Improvement Trust, Phagwara V. The Commissioner of Income Tax, Jalandhar-II

ITA 274/ASR/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9681 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-06-2015
• Assessment Year: misc
• Appeal Filed On: 29-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Charitable institution; Maximum Marginal Rate; Earning of tax free income; Retrospective amendment; Benefit of exemption; Cancellation of registration
• Section: 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR [CORAM: PRAMOD KUMAR AM AND A.D. JAIN JM] I.T.A. NO. 274/ASR/2013 U/S 12AA(3) IMPROVEMENT TRUST, ..APPELLANT PHAGWARA. [PAN:AAALI0047F ] VS. COMMISSIONER OF INCOME - TAX, .RESPONDENT JALANDHAR. APPEARANCES BY: Y.K. SUD FOR THE APPELLANT TARSEM LAL FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JUNE 03, 2015 DATE OF PRONOUNCING THE ORDER : JUNE 29 , 2015 O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS A PPEAL, THE ASSESSEE HAS CHALLENGED CORRECTNESS OF THE LEARNED COMMISSIONERS ORDER DATED 25 TH MARCH, 2013 WITHDRAWING REGISTRATION UNDER SECTION 12AA(3) OF THE INCOME TAX ACT, 1961. 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1 . THAT ORDER OF THE L EARNED COMMISSIONER OF INCOME TAX, JALANDHAR - II, WITHDRAWING REGISTRATION U/S 12AA IS AGAINST LAW AND FACTS OF THE CASE. 2 . THAT ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, JALANDHAR - II, HAS ERRED IN NOT APPRECIATING THAT ALL IMPROVEMENT TRUSTS IN THE STATE OF PUNJAB 2 ARE CONSTITUTED AND GOVERNED BY PUNJAB TOWN IMPROVEMENT ACT, 1922 AND THE AIMS AND OBJECTS OF THE TRUSTS ARE OF GENERAL PUBLIC UTILITY. AND THAT THE APPELLANT IS ALSO A TRUST CONSTITUTED AND GOVERNED UNDER THE PUNJAB TOWN IMPROVEMENT AC T, 1922. 3 . THAT THE LEARNED COMMISSIONER OF INCOME TAX, JALANDHAR II, HAS IGNORED THE FACT THAT PROVISO TO SECION 2(15) OF THE INCOME TAX ACT, 1961 IS NOT APPLICABLE IN THE CASE OF APPELLANT TRUST. 4 . THAT ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, J ALANDHAR - II, HAS ERRED IN WITHDRAWING THE APPELLANTS REGISTRATION U/S 12AA BY HOLDING THAT THE ACTIVITIES OF TRUST ARE NOT CHARITABLE IN NATURE WITHIN THE MEAING OF PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 1961. 5 . THAT ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX, JALANDHAR - II, HAS ERRED IN HOLDING THAT THE APPELLANT TRUST DOES NOT QUALIFY TO BE TREATED AS A CHARITABLE INSTITUTION. 6 . THAT ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, JALANDHAR - II, HAS MISCONSTRUED THE INTENT OF THE LEGISLATURE WHILE INCORPORATING THE PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 1961. 7 . THAT AS CLAIMED IN ABOVE GROUNDS OF APPEAL, ORDER OF COMMISSIONER OF INCOME TAX, JALANDHAR - II, WITHDRAWING THE APPELLANTS REGISTRATION U/S 12AA BE SET - ASIDE AND REGISTRATION U/S 12AA BE ORDERED TO BE RESTORED TO THE APPELLANT. 3. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE US IS A BODY SET UP UNDER THE PUNJAB TOWNS IMPROVEMENT ACT, 1922. ON 28 TH SEPTEMBER 2005, THE AS SESSEE FILED AN APPLICATION SEEKING REGISTRATION UNDER SECTION 12AA OF THE ACT BUT THE SAME WAS REJECTED BY THE THEN COMMISSIONER VIDE ORDER DATED 18 TH MAY 2007. WHEN THE ORDER SO DECLINING THE REGISTRATION WAS CARRIED IN APPEAL BEFORE THIS TRIBUNAL, GRIEV ANCE OF THE ASSESSEE WAS UPHELD AND HE BECAME ENTITLED TO THE BENEFIT OF REGISTRATION. THIS DECISION OF THE TRIBUNAL WAS CHALLENGED BEFORE HONBLE PUNJAB & HARYANA HIGH COURT BUT THEIR LORDSHIPS DECLINED TO INTERFERE IN THE MATTER. 4. THE MATTER, HOWEVER, DID NOT REST AT THAT. 3 5. ON 22 ND FEBRUARY, 2013, LEARNED COMMISSIONER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE REGISTRATION SO GRANTED TO THE ASSESSEE NOT BE WITHDRAWN AND FINDING THE REPLIES OF THE ASSESSEE TRUST UNSATISFACTORY, CANCELLED THE R EGISTRATION OF ASSESSEE U/S. 12AA(3). THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING, THE LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE ISSUE INVOLVED IN THIS APPEAL IS SAME AS WAS IN THE CASE OF KAPURTHALA IMPROVEME NT TRUST VS. CIT (ITA NO. 732/ASR/2013 ) , WHEREIN, THE TRIBUNAL VIDE ORDER DATED 11 TH JUNE 2015 HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE, AND HAS OBSERVED AS FOLLOWS : 9. WE FIND THAT, AS LEARNED COUNSEL RIGHTLY POINTS OUT, THE SCOPE OF POWERS OF T HE COMMISSIONER UNDER SECTION 12AA(3) FOR CANCELLATION OF REGISTRATION ALREADY GRANTED IS VERY LIMITED IN SCOPE INASMUCH AS IT CAN ONLY BE INVOKED ONLY WHEN (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 BEI NG CARRIED OUT IN ACCORDANCE 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 ASSESS EE TRUST ARE NOT GENUINE OR THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE ASSESSEE TRUST. THE CASE OF THE CIT RESTS ON THE FIRST PROVISO TO SECTION 2(15) COMING INTO PLAY ON THE FACTS OF THIS CASE B UT 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 LEARNED COMMISSIONER, IN WITHDRAWING THE REGISTRATION UNDER SECTION 12AA(3), WAS WELL BEYOND THE LIMITED SCOPE OF THE POWERS CONFERRED ON HIM BY THE STATUTE. THE ASSESSEE, THEREFORE, MUST SUCCEED IN THE APPEAL FOR THIS SHORT REASON ALONE. 10. THERE IS, HOWEVER, A MUCH MORE FUNDAMENTAL A REASON FOR THE ASSESSEE SUCCEEDING IN THIS APPEAL. I N OUR CONSIDERED VIEW, THE CONSIDERATIONS WITH RESPECT TO THE FIRST PROVISO TO SECTION 2(15) COMING INTO THE PLAY AND, FOR THAT REASON, THE OBJECTS OF AN ASSESSEE TRUST OR INSTITUTION 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 4 INSTITUTION UNDER SECTION 12A OR 12AA - WHETHER IN RESPECT OF GRANTING OR DECLINING OF A REGISTRATION OR IN RESPECT OF CANCELLATION, EVEN IF OTHERWISE PERMISSIBLE, OF A REGISTRATION . A CLOSER LOOK AT THE SCHEME OF THE ACT WOULD UNAMBIGUOUSLY SHOW THIS ASPECT OF THE MATTER. 11. LET US BEGIN BY TAKING A LOOK AT SECTION 2(15) WHICH DEFINES CHARITABLE ACTIVITIES AND FIRST AND SECOND PROVISOS THERETO. THESE STATUTORY PROVISIONS ARE AS FOLLOWS: (15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY ; PROVIDED F URTHER THAT THE FIRST PROVISO 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 UNDERLINING SUPPLIED BY US) 12. WHAT IS CLEAR FROM THE RID ERS IN THE ABOVE DEFINITION 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 TERMS. THE SAME ACTIVITY CAN BE HIT BY THIS RIDER IN ONE YEAR AND THU S THE ASSESSEE TRUST OR INSTITUTION MAY NOT QUALIFY TO BE EXISTING FOR CHARITABLE PURPOSES, AND THAT VERY ACTIVITY OF THE ASSESSEE TRUST OR INSTITUTION MAY REMAIN UNAFFECTED BY THE SAME DISABLING PROVISION FOR ANOTHER YEAR. THE REASON IS THAT IT IS NOT O NLY THE NATURE OF THE ACTIVITY BUT ALSO THE LEVEL OF ACTIVITY WHICH, TAKEN TOGETHER, DETERMINE WHETHER THIS DISABLING CLAUSE CAN COME INTO PLAY. THE SAFEGUARD AGAINST THE OBJECTS OF THE TRUST BEING VITIATED INSOFAR AS THEIR CHARACTER OF CHARITABLE ACTIVIT IES IS CONCERNED, IS INBUILT IN THE PROVISIONS OF SECTION 13(8) WHICH WAS BROUGHT INTO EFFECT WITH EFFECT FROM THE SAME POINT OF TIME WHEN PROVISO TO SECTION 2(15) WAS INTRODUCED I.E. WITH EFFECT FROM 1 ST APRIL 2009. SECTION 13(8) PROVIDES AS FOLLOWS: SECTION 13 - SECTION 11 NOT TO APPLY IN CERTAIN CASES. 5 . (8) NOTHING CONTAINED IN SECTION 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 PERSON IN THE SAID PREVIOUS YEAR. 13. WHILE INTRODUCING THIS AMENDMENT, EXPLANATORY MEMORANDUM TO THE FINANCE BILL 2012 ( HTTP://INDIABUDGET.NIC.IN/BUDGET2012 - 2013/UB2012 - 13/MEM/MEM1.PDF ) EXPLAINED THE REASONS AND BACKDROP OF THIS LEGISLATIVE AMENDMENT AS FOLLOWS: ASSESSMENT OF CHARITABLE ORGANIZATION IN CASE COMMERCIAL RECEIPTS EXCEED THE SPECI FIED THRESHOLD SECTIONS 11 AND 12 OF THE ACT EXEMPT INCOME OF ANY CHARITABLE TRUST OR INSTITUTION, IF SUCH INCOME IS APPLIED FOR CHARITABLE PURPOSES IN INDIA AND SUCH INSTITUTION IS REGISTERED UNDER SECTION 12AA OF THE ACT. ... SECTION 2(15) OF THE AC T PROVIDES DEFINITION OF CHARITABLE 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 PROV ISO TO SAID SECTION PROVIDES THAT IN CASE WHERE THE ACTIVITY OF ANY TRUST OR INSTITUTION IS OF 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 BUSINESS ; BUT THE AGGREGATE VALUE OF RECEIPTS FROM THE COMMERCIAL ACTIVITIES DOES NOT EXCEED RS. 25,00,000 IN THE PREVIOUS YEAR, THEN THE PURPOSE OF SUCH INSTITUTION SHALL BE CONSIDERED AS CHARITABLE, AND ACCORDINGLY, THE BENEFITS OF EXEMPTION SHALL BE AVAILABLE TO IT. THUS, A CHARITABLE TRUST OR INSTITUTION PURSUING ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY MAY BE A CHARITABLE TRUST IN ONE YEAR AND NOT A CHARITABLE TRUST IN ANOTHER YEAR DEPENDING ON THE AGGREGATE VALUE OF RECEIPTS FROM COMMERCIAL 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 SUB - SECTION 2(15) BECOME APPLICABLE FOR THAT PARTICULAR PREVIOUS YEAR. HOWEVER, THIS TEMP ORARY EXCESS IN ONE YEAR MAY NOT BE TREATED AS ALTERING THE VERY NATURE OF THE TRUST OR INSTITUTION SO AS TO LEAD TO CANCELLATION OF REGISTRATION OR WITHDRAWAL OF APPROVAL OR RESCINDING OF NOTIFICATION ISSUED IN RESPECT OF TRUST OR INSTITUTION. 6 THEREFORE, THERE IS NEED TO ENSURE THAT IF THE PURPOSE OF A TRUST OR INSTITUTION DOES NOT REMAIN CHARITABLE DUE TO APPLICATION OF FIRST PROVISO ON ACCOUNT OF COMMERCIAL RECEIPT THRESHOLD PROVIDED IN SECOND PROVISO IN A PREVIOUS YEAR. THEN, SUCH TRUST OR INSTITUTION WOULD NOT BE ENTITLED TO GET BENEFIT OF EXEMPTION IN RESPECT OF ITS INCOME FOR THAT PREVIOUS YEAR FOR WHICH SUCH PROVISO IS APPLICABLE. SUCH DENIAL OF EXEMPTION SHALL BE MANDATORY BY OPERATION OF LAW AND WOULD NOT BE DEPENDENT ON ANY WITHDRAWAL OF APPROVAL OR CANCELLATION OF REGISTRATION OR A NOTIFICATION BEING RESCINDED. IT IS, THEREFORE, PROPOSED TO AMEND . SECTION 13.. OF THE ACT TO ENSURE THAT SUCH ORGANIZATION 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, WITHDRAWN OR RESCINDED . THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FROM 1ST APRIL, 2009 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2009 - 10 AND SUBSEQUENT ASSESSMENT YEARS. (EMPHASIS BY UNDERLING SUPPLIED BY 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 CHARITABLE INSTITUTION WILL HAVE NO BEARING ON THIS DENIAL OF REGISTRATION. AS A COROLLARY 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 THAT IN TERMS OF THE SECOND PROVISO TO SECTION 2(15), WHICH WAS INTRODUCED BY THE FINANCE ACT 2010 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2009, THE LEGAL PRESCRIPTION SET OUT IN FIRST PROVISO TO SECTION 2(15) CANNOT COME INTO PLAY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY - FIVE LAKH RUPEES OR LESS IN THE PREVIOUS YEAR . CLEARLY, THEREFORE, IN ORDER THAT THE BENEFITS UNDER SECTION 11 ARE DECLINED TO THE ASSESSEE ON THE GROUND THAT IT IS ENGAGED IN SUCH ACTIVITIES AS MAY BE HIT BY THE FIRST PROVISO TO SECTION 2(15), NOT 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 ACTIVITIES MUST EXCEED A SPECIFIED LIMIT. THE SECOND LI MB OF THIS DISABILITY CLAUSE NEEDS TO BE SATISFIED WITH RESPECT TO EACH ASSESSMENT YEAR. OBVIOUSLY, THEREFORE, THIS ASPECT OF THE MATTER CANNOT BE EXAMINED AT THE STAGE OF THE GRANT OR WITHDRAWAL OF REGISTRATION SINCE THE REGISTRATION EXERCISE IS A ONE 7 TIM E EXERCISE AND NOT SOMETHING WHICH MUST BE DONE FOR EACH 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 SECTION 11 ON THAT COUNT, ON YEAR TO YEAR BASIS, NOTWITHSTANDING THE STATUS OF REGISTRATION. 16. THE SCHEME OF THE ACT, IN THIS RESPECT, IS THUS CLEAR. THE STATU S OF REGISTRATION UNDER SECTION 12A OR 12AA HAS NO BEARING, AS RECOGNIZED 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 EXEMPTION UNDER SECTION 11 TO THAT EXTENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THE DISENTITLEMENT FOR EXEMPTION UNDER SECTION 11, AS A RESULT OF THE ACTIVITIES OF AN ASSESSEE BEING HELD T O BE NOT FOR CHARITABLE PURPOSES UNDER SECTION 2(15) READ WITH PROVISOS THERETO, IS IN RESPECT OF ENTIRE INCOME OF THE ASSESSEE TRUST OR INSTITUTION BUT ONLY FOR THE ASSESSMENT YEAR IN RESPECT OF WHICH THE FIRST PROVISO 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 PROVISO TO SECTION 2(15) BUT THE ASSESSEES RECEIPTS FROM SUCH ACTIVITIES DONOT EXCEED SPECIFIED THRESHOLD IN A PARTICULAR AS SESSMENT YEAR, THE ASSESSEE WILL BE SUBJECTED TO UNDUE HARDSHIP IN THE SENSE THAT WHILE THE ASSESSEE WILL BE DISENTITLED TO EXEMPTION UNDER SECTION 11 DUE TO DENIAL OF REGISTRATION UNDER SECTION 12 A OR 12AA WHICH IS SINE QUA NON FOR ADMISSIBILITY OF EXEMP TION UNDER SECTION 11. ON THE OTHER HAND, IF THE STATUS OF REGISTRATION IS GRANTED TO THE ASSESSEE EVEN WHEN SOME OF THE OBJECTS MAY BE HIT BY THE FIRST PROVISO TO SECTION 2(15) AND THE ASSESSEES RECEIPTS FROM SUCH ACTIVITIES DO EXCEED SPECIFIED THRESHOLD , NO PREJUDICE WILL BE CAUSED TO THE LEGITIMATE INTERESTS OF THE REVENUE BECAUSE, NOTWITHSTANDING THE STATUS OF REGISTRATION AND BY THE VIRTUE OF SECTION 13(8), THE ASSESSEE WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 IN RESPECT OF SUCH INCOME. IT IS ONLY ELEMENTARY 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 THE FIRST PROVISO TO SECTION 2(15) COMING INTO PLAY AF FECTING THE GRANT, DECLINE OR WITHDRAWAL OF REGISTRATION UNDER SECTION 12AA WILL THUS LEAD TO WHOLLY AVOIDABLE UNDUE HARDSHIPS TO THE ASSESSEE, WILL BE UNWORKABLE IN PRACTICE AND BE CONTRARY TO THE SCHEME OF THE ACT. 8 19. IN VIEW OF THE ABOVE DISCUSSIONS , IN OUR CONSIDERED VIEW, THE CONSIDERATIONS ABOUT THE POSSIBILITIES OF FIRST PROVISO TO SECTION 2(15) INTO PLAY ARE WHOLLY EXTRANEOUS IN THE PRESENT CONTEXT. AS THE WITHDRAWAL OF REGISTRATION IS SOLELY BASED ON THESE CONSIDERATIONS, THE VERY FOUNDATION OF THE LEARNED COMMISSIONERS ACTION IS UNSUSTAINABLE IN LAW AND CONSISTS OF REASONS 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 WHO LLY DEVOID OF ANY LEGALLY SUSTAINABLE MERITS. 20. HAVING DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE ON THESE ISSUES, WE SEE NO NEED TO ADDRESS OURSELVES, AT THIS STAGE, TO THE QUESTION WHETHER THE FIRST PROVISO TO SECTION 2(15) COULD INDEED APPLY ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE. THAT ASPECT OF THE MATTER IS WHOLLY ACADEMIC AS ON NOW. 5. THE LEGAL POSITION SO EXPLAINED BY US HAS BEEN SUCCINCTLY SUMMED UP BY THE WWW.ITATONLINE.ORG AS FOLLOWS: (I) THE SCOPE OF POWERS OF THE COMMISSIONER UNDER SECTION 12AA(3) FOR CANCELLATION OF REGISTRATION ALREADY GRANTED IS VERY LIMITED IN SCOPE INASMUCH AS IT CAN ONLY BE INVOKED ONLY WHEN (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 ACCORDANCE 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 T HE ACTIVITIES OF THE ASSESSEE TRUST ARE NOT GENUINE OR THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE ASSESSEE TRUST. THE CASE OF THE CIT RESTS ON THE FIRST 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 COMMISSIONER, IN WITHDRAWING THE REGISTRATION UNDER SECTIO N 12AA(3), WAS WELL BEYOND THE LIMITED SCOPE OF THE POWERS CONFERRED ON HIM BY THE STATUTE. (II) THERE IS, HOWEVER, A MUCH MORE FUNDAMENTAL REASON FOR THE ASSESSEE SUCCEEDING IN THIS APPEAL. IN OUR CONSIDERED VIEW, THE CONSIDERATIONS WITH RESPECT TO THE F IRST PROVISO TO SECTION 2(15) COMING INTO THE PLAY AND, FOR THAT REASON, THE OBJECTS OF AN ASSESSEE 9 TRUST OR INSTITUTION BEING HELD TO BE NOT COVERED BY THE DEFINITION OF CHARITABLE PURPOSES, HAVE NO ROLE TO PLAY IN THE MATTERS RELATING TO REGISTRATION O F A TRUST OR INSTITUTION UNDER SECTION 12A OR 12AA - WHETHER IN RESPECT OF GRANTING OR DECLINING OF A REGISTRATION OR IN RESPECT OF CANCELLATION, EVEN IF OTHERWISE PERMISSIBLE, OF A REGISTRATION. A CLOSER LOOK AT THE SCHEME OF THE ACT WOULD UNAMBIGUOUSLY SH OW THIS ASPECT OF THE MATTER; (III) THE DEFINITION OF CHARTABLE PURPOSES IS THAT THE 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 TERMS. THE SAME ACTIVITY CAN BE HIT BY TH IS RIDER IN ONE YEAR AND THUS THE ASSESSEE TRUST OR INSTITUTION MAY NOT QUALIFY TO BE EXISTING FOR CHARITABLE PURPOSES, AND THAT VERY ACTIVITY OF THE ASSESSEE TRUST OR INSTITUTION MAY REMAIN UNAFFECTED BY THE SAME DISABLING PROVISION FOR ANOTHER YEAR. TH E REASON IS THAT IT IS NOT ONLY THE NATURE OF THE ACTIVITY BUT ALSO THE LEVEL OF ACTIVITY WHICH, TAKEN TOGETHER, DETERMINE WHETHER THIS DISABLING CLAUSE CAN COME INTO PLAY. THE SAFEGUARD AGAINST THE OBJECTS OF THE TRUST BEING VITIATED INSOFAR AS THEIR CHAR ACTER OF CHARITABLE ACTIVITIES IS CONCERNED, IS INBUILT IN THE PROVISIONS OF SECTION 13(8) WHICH WAS BROUGHT INTO EFFECT WITH EFFECT FROM THE SAME POINT OF TIME WHEN PROVISO TO SECTION 2(15) WAS INTRODUCED I.E. WITH EFFECT FROM 1ST APRIL 2009; (IV) TH E 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 CHARITABLE INSTITUTION WILL HAVE NO BEARING ON THIS DENIAL OF REGISTRATION. AS A COROLLARY 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 WI THDRAWAL OF THE REGISTRATION UNDER SECTION 12AA; (V) THE SCHEME OF THE ACT IS CLEAR. THE STATUS OF REGISTRATION UNDER SECTION 12A OR 12AA HAS NO BEARING, AS RECOGNIZED IN SECTION 13(8), ON THE AVAILABILITY OF EXEMPTION UNDER SECTION 11. TO THE EXTENT INCO ME 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 EXEMPTION UNDER SECTION 11 TO THAT EXTENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THE DISENTITL EMENT FOR EXEMPTION UNDER SECTION 11, AS A RESULT OF THE ACTIVITIES OF AN ASSESSEE BEING HELD TO BE NOT FOR CHARITABLE PURPOSES UNDER SECTION 2(15) READ WITH PROVISOS THERETO, IS IN RESPECT OF ENTIRE INCOME OF THE ASSESSEE TRUST OR INSTITUTION BUT ONLY FOR THE ASSESSMENT YEAR IN RESPECT OF WHICH THE FIRST PROVISO TO SECTION 2(15) IS TRIGGERED. 10 (VI) 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) BUT THE ASSESSEES RECEIPTS FROM SUCH ACTIVITIES DO NOT EXCEED SPECIFIED THRESHOLD IN A PARTICULAR ASSESSMENT YEAR, THE ASSESSEE WILL BE SUBJECTED TO UNDUE HARDSHIP IN THE SENSE THAT WHILE THE ASSESSEE WILL BE DISENTITLED TO EXEMPTION UNDER SECTION 11 DUE TO D ENIAL 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 SOME OF THE OBJECTS MAY BE HIT BY THE FIRST PROVIS O TO SECTION 2(15) AND THE ASSESSEES RECEIPTS FROM SUCH ACTIVITIES DO EXCEED SPECIFIED THRESHOLD, NO PREJUDICE WILL BE CAUSED TO THE LEGITIMATE INTERESTS OF THE REVENUE BECAUSE, NOTWITHSTANDING THE STATUS OF REGISTRATION AND BY THE VIRTUE OF SECTION 13(8) , THE ASSESSEE WILL NOT BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11 IN RESPECT OF SUCH INCOME. IT IS ONLY ELEMENTARY THAT A STATUTORY PROVISION IS TO BE INTERPRETED UT RES MAGIS VALEAT QUAM PEREAT, I.E., TO MAKE IT WORKABLE RATHER THAN REDUNDANT . 6. WE MA Y, HOWEVER, ALSO TAKE NOTE OF A COORDINATE BENCH DECISION IN THE CASE OF MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY VS DIT [(2015) 65 SOT 145 (MUM)] READ WITH DECISION DATED 10 TH APRIL 2015, ON MISCELLANEOUS APPLICATION ON THIS DECISION, WHICH IS RE PORTED AS MMRDA VS DIT [2015 - TIOL - 732 - ITAT - MUM] . 7. THIS DECISION ON MERITS, THOUGH ITS STRIKES A DIFFERENT CHORD ON THE ISSUE, IS NOT A BINDING PRECEDENT AND IT HAS BEEN RECALLED BY THE BENCH ANYWAY. THE MATTER HAS NOW BEEN REFERRED TO HONBLE PRESIDE NT FOR CONSTITUTION OF SPECIAL BENCH TO DECIDE THE QUESTION WHETHER OR NOT ON THE FACTS OF THE CASE, REGISTRATION GRANTED U/S. 12A COULD BE WITHDRAWN ON THE ALLEGED GROUND THAT THE ACTIVITIES OF THE ASSESSEE WERE NOT FOR 'CHARITABLE PURPOSE' CONSIDERING THE PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT, 1961. AS PER THE RECORDS OF THE PRESENT CASE, THOUGH, A SIMILAR REQUEST MADE IN THE PRESENT CASE WAS NOT ACCEPTED BY THE THEN OFFICIATING PRESIDENT, AS COMMUNICATED VIDE LETTER DATED 2 ND APRIL 2014 ISSUED BY 11 THE ASSISTANT REGISTRAR, ITAT, MUMBAI. WE CANNOT, THEREFORE, FOLLOW THIS COORDINATE BENCH BY SENDING THE REQUEST FOR CONSTITUTION OF SPECIAL BENCH TO HONBLE PRESIDENT. 8. BE THAT AS IT MAY, AS WE HAVE NOTED EARLIER IN THIS ORDER, SO FAR AS THE MATT ERS REGARDING GRANT OF, DECLINE OF OR WITHDRAWAL OF REGISTRATION UNDER SECTION 12 A OR 12AA IS CONCERNED, THE PROVISO TO SECTION 2(15) HAS NO ROLE TO PLAY INASMUCH IRRESPECTIVE OF WHETHER OR NOT AN ASSESSEE HAS A REGISTRATION UNDER SECTION 12A OR 12AA, ONC E THE PROVISO TO SECTION 2(15) COME INTO PLAY, THE ASSESSEE WILL NOT BE ENTITLED TO EXEMPTION OF INCOME DUE TO THE APPLICATION OF SECTION 132(8). WE HAVE NOTED THAT THERE IS NO DECISION CONTRARY OF THIS VIEWS BY ANY COORDINATE BENCH. IN THE CASE OF MMRDA ( SUPRA), THE COORDINATE BENCH HAS NOTED SOME ARGUMENTS IN THIS REGARD BUT THERE IS NO FINDING OR ADJUDICATION ON THE MATTER. IN THE CASE OF ENTERTAINMENT SOCIETY OF GOA (SUPRA), THERE IS NO REFERENCE TO THIS ASPECT OF THE MATTER AT ALL. AS KAPURTHALA IMPRO VEMENT TRUST DECISION (SUPRA), TO THE BEST OF OUR KNOWLEDGE, IS THE ONLY DECISION ON THAT ASPECT OF THE MATTER AND WE HAVE NO DOUBTS ON ITS CORRECTNESS, WE SEE NO REASONS NOT TO FOLLOW THIS DECISION. ACCORDINGLY, FOR THIS SHORT REASON ALONE, THE APPEAL OF THE ASSESSEE DESERVES TO BE ALLOWED AND, THEREFORE, ALL OTHER PERIPHERAL LEGAL ISSUES, INCLUDING THE ISSUE ON WHICH SPECIAL BENCH IS RECOMMENDED BY THE COORDINATE BENCH, ARE NO MORE THAN ACADEMIC ON THE FACTS OF THIS CASE. WHEN PROVISO TO SECTION 2(15) HAS NO RELEVANCE WITH REGARD TO REGISTRATION UNDER SECTION 12A OR 12AA OF THE ACT, IT IS WHOLLY ACADEMIC, IN THE CONTEXT OF VALIDITY OF WITHDRAWAL OF REGISTRATION, WHETHER OR NOT THE PROVISO TO SECTION 2(15) ARE APPLICABLE ON THE FACTS OF THE CASE BUT THEN IT IS THIS ASPECT OF THE MATTER WHICH HAS BEEN SUBJECT MATTER OF CONSIDERATION BEFORE THE COORDINATE BENCH. 9. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN MIND THE ENTIRETY OF THE CASE, THE DECISION OF THE COORDINATE BENCH, IN MMRDAA CASE (SUPRA), TO REFER 12 THE MATTER FOR CONSTITUTION OF A SPECIAL BENCH, AND THE SAID DECISION DOES NOT AFFECT OUR PRESENT ADJUDICATION. 10. FOR THE REASONS SET OUT ABOVE, AND RESPECTFULLY FOLLOWING OUR DECISION IN KAPURTHALA IMPROVEMENT TRUSTS CASE (SUPRA), WE HOLD THAT THE WITHDRAWAL OF REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12A WAS UNSUSTAINABLE IN LAW. WE QUASH THE WITHDRAWAL ORDER AND RESTORE THE REGISTRATION GRANTED TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED UNDER PROVISO TO RULE 34(4) OF THE APPELLATE TRIBUNAL RULES 1963 TODAY ON 29 TH DAY OF JUNE, 2015. SD/ - SD/ - A D JAIN PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER ) DATED: THE 29 TH DAY OF JUNE 2015 *AKS/ - COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AMRITSAR BEN CH, AMRITSAR