT. 18. THE CONSIDERATIONS ABOUT THE POSSIBILITIES OF T HE FIRST PROVISO TO SECTION 2(15) COMING INTO PLAY AFFECTING THE GRANT, DECLINE OR WI THDRAWAL OF REGISTRATION UNDER SECTION 12AA WILL THUS LEAD TO WHOLLY AVOIDABLE UND UE HARDSHIPS TO THE ASSESSEE, WILL BE UNWORKABLE IN PRACTICE AND BE CONTRARY TO T HE SCHEME OF THE ACT. 19. IN VIEW OF THE ABOVE DISCUSSIONS, IN OUR CONSID ERED VIEW, THE CONSIDERATIONS ABOUT THE POSSIBILITIES OF FIRST PROVISO TO SECTION 2(15) INTO PLAY ARE WHOLLY EXTRANEOUS IN THE PRESENT CONTEXT. AS THE WITHDRAWA L OF REGISTRATION IS SOLELY BASED ON THESE CONSIDERATIONS, THE VERY FOUNDATION OF THE LEARNED COMMISSIONERS ACTION IS UNSUSTAINABLE IN LAW AND CONSISTS OF REAS ONS WHICH ARE NOT AT ALL RELEVANT IN THE CONTEXT OF REGISTRATION STATUS UNDER SECTION 12A OR 12AA OF THE ACT. FOR THIS REASON ALSO, THE ACTION OF THE LEARNED COMMISSIONER IS WHOLLY DEVOID OF ANY LEGALLY SUSTAINABLE MERITS. 20. HAVING DECIDED THE ISSUE IN FAVOUR OF THE ASSES SE ON THESE ISSUES, WE SEE NO NEED TO ADDRESS OURSELVES, AT THIS STAGE, TO THE QU ESTION WHETHER THE FIRST PROVISO TO SECTION 2(15) COULD INDEED APPLY ON THE FACTS AN D IN THE CIRCUMSTANCES OF THIS CASE. THAT ASPECT OF THE MATTER IS WHOLLY ACADEMIC AS ON NOW. 8. BRIEFLY PUT THE PROPOSITION LAID DOWN BY THE ITA T, AMRITSAR BENCH IS BASED ON THE FOLLOWING REASONS: I) THE SCOPE OF POWERS OF THE COMMISSIONER UNDER SE CTION 12AA(3) FOR CANCELLATION OF REGISTRATION ALREADY GRANTED IS VER Y LIMITED IN SCOPE IN AS MUCH AS IT CAN ONLY BE INVOKED ONLY WHEN (I) THE ACTIVIT IES OF THE TRUST ARE NOT GENUINE, OR (IT) THE ACTIVITIES OF THE TRUST OR THE INSTITUT ION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE INS TITUTION. II) THE CONSIDERATIONS OF FIRST PROVISO TO SECTION 2(15) HAVE NO ROLE TO PLAY IN THE MATTERS RELATING TO REGISTRATION OF A TRUST OR INST ITUTION UNDER SECTION 12A OR 12AA - WHETHER IN RESPECT OF GRANTING OR DECLINING OF A RE GISTRATION OR IN RESPECT OF CANCELLATION. WHAT IS CLEAR FROM THE RIDERS IN THE DEFINITION OF CHARITABLE PURPOSES' IS THAT RIDER SET OUT THEREIN UNDER FIRST PROVISO TO SECTION 2(15), CAN ONLY COME INTO PLAY ON YEAR TO YEAR BASIS AND NOT IN ABS OLUTE TERMS. IN ORDER THAT THE BENEFITS UNDER SECTION 11 ARE DECLINED TO THE ASSES SEE ON THE GROUND THAT IT IS ENGAGED IN SUCH ACTIVITIES AS MAY BE HIT BY THE FIR ST PROVISO TO SECTION 2(15) NOT 8 ONLY THE ASSESSEE MUST BE ENGAGED IN CARRYING OUT S UCH ACTIVITIES AS MAY HIT THE FIRST PROVISO TO SECTION 2(15) BUT ALSO THE RECEIPT S OF THE ASSESSEE FROM SUCH ACTIVITIES MUST EXCEED A SPECIFIED LIMIT. THE SECON D LIMB OF THIS DISABILITY CLAUSE NEEDS TO BE SATISFIED WITH RESPECT TO EACH ASSESSME NT YEAR. OBVIOUSLY, THEREFORE, THIS ASPECT OF THE MATTER CANNOT BE EXAM INED AT THE STAGE OF THE GRANT OR WITHDRAWAL OF REGISTRATION SINCE THE REGIS TRATION EXERCISE IS A ONE TIME EXERCISE AND NOT SOMETHING WHICH MUST BE DONE FOR E ACH ASSESSMENT YEAR SEPARATELY. THAT IS PRECISELY THE REASON, AS NOTED IN THE EXPLANATORY MEMORANDUM, AS TO WHY THE REMEDY FOR THE ACTIVITIES BEING HIT BY THE FIRST PROVISO TO SECTION 2(15) LIES NOT IN GRANT, DECLINE OR WITHDRAWAL OF REGISTRATION BUT IN DECLINING THE BENEFITS OF EXEMPTION UNDER SECTIO N 11 ON THAT COUNT, ON YEAR TO YEAR BASIS, NOTWITHSTANDING THE STATUS OF REGIST RATION. IF THE STATUS OF REGISTRATION IS TO BE DECLINED TO AN ASSESSEE ONLY ON THE GROUND THAT SOME OF THE OBJECTS MAY BE HIT BY THE FIRST PROVISO TO SECTION 2(15) BU T THE ASSESSEE'S RECEIPTS FROM SUCH ACTIVITIES DO NOT EXCEED SPECIFIED THRESHOLD I N A PARTICULAR ASSESSMENT YEAR, THE ASSESSEE WILL BE SUBJECTED TO UNDUE HARDS HIP IN THE SENSE THAT THE ASSESSEE WILL BE DISENTITLED TO EXEMPTION UNDER SEC TION 11 DUE TO DENIAL OF REGISTRATION UNDER SECTION 12A OR 12AA WHICH IS SIN E QUA NON FOR ADMISSIBILITY OF EXEMPTION UNDER SECTION 11. (III) THE SAFEGUARD AGAINST THE OBJECTS OF THE TRUS T BEING VITIATED INSOFAR AS THEIR CHARACTER OF 'CHARITABLE ACTIVITIES' IS CONCERNED, IS INBUILT IN THE PROVISIONS OF SECTION 13(8) WHICH WAS BROUGHT INTO EFFECT WITH EF FECT FROM THE SAME POINT OF TIME WHEN PROVISO, TO SECTION 2(15)WAS INTRODUCED - I.E. WITH EFFECT FROM 1-4- 2009, SECTION 13(8). THUS THE FACT THAT THE OBJECTS OF THE ASSESSEE MAY BE HIT BY THE PROVISO TO SECTION 2(15) CANNOT HAVE ANY BEARING ON THE GRANT, DENIAL OR WITHDRAWAL OF THE REGISTRATION UNDER SECTION 12AA. 9 9. THE FACTS OF THE PRESENT CASE WE FIND ARE IDENTI CAL TO THE FACTS OF KAPURTHALA IMPROVEMENT TRUST VS.CIT60 TAXMANN.COM 3 01 (AMRITSAR-TRIB), (SUPRA), THE REGISTRATION GRANTED U/S 12AA HAVING BEEN CANCE LLED ON ACCOUNT OF THE PROVISO TO SECTION 2(15) COMING INTO PLAY IN THE PR ESENT CASE. UNDENIABLY THERE IS NO CHANGE IN THE OBJECTS OF THE ASSESSEE TRUST CON SIDERING WHICH REGISTRATION UNDER SECTION 12AA WAS GRANTED TO THE ASSESSE. ALSO IT IS NOT THE CASE OF THE LD. CIT THAT THE ACTIVITIES OF THE TRUST ARE NOT IN CON SONANCE WITH ITS STATED OBJECTS. AS OUTLINED IN THE INSTRUMENT OF CREATION OF THE ASSES SEE TRUST, UTILISATION OF LAND AND ALLOTMENT OF PLOTS AND FLATS AND MULTISTOREYED HOUS E BY DRAW OF LOTS AND SALE OF COMMERCIAL PLOTS / SHOPS BY AUCTION WAS ONE OF THE STATED OBJECTS OF THE ASSESSEE SOCIETY. THE SAME WAS TAKEN INTO CONSIDERA TION BY THE CIT WHILE GRANTING REGISTRATION UNDER SECTION 12A. AND IT IS ON CONSID ERING THESE VERY ACTIVITIES, THAT THE LD. CIT HAS HELD THAT THEY ARE COMMERCIAL IN NA TURE AND HENCE NOT CHARITABLE. ONCE CERTAIN OBJECTS HAVE BEEN FOUND TO BE CHARITABLE IN NATURE, THE ACTIVITIES CARRIED OUT IN ACCORDANCE WITH THE SAME CANNOT LATER BE ON SAID TO BE NOT IN THE NATURE OF CHARITY UNLESS THEY ARE SHOWN TO BE CARRIED OUT NOT IN CONSONANCE WITH THE STATED OBJECTS OR ARE FOUND TO BE NOT GENUINE. FURTHER WE FIND THAT IT IS ALSO NOT THE CASE OF THE LD. CIT TH AT THE ACTIVITIES ARE NOT GENUINE. THEREFORE CONSIDERING THE POWERS GRANTED TO THE LD. CIT UNDER SECTION 12AA(3), THE REGISTRATION GRANTED TO THE ASSESSEE IN ANY CAS E COULD NOT HAVE BEEN CANCELLED. FURTHER AS HELD BY THE HONBLE ITAT AMRI TSAR BENCH IN THE CASE OF KAPURTHALA IMPROVEMENT TRUST (SUPRA) THE PROVISO TO SECTION 2(15) CANNOT BE APPLIED FOR CANCELLING REGISTRATION UNDER SECTION 1 2AA(3). 10. THE MADRAS HIGH COURT IN THE CASE OF TAMIL NADU CRICKET ASSOCIATION VS. DIT (EXEMPTION) (2013) 86 CCH 212 HELD THAT FOR INV OKING SECTION 12AA R.W.S 2(15) OF THE INCOME TAX ACT, THE REVENUE HAS TO SHOW THAT THE ACTIVITIES ARE NOT FITTING WITH THE OBJECTS OF THE ASSOCIATION AND THAT THE DO MINANT ACTIVITIES ARE IN THE NATURE OF TRADE, COMMERCE & BUSINESS. THIS WE FIND IS NOT THE CASE IN THE PRESENT 10 APPEAL SINCE UNDENIABLY THE ACTIVITIES BEING CARRIE D OUT BY THE ASSESSEE TRUST ARE IN CONSONANCE WITH ITS STATED OBJECT. THE ARGUMENT OF THE LD. DR THAT THE APEX COURT HAS ADMITTED SLP IN THE ABOVE CASE, DOES NOT ALTER THE IMPACT OF THE DECISION OF THE HIGH COURT TILL AN ORDER IS PASSED BY THE APEX COURT. AS FOR THE RELIANCE PLACED BY THE LD. DR ON THE DEC ISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BHATINDA IMPROVEM ENT TRUST, WE FIND THAT THE SAME HAS NO RELEVANCE SINCE THE QUESTION BEFORE THE HON'BLE COURT WAS AS FOLLOWS: 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 UNDE R SECTION 12AA OF THE INCOME TAX ACT. 1961 ON THE GROUND OF ITS CARRYING OUT ACT IVITIES IN ACCORDANCE WITH A STATUTE AND THEREBY HOLDING IT TO BE CARRYING OUT A CTIVITIES OF TRADE, COMMERCE OR BUSINESS WITH A PROFIT MOTIVE ? TO WHICH THE HONBLE HIGH COURT HAS HELD AS UNDER: ACCORDINGLY, THE IMPUGNED ORDERS PASSED BY THE TR IBUNAL IN BOTH THE APPEALS ARE SET ASIDE AND THE MATTER IS REMANDED TO THE TRI BUNAL 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 A CT AFTER AFFORDING AN OPPORTUNITY OF HEARING TO THE PARTIES IN ACCORDANCE WITH LAW. NEEDLESS TO SAY ANYTHING OBSERVED HEREINBEFORE SHALL NOT BE TAKEN T O BE EXPRESSION OF OPINION ON THE MERITS OF THE CONTROVERSY. SINCERE EFFORTS SHAL L BE MADE TO DECIDE THE MATTER EXPEDITIOUSLY. AS A RESULT ALL THE APPEALS STAND DI SPOSED OF. 11. A CONCOMITANT READING OF THE TWO REVEALS THAT T HE ISSUE IN THAT CASE WAS WHETHER IN VIEW OF THE FACT THAT THE TRUST WAS CARR YING OUT ACTIVITIES IN ACCORDANCE WITH THE STATUTE UNDER WHICH IT WAS CREA TED THE SAME COULD BE STILL CONSIDERED TO BE NON CHARITABLE IN NATURE AS PER SE CTION 2(15) OF THE INCOME TAX ACT. THE HIGH COURT WE FIND HAS REMANDED THE IS SUE TO THE TRIBUNAL FOR FRESH EXAMINATION OF THIS ASPECT AND HAS FURTHER CATEGORI CALLY STATED THAT ANYTHING OBSERVED IN THE ORDER SHALL NOT BE TAKEN TO BE AN E XPRESSION ON THE MERITS OF THE CONTROVERSY. EVIDENTLY NO VIEW HAS BEEN EXPRESSED B Y THE HONBLE HIGH COURT ON THE ISSUE OF CANCELLATION OF REGISTRATION U/S 12AA ON ACCOUNT OF THE PROVISO TO SECTION 2(15) BEING ATTRACTED AND HENCE THE DECISIO N HAS NO RELEVANCE TO THE ISSUE IN HAND IN THE PRESENT CASE. 11 AT THIS JUNCTURE IT IS PERTINENT TO POINT OUT THAT EVEN THE CBDT HAS VIDE ITS CIRCULAR NO. 21/2016 DT. 27/05/2016 CLARIFIED THAT REGISTRAT ION OF A CHARITABLE INSTITUTION GRANTED U/S 12AA SHOULD NOT BE CANCELLED MERELY ON ACCOUNT OF THE PROVISO TO SECTION 2(15) COMING INTO PLAY. THE RELEVANT CIRCUL AR IS REPRODUCED HEREUNDER : CIRCULAR NO. 21/2016 F.110.197/17/2016-1TA-1 GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NEW DELHI, THE 27TH MAY, 2016 SUBJECT CLARIFICATION REGARDING CANCELLATION OF R EGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 1961 IN CERTAIN CIRCUMSTANCES REG ARDING SECTIONS 11 AND 12 OF THE INCOME-TAX ACT, 1961 (AC T) EXEMPT INCOME OF CHARITABLE TRUSTS OR INSTITUTIONS, IF SUCH INCOME I S APPLIED FOR CHARITABLE PURPOSE AND SUCH INSTITUTION IS REGISTERED UNDER SECTION 12 AA OF THE ACT. 2. SECTION 2(15) OF THE ACT PROVIDES DEFINITION OF CHARITABLE PURPOSE. IT INCLUDES ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY PROVIDED IT DOES NOT INVOLVE CARRYING ON OF ANY ACTIVITY IN THE NATURE O F TRADE, COMMERCE OR BUSINESS ETC. FOR FINANCIAL CONSIDERATION, THE 2ND PROVISO T O SAID SECTION, INTRODUCED .E F. 01-04-2009 VIDE FINANCE ACT 2010, PROVIDES THAT IN CASE WHERE THE ACTIVITIES OF ANY TRUST OR INSTITUTION IS OF THE NATURE OF ADVANC EMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND IT INVOLVES CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS; BUT THE AGGREGATE VALU E OF RECEIPTS FROM SUCH COMMERCIAL ACTIVITIES DOES NOT EXCEED RS. 25,00,000 / IN THE PREVIOUS YEAR THE PURPOSE OF SUCH TRUST/INSTITUTION SHALL BE DEEMED A S CHARITABLE DESPITE IT DERIVING CONSIDERATION FROM SUCH ACTIVITIES. HOWEVE R, IF THE AGGREGATE VALUE OF THESE RECEIPTS EXCEEDS THE SPECIFIED CUT-OFF, THE A CTIVITY WOULD NO LONGER BE CONSIDERED AS CHARITABLE AND THE INCOME OF THE TRUS T /INSTITUTION WOULD NOT BE ELIGIBLE FOR TAX EXEMPTION IN THAT YEAR THUS AN ENT ITY, PURSUING ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY, COULD BE TREATED AS A CHARITABLE INSTITUTION IN ONE YEAR AND NOT A CHARITABLE INSTITUTION IN THE OTHER YEAR DEPENDING ON THE AGGREGATE VALUE OF RECEIPTS FROM COMMERCIAL ACTIVIT IES, THE POSITION REMAINS SIMILAR WHEN THE FIRST AND SECOND PROVISOS OF SECTI ON 2(15) GET SUBSTITUTED BY THE NEW PROVISO INTRODUCED W.E.F. 01-04-2016 VIDE FINAN CE ACT, 2015, CHANGING THE CUT-OFF BENCHMARK AS 20% OF THE TOTAL RECEIPTS INST EAD OF THE FIXED LIMIT OF RS.25,00,000/- AS IT EXISTED EARLIER. 3. THE TEMPORARY EXCESS OF RECEIPTS BEYOND THE SPEC IFIED CUT-OFF IN ONE YEAR MAY NOT NECESSARILY BE THE OUTCOME OF ALTERATION IN THE VERY NATURE OF THE ACTIVITIES OF THE TRUST OR INSTITUTION REQUIRING CANCELLATION OF REGISTRATION ALREADY GRANTED TO THE TRUST OR INSTITUTION. HENCE, SECTION 1 OF THE ACT H AS BEEN AMENDED VIDE FINANCE ACT, 2012 BY INSERTING A NEW SUB-SECTION (8) THEREI N TO PROVIDE THAT SUCH ORGANIZATION WOULD NOT GET BENEFIT OF TAX EXEMPTION IN THE PARTICULAR YEAR IN WHICH ITS RECEIPTS FROM COMMERCIAL ACTIVITIES EXCEE D THE THRESHOLD WHETHER OR NOT THE REGISTRATION GRANTED IS CANCELLED. THIS AMENDME NT HAS TAKEN EFFECT RETROSPECTIVELY FROM 1ST APRIL, 2009 AND ACCORDINGL Y APPLIES IN RELATION TO THE ASSESSMENT YEAR 2009- 10 ONWARDS. 4. IN VIEW OF THE AFORESAID POSITION, IT IS CLARIFI ED THAT IT SHALL NOT BE MANDATORY TO CANCEL THE REGISTRATION ALREADY GRANTED U/S 11 TO A CHARITABLE INSTITUTION MERELY ON THE GROUND THAT THE CUT-OFF SPECIFIED IN THE PRO VISO TO SECTION 2(15) OF THE ACT IS EXCEEDED IN A PARTICULAR YEAR WITHOUT THERE BEIN G ANY CHANGE IN THE NATURE OF 12 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 A CT VIDE FINANCE ACT, 2016, PRESCRIBING SPECIAL PROVISIONS RELATING TO TAX ON A CCRETED INCOME OF CERTAIN TRUSTS AND INSTITUTIONS, CANCELLATION OF REGISTRATION GRAN TED U/S 12AA MAY LEAD TO A CHARITABLE INSTITUTION GETTING HIT BY SUB-SECTION ( 3) OF SECTION 115TD AND BECOMING LIABLE TO TAX ON ACCRETED INCOME. THE CANCELLATION OF REGISTRATION WITHOUT JUSTIFIABLE REASONS MAY, THEREFORE, CAUSE ADDITIONA L HARDSHIP TO AN ASSESSEE INSTITUTION DUE TO ATTRACTION OF TAX-LIABILITY ON A CCRETED INCOME. THE FIELD AUTHORITIES ARE, THEREFORE, ADVISED NOT TO CANCEL T HE REGISTRATION OF A CHARITABLE INSTITUTION GRANTED U/S 12AA JUST BECAUSE THE PROVI SO TO SECTION 2{15) COMES INTO PLAY. THE PROCESS FOR CANCELLATION OF REGISTRATION IS TO BE INITIATED STRICTLY IN ACCORDANCE WITH SECTION 12 (3) AND 12AA(4) AFTER CA REFULLY EXAMINING THE APPLICABILITY OF THESE PROVISIONS. 6. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL CO NCERNED, DEEPSHIHA SHARMA DIRECTOR TO THE GOVERNMENT OF INDIA 12. IN VIEW OF THE ABOVE, WE HOLD THAT AMENDMENT TO SECTION 2(15) OF THE ACT CANNOT BE THE BASIS FOR CANCELLATION OF REGISTRATIO N GRANTED EARLIER UNDER SECTION 12AA OF THE ACT. THUS WE SET ASIDE THE ORDER UNDER APPEAL AND HOLD THAT CIT WAS NOT JUSTIFIED IN CANCELING THE REGISTRATION IN THE PRESENT CASE. 13. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17/06/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR