INTERNET AND MOBILE ASSOCIATION OF INDIA, MUMBAI V. DIT (E), MUMBAI

ITA 1212/MUM/2012

• Counselvise Citation: 121219914 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 01-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 22-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Assessee Lawyers: B V JHAVERI
• Keywords: Charitable institution; Opportunity of being heard; Cancellation of registration
• Section: 12A; 12AA; 12; 11

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL MUMBAI - I BENCH MUMBAI . . , / ! ! ! ! , '# '# '# '# BEFORE S/SH. H.L.KARWA,PRESIDENT & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1212/MUM/2012, $ $ $ $ % % % % / ASSESSMENT YEAR 2009-10 INTERNATE AND MOBILE ASSOCIATION OF INDIA, 406, 4 TH FLOOR, MONEY TERRACE, 167 DR.A.B.ROAD, MUMBAI-400018 VS. D.I.T.(E) MUMBAI. PAN: AAAAI1013Q ( &' / APPELLANT) ( ()&' / RESPONDENT) &' * / APPELLANT BY : SHRI B.V. JHAVERI ()&' + * / RESPONDENT BY : SHRI SURINDER JIT SINGH $ $ $ $ + ++ + ,- ,- ,- ,- / DATE OF HEARING : 06-05-2014 ./% + ,- / DATE OF PRONOUNCEMENT : 28- 05- 2014 $ $ $ $ , 1961 + ++ + 254 )1( ,0, ,0, ,0, ,0, '1 '1 '1 '1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M. '# '# '# '#, ,, , ! $ ! $ ! $ ! $ : CHALLENGING THE ORDER DATED 08.12.2011 OF THE DIREC TOR OF INCOME-TAX (EXEMPTION),MUMBAI, ASSESSEE-TRUST HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. THE LEARNED OFFICER, DIRECTOR OF INCOME TAX,(EXE MPTION), MUMBAI ERRED IN CANCELLING REGISTRATION U/S 12A. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE AND /OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL AT THE TIME OF HEARING. 2. THE ASSESSEE,A PUBLIC CHARITABLE TRUST,WAS REGISTER ED U/S.12A OF THE ACT, ON 6.3.2004.IT FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 29 TH SEPTEMBER 2009 DECLARING TOTAL INCOME AT RS. NIL.T HE DIRECTOR OF INCOME-TAX (EXEMPTION),MUMBAI(DIT-E),RE CEIVED A PROPOSAL FROM THE ADIT (E)-II (1),MUMBAI FOR CANCELLATION OF REGISTRATION GRANTED TO THE ASSESSEE ON THE GROUND THAT THE IT WAS CARRYING ON ACTIVITIES IN THE NATURE OF TRADE,COMME RCE OR BUSINESS, ETC.ACCORDINGLY,VIDE SHOW CAUSE NOTICE,DATED 3.11.2011,THE ASSESSEE TRUST WAS ASKED AS TO WHY THE REGISTRATION GRANTED TO IT SHOULD NOT BE WITHDRAWN BY INVOKING THE PROVISIONS OF SECTION 12AA(3) OF THE ACT AS THE INCOME EARNED BY IT BY HOLDING SEMINAR OF RS. 3,04,88,920/ - WAS IN RESPECT OF THE ACTIVITIES IN THE NATURE OF TRADE,COMMERCE AND BUSINESS.AFTER CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE TRUST,THE DIT (E) HELD THAT THE AMOUNT RECEIVED BY THE TRUST BY H OLDING SEMINAR WAS IN THE NATURE OF NATURE OF TRADE,COMMERCE OR BUSINESS,THAT THE ACTIVITIES OF T HE ASSESSEE-TRUST WERE NOT CARRIED OUT FOR CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2( 15) OF THE ACT,THAT THE ACTIVITIES OF THE TRUST WERE COVERED BY THE PROVISO TO SECTION 2(15),THAT T HE TRUST ITSELF HAD BECOMES NON-GENUINE FOR THE SECTION 11 OF THE ACT,THAT THE RECEIPTS SHOWN BY TH E ASSESSEE IN ITS INCOME & EXPENDITURE ACCOUNT FROM ARRANGING SEMINARS AT RS.3,04, 88,920/-MADE IT AMPLY CLEAR THAT THE TRUST WAS DOING REGULAR 2 ITA NO.1212/MUM/2012 INTERNATE AND MOBILE ASSOCIATI ON OF INDIA ACTIVITIES WHICH WERE IN THE NATURE OF BUSINESS,THA T BY COLLECTING MONEY IN THE NAME OF AWARENESS PROGRAMMES THROUGH SEMINARS IT WAS SYSTEMATICALLY G ENERATING ITS INCOME,THAT THE TRUE NATURE OF THE ACTIVITIES WAS PURELY BUSINESS AND SAME WAS INC IDENTAL TO ACHIEVEMENTS OF ITS OBJECTS,THAT SAME HAD NO RELEVANCE AS THE PROVISO TO SECTION 2(1 5) GOT ATTRACTED.VIDE HIS ORDER PASSED U/S.12AA(3) OF THE ACT DATED 08.12.2011,CANCELLED T HE REGISTRATION GRANTED TO THE ASSESSEE-TRUST 3. BEFORE US AUTHORISED REPRESENTATIVE(AR)ARGUED THAT THE DIT(E) COULD CANCEL THE REGISTRATION GRANTED U/S.12A OF THE ACT BY INVOKING THE PROVISIO NS OF SECTION 12AA(3) OF THE ACT ONLY IF HE WAS SATISFIED THAT THE ACTIVITIES OF THE TRUST WERE NOT GENUINE OR THE ACTIVITIES OF THE TRUST WERE NO T BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST,THAT SECTION 12AA(3) OF THE ACT DID NOT AUTHORISE THE DIT(E) TO CANCEL REGISTRATION U/S .12A,IF HE WAS OF THE OPINION THAT THE ACTIVITIES OF THE ASSESSEE TRUST INVOLVED THE CARRYING ON OF A NY ACTIVITY IN THE NATURE OF TRADE,COMMERCE OR BUSINESS,THAT DIT(E) HAD FAILED TO BRING OUT ANY FA CT THAT THE ACTIVITIES OF THE ASSESSEE TRUST WERE NOT GENUINE OR WERE NOT CARRIED OUT AS PER THE OBJE CTS OF THE TRUST,THAT THE ASSESSEE WAS HOLDING SEMINARS SOLELY FOR ACHIEVING AND FULFILLING THE OB JECTS OF THE TRUST OF PARTING WITH INFORMATION AND KNOWLEDGE IN RESPECT OF INTERNET AND ITS USAGE,THAT THE ACTIVITY OF HOLDING SEMINAR WAS NOT IN THE NATURE OF TRADE,COMMERCE OR BUSINESS,THAT THE SEMIN ARS WERE HELD FOR ATTAINMENT OF THE MAIN OBJECTS OF THE TRUST,THAT OUT OF THE GROSS RECEIPT( RS.3,04,88,921/-);RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL;THE MAJOR RECEIPT WAS IN THE FORM OF MEMBERSHIP FEES(RS.1,90, 99,691/-), THAT THERE WAS A DEFICIT OF RS.28,60,953/-ON HOLDIN G SEMINARS,THAT IT HAD NOT EARNED ANY INCOME FROM CONDUCTING SEMINARS ON THE VARIOUS SUBJECTS ON INTERNET AND MOBILE,THAT IT WAS NOT CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE/COMMERCE/BUS INESS OR ANY ACTIVITY OF RENDERING ANY SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR A FEE OR ANY OTHER CONSIDERATION. HE RELIED UPON THE CASES OF M/S.THE BOMBAY PRESIDEN CY GOLF CLUB LTD.(149TTJ471),AGRA DEVE - LOPMENT AUTHORITY(141ITD 336),CHATURVEDI HAR PRASAD EDUCATIONAL (134 TTJ781),BHARAT JYOTI (142TTJ 800),SARVODAYALLAKKIYA(343ITR300),AHMEDABAD URBAN DEVELOPMENT AUTHORITY (ITA 754/AHD/ 2010, A.Y. 2009-010 DATE21.05.2010,ELECTRO NICS MFRS.ASSOCIATION(31 SOT 346)INDIAN ELECTRICAL & ELECTRONICS MFRS.ASSOCIATION(ITA/5780/ MUM/2011),JODHPUR CHARTERED ACCOUNTANTS SOCIETY(258ITR548).DEPARTMENTAL REPRESENTATIVE SUPP ORTED THE ORDER OF THE DIT (E)AND STATED THAT ACTIVITIES OF CONDUCTING SEMINAR WAS A BUSINES S ACTIVITY. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE ARE AWARE THAT BECAUSE OF AMENDMENT TO SECTION 2(15)W.E.F.01.04.20 09 CERTAIN CHANGES HAVE BEEN BROUGHT ABOUT THE TRUSTS AND IN THE DEFINITION OF THE PHRASE CHAR ITABLE ACTIVITIES.SIMILARLY,CERTAIN CHANGES HAD OCCURRED IN THE STATUTE WHEN POWER WAS GIVEN TO THE DEPARTMENTAL AUTHORITIES TO CANCEL THE REGISTR -ATION AS PER THE PROVISIONS OF SECTION 12AA(3)OF T HE ACT.WE FIND THAT THE EXPLANATORY NOTES TO THE PROVISIONS OF THE FINANCE ACT,2010( CIRCULAR NO.1/2011[F.NO.142/L/2011-SO(TPL)-I,DATED 6-4- 2011) HAS EXPLAINED THE BACKGROUND FOR BRINGING CHA NGE IN THE SECTION AS UNDER: 7.CANCELLATION OF REGISTRATION OBTAINED UNDER SECT ION 12A 7.1.SECTION 12AA PROVIDES THE PROCEDURE RELATING TO REGISTRATION OF A TRUST OR INSTITUTION ENGAGED IN CHARITABLE ACTIVITIES.SECTION 12AA(3)PREVIOUSLY PROVIDED THAT IF THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE FOUND TO BE NON-GENUINE OR ITS ACTI VITIES ARE NOT IN ACCORDANCE WITH THE OBJECTS FOR WHICH SUCH TRUST OR INSTITUTION WAS ESTABLISHED,THE REGISTRATION GRANTED UNDER SECTION 12AA CAN BE CANCELLED BY THE COMMISSIONER AFTER PROVIDING THE T RUST OR INSTITUTION AN OPPORTUNITY OF BEING HEARD. 3 ITA NO.1212/MUM/2012 INTERNATE AND MOBILE ASSOCIATI ON OF INDIA 7.2.THE POWER OF CANCELLATION OF REGISTRATION IS IN HERENT AND FLOWS FROM THE AUTHORITY OF GRANTING REGISTRATION.HOWEVER,JUDICIAL RULINGS IN SOME CASES HAVE HELD THAT THE COMMISSIONER DOES NOT HAVE THE POWER TO CANCEL THE REGISTRATION WHICH WAS OBTAINED EARLIER BY ANY TRUST OR INSTITUTION UNDER PROVISIONS OF SECTION 12A AS IT IS NOT SPECIF ICALLY MENTIONED IN SECTION 12AA. 7.3.THEREFORE,SECTION 12AA HAS BEEN AMENDED TO PROV IDE THAT THE COMMISSIONER CAN ALSO CANCEL THE REGISTRATION OBTAINED UNDER SECTION 12A AS IT S TOOD BEFORE AMENDMENT BY FINANCE (NO.2) ACT,1996. 7.4.APPLICABILITY-THIS AMENDMENT HAS BEEN MADE APPL ICABLE WITH EFFECT FROM 1ST JUNE, 2010 AND SHALL ACCORDINGLY APPLY FOR ASSESSMENT YEAR2011-12 AND SUBSEQUENT ASSESSMENT YEARS. FROM THE ABOVE IT IS CLEAR THAT DIT(E)CAN CANCEL TH E REGISTRATION GRANTED TO A TRUST IF THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE FOUND TO BE NON-GEN UINE OR ITS ACTIVITIES ARE NOT IN ACCORDANCE WITH THE OBJECTS FOR WHICH SUCH TRUST OR INSTITUTION WAS ESTABLISHED.IN THE CASE OF SARVODAYA ILAKKIYA PANNAJ(SUPRA)THE HONBLE MADRAS HIGH COURT TOOK A V IEW THAT ONCE A REGISTRATION U/S. 12A OF THE ACT WAS GRANTED, THE SAME COULD BE CANCELLED ONLY O N SATISFACTION OF TWO CONDITIONS LAID DOWN IN SECTION 12AA(3) OF THE ACT, VIZ.,(A) THAT THE ACTIV ITIES OF THE TRUST OR INSTITUTION ARE NOT GENUINE; AND (B) THAT THE ACTIVITIES OF THE TRUST OR INSTITU TION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH T HE OBJECTS OF THE TRUST OR INSTITUTION.THE HONBLE HIG H COURT EXPRESSED THE VIEW THAT THERE MUST BE SPECIFIC FINDINGS WITH REGARD TO THE AFORESAID TWO CONDITIONS.WE FIND THAT THE DIT(E) HAS NOT GIVEN SPECIFIC FINDING AS REQUIRED BY THE HONBLE M ADRAS HIGH COURT.HOLDING OF SEMINARS CANNOT BE TERMED A COMMERCIAL OR BUSINESS ACTIVITY IN THE CASE UNDER APPEAL,AS THE TRUST WAS ESTABLISHED FOR THIS SPECIFIC PURPOSE.DIT(E)HAS IGNORED THE FAC T THE TRUST HAD SUFFERED LOSS BY ARRANGING SEMINARS.CIRCULAR ISSUED BY THE CBDT ON 06.04.2011 CLEARLY MENTIONS THAT AMENDMENT WOULD BE APPLICABLE FROM THE AY.2011-12 AND SUBSEQUENT ASSES SMENT YEARS.IN THE CASE OF AGRA DEVELOPM - ENT AUTHORITY(SUPRA).IN THAT MATTER THE ASSESSEE WA S GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT W.E.F. 01.04.2003 AND VIDE ORDER DATED 24.09.20 03,SAID REGISTRATION WAS CANCELLED BY THE CIT BY THE IMPUGNED ORDER DATED 04.04.2012 W.E.F.2009-1 0.DECIDING THE APPEAL TRIBUNAL HELD AS UNDER: FROM THE CONJOINT READING OF SUB-SECTION (1) CLAUSE (B) AND SUB-SECTION (3) OF SECTION 12AA,IT WOULD BE SEEN THAT THE CANCELLATION OF THE REGISTRA TION WAS PROVIDED WHERE THE REGISTRATION WAS GRANTED UNDER CLAUSE (B) OF SUB-SECTION (1). FURTHE R CANCELLATION UNDER SUB-SECTION (3) WAS ALSO PROVIDED WHERE THE REGISTRATION WAS OBTAINED AT ANY TIME UNDER SECTION 12A [MAY BE UNDER CLAUSE (A) OR CLAUSE (AA) OF SUB-SECTION (1) OF SECTION 12 A]. BUT THIS POWER OF CANCELLATION OF REGISTRATION OBTAINED UNDER SECTION 12A CAME TO BE INCORPORATED BY WAY OF AMENDMENT INTRODUCED BY THE FINANCE ACT, 2010 WITH EFFECT FROM 01.06.2010. THAT BEING THE INTERPRETATION OF SUB-SECTION (3), IT IS AMPLY CLEAR THAT THE POWER TO CANCEL THE REGISTR ATION ONCE GRANTED WAS ONLY CONFINED TO THE REGISTRATION GRANTED UNDER CLAUSE (B) OF SUB-SECTIO N (1) OF SECTION 12AA TILL BEFORE 01.06.2010. OF COURSE, NOW WITH EFFECT FROM 01.06.2010, THE POWER VESTS WITH THE COMMISSIONER EVEN TO CANCEL THE REGISTRATION GRANTED UNDER ANY OF THE CLAUSES OF SU B-SECTION (1) OF SECTION 12ASECTION 12AA(3) OF THE ACT EMPOWERS THE CIT TO CANCEL SUCH REGISTRA TION IF HE SATISFY THAT ACTIVITIES OF THE TRUST OR INSTITUTIONS ARE NOT GENUINE OR ARE NOT BEING CARRI ED OUT IN ACCORDANCE WITH OBJECTS OF THE TRUST OR INSTITUTION AS THE CASE MAY BE. THE COMBINED READIN G OF BOTH THE SECTIONS MAKES IT CLEAR THAT BEFORE 01.06.2010 REGISTRATION CAN BE CANCELLED ONL Y ON THOSE CASES WHERE THE REGISTRATION HAS BEEN GRANTED UNDER SECTION 12AA(1)(B) OF THE ACT.BE FORE 01.06.2010 THIS SECTION 12AA(3) NOWHERE EMPOWERS THE CIT TO CANCEL OR WITHDRAW REGISTRATION UNDER SECTION 12A OF THE ACT. IN ABSENCE OF SUCH POWER,THE REGISTRATION GRANTED UNDER SECTION 1 2A CANNOT BE WITHDRAWN OR CANCELLED BEFORE 1.6.2010. THE POWER OF CANCELLATION OF REGISTRATION UNDER SECTION 12A OF THE ACT CAME TO BE INCORPORATED BY WAY OF AMENDMENT INTRODUCED BY FINA NCE ACT 2010 W.E.F. 01.06.2010. THE C.B.D.T. CIRCULAR NO.1/2011 DATED 06.04.2011 EXPLAI NS THAT THIS AMENDMENT WILL APPLY FOR A.Y. 2011-12 AND SUBSEQUENT YEARS. WHEREAS, IN THE CASE UNDER CONSIDERATION, THE CIT CANCELLED 4 ITA NO.1212/MUM/2012 INTERNATE AND MOBILE ASSOCIATI ON OF INDIA REGISTRATION UNDER SECTION 12A OF THE ACT FOR A.Y. 2009-10 WHICH IS NOT IN ACCORDANCE WITH THE LAW. FACTS OF THE CASE UNDER CONSIDERATION,ARE ALMOST SI MILAR TO THE FACTS OF THE MATTER OF AGRA DEVELOPMENT AUTHORITY(SUPRA). AGRA DEVELOPMENT AUTH ORITY(SUPRA).IN THIS CASE REGISTRATION WAS GRANTED IN 2004 AND WAS WITHDRAWN FOR THE AY.2009-1 0 I.E. BEFORE THE AY. 2011-12.AS THE CANCELLATION IS AGAINST THE PROVISIONS OF LAW,SO SA ME CANNOT BE ENDORSED.ALLOWING THE APPEAL OF THE ASSESSEE,EFFECTIVE GROUND OF APPEAL RAISED BY I T IS DECIDED IN ITS FAVOUR. AS A RESULT,AS SESSEES APPEAL STANDS ALLOWED. 3,4 $5, + 6 + , 78 ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MAY,2014. '1 + ./% 9 :'$ 28 , 2014 / + 0 ; SD/- SD/- ( . . / H.L.KARWA ) ( ! / RAJENDRA ) / PRESIDENT '# '# '# '# /ACCOUNTANT MEMBER / MUMBAI, :'$ /DATE: 28 . 05.2014 SK '1 '1 '1 '1 + ++ + (,= (,= (,= (,= >=%, >=%, >=%, >=%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / ? @ , 4. THE CONCERNED CIT / ? @ 5. DR I BENCH, ITAT, MUMBAI / =A0 (,$ , . . . 6. GUARD FILE/ 0 3 )=, )=, )=, )=, (, (,(, (, //TRUE COPY// '1$ / BY ORDER, B / 7 DY./ASST. REGISTRAR , /ITAT, MUMBAI