The Income-tax Officer, Bathinda V. M/s. Sukhmani Society for Citizen Services, Bathinda

ITA 161/ASR/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4536 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-04-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Retrospective amendment; Competent authority; Cancellation of registration
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NO. 141/(ASR)/2014 A SSESSMENT YEAR: SUKHMANI SOCIETY FOR CITIZEN SERVICES, MINI SECRETARIAT, ROOM NO. 120, BATHINDA [PAN: AAEAS 7047J] VS. COMMISSIONER OF INCOME TAX, BATHINDA. (APPELLANT) (RESPONDENT) I.T.A. NOS. 159 TO 162/(ASR)/2014 ASSESS MENT YEARS: 2005-06 TO 2008-09 INCOME TAX OFFICER, WARD-1(1), BATHINDA VS. SUKHMANI SOCIETY FOR CITIZEN SERVICES, MINI SECRETARIAT, ROOM NO. 120, BATHINDA [PAN: AAEAS 7047J] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. DEVENDRA SINGH CIT- D.R. RESPONDENT BY: SH. J. K. GUPTA (ADV.) DATE OF HEARING: 25.04.2018 DATE OF PRONOUNCEMENT: 15.05.2018 ORDER PER BENCH: THIS IS A SET OF FIVE APPEALS RAISING ALLIED ISSUES . WHILE THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER U/S. 12AA(3) OF THE I NCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 06.01.2014 BY THE COMMISSIONER O F INCOME TAX, BATHINDA ITA NOS. 141, 159 TO 162(ASR)/2014 (AYS. 2005-06 TO 2008-09) SUKHMANI SOCIETY FOR CIT IZEN SERVICES, BATHINDA 2 ('CIT' FOR SHORT), THE APPEALS BY THE REVENUE ARE I N RESPECT OF THE QUANTUM PROCEEDINGS FOR ASSESSMENT YEARS (AYS.) 2005-06 TO 2008-09, DECIDED BY THE FIRST APPELLATE AUTHORITY, BEING THE COMMISSIONER OF INCO ME TAX (APPEALS), BATHINDA ('CIT(A)' FOR SHORT), VIDE HIS COMMON ORDER DATED 2 8.03.2013. ASSESSEES APPEAL (IN ITA NO. 141/ASR/2014) 2. THE ISSUE IN THIS CASE IS IF THE CANCELLATION OF REGISTRATION BY THE COMPETENT AUTHORITY U/S. 12AA(3) OF THE ACT IS VALID IN THE E YES OF LAW. THE SAME IS ON THE PREMISE THAT THE ASSESSEES OBJECTS, INCLUDING THE MANNER OF CARRYING THEM OUT, CAN NO LONGER BE REGARDED AS A CHARITABLE PURPOSE IN VIEW OF THE AMENDMENT TO SECTION 2(15) BY FINANCE ACT, 2010 W.R.E.F. 01.04.2 009, W.E.F. WHICH DATE SECTION 2(15) STANDS SUBSTITUTED BY FINANCE ACT, 2008. THE EXTANT LAW READS AS UNDER: SECTION 2. DEFINITIONS. (15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE PO OR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND W ILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTERE ST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY : PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY 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 RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHE R CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES (*) OR LESS IN THE PREVIOUS YEAR. (*) (TWENTY FIVE LAKHS, BY FINANCE ACT, 2011, W.E.F . 01/4/2012) ITA NOS. 141, 159 TO 162(ASR)/2014 (AYS. 2005-06 TO 2008-09) SUKHMANI SOCIETY FOR CIT IZEN SERVICES, BATHINDA 3 IT IS CLAIMED THAT THE ASSESSEES ACTIVITIES CONSTI TUTE BUSINESS AND, FURTHER, IT CHARGING FOR THE SERVICES RENDERED BY IT TO THE REC IPIENTS OF THOSE SERVICES, ITS OBJECT/S, ADMITTEDLY AN OBJECT/S OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IS NO LONGER A CHARITABLE PURPOSE . 3. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE (AR ), THE ASSESSEES COUNSEL, WOULD BASE HIS ARGUMENT ON THE RESTRICTED SCOPE OF SECTION 12AA(3), WHICH READS AS UNDER: PROCEDURE FOR REGISTRATION 12AA. (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTE D REGISTRATION UNDER CLAUSE ( B ) OF SUB-SECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO.2) ACT, 1996 (33 O F 1996) AND SUBSEQUENTLY THE PRINCIPAL COMMISSIONER OR COMMISSIONER 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 O RDER IN WRITING CANCELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSE D UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD. IT IS THEREFORE ONLY WHERE THE ACTIVITY/S OF THE TR UST OR INSTITUTION IS NOT GENUINE, OR IS NOT CARRIED OUT IN ACCORDANCE WITH ITS OBJECTS, THAT THE REGISTRATION COULD BE CANCELLED UNDER SECTION 12AA(3). THIS, IN FACT, STA NDS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT AS WELL IN CIT V. VED NIKETAN DHAM (IN ITA NO. 70 OF 2013 DATED 21.08.2013, COPY ON RECORD), SO THAT THE MATTER OUGHT TO BE REGARDED AS NO LONGER RES INTEGRA. THE DEPARTMENTAL REPRESENTATIVE (DR) WOULD, ON THE OTHER HAND, RELY ON SECTION 2(15). THE REGISTRATION GRANT ED TO THE ASSESSEE, HE WOULD CONTINUE, WAS NO DOUBT ON THE SAME OBJECTS. HOWEVER , THE SAME CAN NO LONGER, I.E., W.E.F. 01.04.2009, BE REGARDED AS CONSTITUTING A C HARITABLE PURPOSE UNDER LAW. CONTINUING THE REGISTRATION WOULD WORK AT CROSS PUR POSES WITH THE LAW, DEFEATING ITA NOS. 141, 159 TO 162(ASR)/2014 (AYS. 2005-06 TO 2008-09) SUKHMANI SOCIETY FOR CIT IZEN SERVICES, BATHINDA 4 THE VERY PURPOSE OF REGISTRATION. RELIANCE WAS FURT HER PLACED BY HIM ON THE DECISION BY THE TRIBUNAL IN SUKHMANI SOCIETY FOR CITIZEN SERVICES, MANSA V. CIT (IN ITA NO. 551/ASR/2011, DATED 26.09.2012), BESIDE S OTHERS BY THE TRIBUNAL, CONFIRMING THE DENIAL OF REGISTRATION U/S. 12AA(1) TO A SOCIETY WITH SIMILAR OBJECTS AND ACTIVITIES. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE COMPETENT AUTHORITY, WHILE GRANTING REGISTRATIO N, HAS TO BE SATISFIED ABOUT THE OBJECTS OF THE APPLICANT-TRUST/S INSTITUT ION, AS WELL AS THE GENUINENESS OF ITS ACTIVITIES. CLEARLY, SATISFACTION QUA THE OBJECTS IMPLIES SATISFACTION AS THE SAME CONSTITUTING A CHARITABLE PURPOSE UNDER THE ACT. THE CANCELLATION OF REGISTRATION, POWER FOR WHICH STANDS CONFERRED U/S. 12AA(3), CO-O PTED ON THE STATUTE BY FINANCE (NO. 2) ACT, 2004 W.E.F. 01.10.2004, COULD ONLY BE ON THE GROUND OF THE ACTIVITIES OF THE REGISTERED ENTITY BEING EITHER NOT GENUINE O R BEING NOT CARRIED OUT IN ACCORDANCE WITH ITS OBJECTS. THERE IS ADMITTEDLY N O FINDING QUA EITHER OF THESE TWO CONDITIONS, SUBJECT TO THE SATISFACTION OF EITHER O F WHICH ONLY COULD THE COMPETENT AUTHORITY EXERCISE HIS POWER OF CANCELLATION OF REG ISTRATION. THE QUESTION, THOUGH, PERHAPS, NEEDS TO BE EXAMINE D IN A LARGER PERSPECTIVE. AN AUTHORITY CONFERRING REGISTRATION HAS AN INHEREN T POWER TO CANCEL THE SAME WHERE THERE IS A FUNDAMENTAL CHANGE IN THE CONDITIO NS ON THE BASIS OF WHICH THE REGISTRATION WAS GRANTED. A PARALLEL COULD BE DRAWN WITH THE INHERENT POWER TO RECTIFY AN ORDER BY ANY AUTHORITY PASSING THE SAME, I.E., WHERE IT FINDS A MISTAKE TO HAVE CREPT IN OR IMBUES IT. THIS, OF COURSE, WOULD BE SUBJECT TO HEARING THE PARTY BEING PREJUDICED, WHICH STIPULATION ALSO FINDS MENT ION IN THE PROVISO TO SECTION 12AA(3), AS INDEED IN SEC. 154(3). ANOTHER EXAMPLE THAT COMES READILY TO MIND IS WHERE THERE IS A CHANGE IN THE OBJECT/S OF THE REGI STERED ENTITY, I.E., ON THE BASIS OF ITA NOS. 141, 159 TO 162(ASR)/2014 (AYS. 2005-06 TO 2008-09) SUKHMANI SOCIETY FOR CIT IZEN SERVICES, BATHINDA 5 WHICH OBJECTS REGISTRATION STANDS GRANTED TO IT. CO ULD IT BE SAID THAT THE REGISTRATION CANNOT BE REVISITED AS THERE IS NO CHANGE IN ITS A CTIVITY/S OR THE SAME IS NOT CARRIED OUT IN ACCORDANCE WITH ITS OBJECTS? THIS ISSUE IN F ACT STANDS CONSIDERED BY THE TRIBUNAL IN RAJASTHAN CRICKET RAJASTHAN CRICKET ASSOCIATION V. CIT (IN ITA NO. 69/JP./2011, DATED 13/7/2012), ANSWERING THIS QUEST ION IN THE AFFIRMATIVE. THE CHANGE IN LAW, WHEREBY THE OBJECTS COULD NO LONGER BE REGARDED AS A CHARITABLE PURPOSE, SO THAT REGISTRATION CANNOT OBTAIN THERE- UNDER, IS ONE SUCH FUNDAMENTAL CHANGE. THIS, IT MAY BE APPRECIATED, COULD NOT BE A NTICIPATED AT THE TIME OF REGISTRATION, FOR THE CHANGE IN LAW FALLS IN THE LE GISLATIVE FIELD. THE REGISTERING AUTHORITY, WHILE GRANTING REGISTRATION, CAN POSSIBL Y STIPULATE ONLY THOSE CONDITIONS WHICH COULD BE ENVISAGED AT THE TIME OF ITS GRANT, AND WHICH WOULD NECESSARILY RELATE TO THE CONDUCT OF THE ENTITY BEING CONFERRED THE BENEFIT OF REGISTRATION. THE SAME MAY, THEREFORE, NOT BE REGARDED AS ABSOLUTE, O R OPERATE TO BIND THE REVENUE. AS SUCH, IN OUR HUMBLE VIEW, THERE IS SCOPE FOR TRA VELING BEYOND THE CONFINES OF THE PROVISION, ON THE BASIS OF THE INHERENT POWER O F THE AUTHORITY GRANTING REGISTRATION. SO, HOWEVER, OUR VIEW, BROUGHT FORTH ONLY FOR ITS CONSIDERATION BY THE HIGHER FORUM IN APPROPRIATE PROCEEDINGS, IS TO NECESSARILY SUBMIT TO THE WISDOM OF THE HIGHER COURT, WHICH HAS A BINDING AFFECT. THE HON'B LE JURISDICTIONAL HIGH COURT HAS IN VED NIKETAN DHAM (SUPRA) CLARIFIED THAT THE CANCELLATION OF REGISTR ATION U/S. 12AA(3) COULD ONLY BE ON THE SATISFACTION OF THE PRECONDITION OF THE ACTIVITIES OF THE TRUST BEING NOT GENUINE OR BEING NOT CARRIED OU T IN ACCORDANCE WITH ITS OBJECTS. ACCORDINGLY, NOTWITHSTANDING THE DECISION BY THE TR IBUNAL IN, AMONG OTHERS, SUKHMANI SOCIETY FOR CITIZEN SERVICES, MANSA (SUPRA), WHICH VIEW STANDS AGAINST REITERATED BY THE TRIBUNAL IN SUKHMANI SOCIETY FOR CITIZEN SERVICES, JALANDHAR (IN ITA NO. 52/ASR/2014 DATED 24.04.2018), OR THE DISCU SSION IN THE FOREGOING PART OF ITA NOS. 141, 159 TO 162(ASR)/2014 (AYS. 2005-06 TO 2008-09) SUKHMANI SOCIETY FOR CIT IZEN SERVICES, BATHINDA 6 THIS ORDER, THE CANCELLATION OF REGISTRATION CANNOT BE SUSTAINED. WHILE IN THE FORMER ORDER, THE TRIBUNAL UPHELD THE NON-GRANT OF REGISTR ATION U/S. 12AA, IN THE LATTER, IT CONFIRMED THE DENIAL OF EXEMPTION U/S. 11. WE DECID E ACCORDINGLY, AND THE ASSESSEE SUCCEEDS. REVENUES APPEAL (IN ITA NOS. 159 TO 162/ASR./2014) 5. THE BRIEF FACTS ATTENDING THE REVENUES APPEALS, COMMON FOR ALL THE YEARS, IS THAT THE ASSESSEE WAS DENIED THE BENEFIT OF SECTION 10(23C)(IV) OF THE ACT, OR, ALTERNATIVELY, SECTIONS 11 AND 12, IN THE ABSENCE O F APPROVAL UNDER THE FORMER SECTION OR, AS THE CASE MAY BE, REGISTRATION U/S. 1 2AA OF THE ACT. THE LD. CIT(A), WHILE CONFIRMING THIS DENIAL, FURTHER OPINED THAT I F IT AT ANY FUTURE DATE THE ASSESSEE MAY BE ALLOWED APPROVAL/REGISTRATION, AS INDEED IT HAS BEEN, THE DENIAL OF BENEFIT UNDER SECTION 10(23C)(IV)/SS. 11 & 12, WOULD HAVE T O BE WITHDRAWN INASMUCH AS THE ABSENCE OF THE FORMER IS THE BASIS OF THE SAID DENIAL. THIS PART OF THE IMPUGNED ORDER STANDS ASSAILED BY THE REVENUE AS NOT VALID. THE APPEALS BY THE ASSESSEE, AS CLARIFIED BY THE PARTIES DURING HEARING, STAND DISM ISSED BY THE TRIBUNAL IN VIEW OF THE ABSENCE OF THE APPROVAL U/S. 10(23C)(IV)/CANCEL LATION OF ITS REGISTRATION U/S.12AA. THE RESTORATION OF REGISTRATION, IN VIEW OF THE DECISION BY THE HONBLE HIGH COURT IN VED NIKETAN DHAM (SUPRA), BEING FOLLOWED BY US, WOULD OPERATE TO REMOVE THE VERY BASIS ON WHICH THE BENEFIT OF SS. 1 1 & 12 STANDS DENIED TO IT, RENDERING THE REVENUES APPEALS INFRUCTUOUS. THIS I S THE ASSESSEES CASE BEFORE US. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE RELEVANT PART OF THE IMPUGNED ORDER, OBJECTED TO BY THE REVENUE, READS AS UNDER: TILL DATE NO CONDONATION HAS BEEN GRANTED BY THE H ONBLE CHAIRMAN OF CENTRAL BOARD OF DIRECT TAXES, AS SUCH, ASSESSEE APPELLANT IS NOT EN TITLED FOR EXEMPTION UNDER SECTION ITA NOS. 141, 159 TO 162(ASR)/2014 (AYS. 2005-06 TO 2008-09) SUKHMANI SOCIETY FOR CIT IZEN SERVICES, BATHINDA 7 10(23C)(IV) OF THE ACT TILL THE APPLICATION IS CONS IDERED BY THE HONBLE CHAIRMAN OF THE CENTRAL BOARD OF DIRECT TAXES AND THE PRESCRIBED AU THORITY AS PER LAW. SIMILARLY, THOUGH THE OBJECTS OF THE ASSESSEE APPELLANT SOCIETY ARE CHARI TABLE AS PER JUDGMENTS REFERRED BY THE LEARNED COUNSEL OF THE ASSESSEE APPELLANT SOCIETY B UT FOR CLAIMING EXEMPTION UNDER SECTION 11, 12, THE ASSESSEE APPELLANT SOCIETY SHOULD HAVE MADE AN APPLICATION TO THE LEARNED COMMISSIONER OF INCOME TAX BEFORE THE ENDING OF THE RELEVANT ASSESSMENT YEAR. BUT NO SUCH APPLICATION HAS BEEN MADE BEFORE THE DUE DATE FOR C LAIMING EXEMPTION UNDER SECTION 11, 12 OF THE ACT THE FILING OF APPLICATION WITHIN THE PRE SCRIBED TIME IS A PRE-CONDITION, THEREFORE NON FILING OF APPLICATION IS NOT MERELY A TECHNICAL GROUND FOR NOT ALLOWING EXEMPTION UNDER SECTION 11, 12 OR 10(23C)(IV) OF THE I.T. ACT. THER EFORE, GROUNDS OF APPEAL NO. 3 & 4 ARE DISMISSED. HOWEVER, AS AND WHEN THE REQUEST OF THE ASSESSEE APPELLANT IS CONSIDERED BY THE HONBLE CENTRAL BOARD OF DIRECT TAXES FOR CONDONING THE DELAY IN FILING THE APPLICATION AND REGISTRATION GRANTED BY THE PRESCRIBED AUTHORITY TH E AO MAY ALLOW THE EXEMPTION ACCORDING TO LAW. WE, IN PRINCIPLE, AGREE WITH THE REVENUE THAT THE L D. CIT COULD NOT HAVE EXCEEDED HIS JURISDICTION INASMUCH AS THE LAW HAS TO TAKE IT S COURSE. HOWEVER, AS WE SEE IT, HIS OBSERVATION IS ONLY FOR A CONSEQUENTIAL EFFECT. THUS, TO THE EXTENT, OR READ IN THIS MANNER, THERE IS NO INFIRMITY IN THE IMPUGNED ORDER . SUBJECT TO THIS CLARIFICATION, WHICH WE HEREBY ISSUE, THE IMPUGNED ORDER REQUIRES NO INTERFERENCE. WHY, THE BENEFIT OF SECTIONS 11 AND 12 COULD, IN SPITE OF RE GISTRATION U/S. 12AA, BE DENIED IN VIEW OF SECTION 13(8), INSERTED BY FINANCE ACT, 201 2, WITH RETROSPECTIVE EFFECT FROM 01/4/2009, I.E., AY 2009-10 ONWARDS. IN FACT, SEC. 2(15), AS AFORE-NOTED, ITSELF STANDS SUBSTITUTED ONLY BY FINANCE ACT, 2010, W.R.E .F. 01/4/2009. THE CANCELLATION OF REGISTRATION COULD NOT THEREFORE HAVE EFFECT PRI OR THERETO. WE DECIDE ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED, AND THE REVENUES APPEALS ARE DISPOSED OF ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 15, 2018 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 15.05.2018 ITA NOS. 141, 159 TO 162(ASR)/2014 (AYS. 2005-06 TO 2008-09) SUKHMANI SOCIETY FOR CIT IZEN SERVICES, BATHINDA 8 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: INCOME TAX OFFICER, WARD-1(1 ), BATHINDA (2) THE RESPONDENT: SUKHMANI SOCIETY FOR CITIZE N SERVICES, MINI SECRETARIAT, ROOM NO. 120, BATHINDA (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER