THE NORTH INDIAN ASSOCIATION, MUMBAI V. DIT (E), MUMBAI

ITA 409/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5129 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETAM SINGH
• Keywords: Business income; Charitable institution; Retrospective amendment; Cancellation of registration
• Section: 12A; 12AA; 11

Judgement Text

, CH CHCH CH INCOME TAX APPELLATE TRIBUNAL,MUMBAI - B BENCH. . .. . . .. . , ,, , !'#$ !'#$ !'#$ !'#$ , ' ' ' ' %& %& %& %& BEFORE S/SH.H.L.KARVA,PRESIDENT & RAJENDRA,ACCOUNTA NT MEMBER /. ITA NO. 409/MUM/2012 , ' ' ' ' ( ( ( ( / ASSESSMENT YEAR-2009-10 THE NORTH INDIAN ASSOCIATION, BHAUDAJI ROAD EXTENTION, BEHIND KINGS CIRCLE RAILWAY STATION, OFF SION ROAD, MUMBAI- 400022 VS. DIRECTOR OF INCOME TAX (EXEMPTIONS), PIRAMAL CHAMBERS, 6 TH FLOOR, PAREL, AAYAKAR BHAVAN, MUMBAI- 400012 PAN:AAATN0366J ( )* / APPELLANT ) ( +,)* / RESPONDENT ) )* )* )* )* - - - - ' '' ' / APPELLANT BY : SHRI SHEKHAR GUPTA +,)* . - ' / RESPONDENT BY : SHRI PREETAM SINGH ' ' ' ' . .. . /0 /0 /0 /0 / DATE OF HEARING : 17 -12-2013 12( . /0 / DATE OF PRONOUNCEMENT : 20-12-2013 PER RAJENDRA, A.M. CHALLENGING THE ORDER DATED 08.12.2011 OF THE DIREC TOR OF INCOME TAX(EXEMPTIONS), MUMBAI, PASSED U/S.12AA(3)OF THE ACT,ASSESSEE-TRUST HAS FILED FOLLOWING GROUNDS OF APPEALS: 1.THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN PASSING AN ORDER U/S.12AA(3) OF THE INCOME TAX ACT WITHDRAWING THE REGISTRATION U/S. 11 OF THE ACT GRANTED TO THE ASSESSEE. 2.THE ASSESSEE COMPANY CRAVES LEAVE TO ADD, ALTER O R AMEND THE ABOVE GROUND OF APPEAL. BRIEF FACTS OF THE CASE: 2. AS PER THE DIRECTOR OF INCOME-TAX-EXEMPTION,MUMBAI( DIT-E),HE RECEIVED A PROPOSAL FROM THE ADIT-(E),MUMBAI FOR CANCELLATION OF REGISTRATION GR ANTED TO THE ASSESSEE U/S.12A OF THE ACT ON THE GROUND THAT THE ASSESSEE-TRUST HAD BEEN CARRYING ON ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND THAT THE GROSS RECEIPTS THERE-FROM WER E IN EXCESS OF RS.10 LACS.DIT-E WAS OF THE OPINION THAT THE PROVISO TO SECTION 2(15) OF THE AC T WAS ATTRACTED IN THE CASE FROM A.Y.2009-10, THAT REGISTRATION GRANTED TO THE ASSESSEE HAD TO BE WITH DRAWN.HE ISSUED A SHOW CAUSE VIDE THIS OFFICE LETTER NO.DIT(E)/ITO(HQ)/ WITHDRAWAL/41/2011-12 DAT ED 03.11.2011 WAS ISSUED TO THE ASSESSEE AS TO WHY SHOULD THE REGISTRATION AS GRANTED TO IT NOT BE WITHDRAWN. 2.1. THE ASSESSEE IN ITS REPLY SUBMITTED THAT FROM THE P LAIN READING OF THE PROVISO TO SECTION 2(15) IT WAS CLEAR THAT IT WAS NOT HIT BY SAID PROVISO,THAT THERE WAS NO TRADE OR BUSINESS ACTIVITY CARRIED OUT BY THE ASSOCIATION,THAT THE MAIN OBJECT OF THE ASSE SSEE WAS TO ENCOURAGE, DEVELOP, EXTEND AND PROMOTE SPORTS AND RECREATIONAL ACTIVITIES BESIDES THE CLUB WAS AUTHORISED TO CARRY OUT ACTIVITIES WHICH WERE INCIDENTAL AND AUXILIARY TO PROMOTE THE SPORTS,THAT THE WORD BUSINESS WAS LARGE AND INFINITE IMPORT BUT IT REPRESENTED AN ACTIVITY CARR IED ON CONTINUOUSLY IN AN ORGANISED MANNER WITH A SAID PURPOSE AND WITH A VIEW TO EARN PROFIT,THAT TH E CLUB WAS A MEMBERSCLUB AND PRINCIPLE OF MUTUALITY WERE APPLICABLE IN THE MATTER UNDER CONSI DERATION. 2 ITA NO.409/MUM/2012 THE NORTH INDIAN ASSOCIATION. 2.2. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND AFTER REFERRING TO THE PROVISIONS OF THE SECTION 2(15)OF THE ACT,HE HELD THAT IF ANY TRUST;W HOSE MAIN OBJECT WAS FOR ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY;CARRIED OUT ANY ACTIVITIES WHICH WERE IN THE NATURE OF ANY TRADE/COMMERCE/BUSINESS THEN ALL ACTIONS OF SUCH A TRUST WERE COVERED BY THE AFORESAID PROVISO. HE FURTHER HELD THAT IN THE ASSESSEES CASE THERE WERE CLEAR-CUT EARNINGS WHICH WAS SHOWN AS INCOME BY WAY OF ROYALTY INCOME(RS.22,83,551/-)FROM OBJECTS O F THE CLUB AND FROM PREMISES CONTRACTORS AND SERVICES(RS.48,48,023/-),THAT SUCH RECEIPTS WERE IN EXCESS OF RS.10 LACS,THAT THE ASSESSEE WAS RECEIVING INCOME TOWARDS COMMERCIAL EXPLOITATION OF ITS PROPERTY IN A SYSTEMATIC MANNER WHICH WAS NOTHING BUT A BUSINESS INCOME,THAT THE ASSESSEE TRUST WAS DIRECTLY HIT BY THE PROVISO TO SECTION 2(15) WHICH HAD BEEN INTRODUCED FROM AY.2009-10,THA T ONCE A CHARITABLE TRUST WAS HIT BY AFORESAID PROVISO THERE WAS CHANGE IN THE STATUS OF SUCH TRUS T AND IT WAS TO BE HELD THAT IT WAS NOT FOR CHARITABLE PURPOSE.HE FINALLY HELD THAT THE ASSESSE E TRUST HAD BECOME NON GENUINE AND THE REGISTRATION AS ALLOWED TO IT IN EARLIER YEARS U/S. 12AA WAS TO BE CANCELLED OR WITHDRAWN W.E.F. A.Y. 2009-10. 2.3. BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED T HAT TRUST WAS REGISTERED IN ,THAT IT WAS GETTING RENEWAL U/S.80G OF THE ACT FROM TIME TO TIM E,THAT REGISTRATION WAS GRANTED TO THE ASSESSEE U/S.12A OF THE ACT,THAT THE IT WAS NOT COVERED BY T HE PROVISIONS OF SECTION 12AA(3)OF THE ACT, THAT SAID PROVISIONS WERE APPLICABLE FROM 01.06.2010 I.E .FROM AY. 2011-12 ONLY,THAT THE CIRCULAR ISSUED BY THE CBDT(CIRCULAR NO.1/2011 DTD.06.04.2011)MANDA TED THAT AMENDMENTS INTRODUCED IN THE SECTION 12AA WOULD APPLY FOR AY.2011-12 AND SUBSEQU ENT YEARS.HE RELIED UPON THE DECISIONS OF MAHARASHTRA HOUSING AND AREA DEVELOPMENT AUTHORITY( 33TAXMANN.COM 604),KODAVA SAMAJ(32TAXMANN.COM124),KAPOOR EDUCATIONAL SOCIETY( 15TAXMANN.COM40)DELIVERED BY THE MUMBAI,BANGLORE AND LUCKNOW BENCHES OF THE TRIBUANL AND THE JUDGMENT OF THE HONBLE P&H HIGH COURT DELIVERED IN THE CASE OF VED NIKETAN DHA M(38TAXMANN.COM342).DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE DIT- E. 2.4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.UNDISPUTED FACTS OF THE CASE UNDER CONSIDERATION ARE THAT THE ASSESSEE-TRUS T WAS GRANTED REGISTRATION ON 27.11.1995, THAT DIT-E,VIDE HIS ORDER DTD.8.12.2011WITHDREW THE REGI STRATION GRANTED TO IT FOR THE YEAR 2009-10,THAT THE AMENDED PROVISIONS OF SECTION 12AA(3)WERE EFFEC TIVE FROM AY.2011-12.WE FIND THAT IN THE CASE OF MAHARASHTRA HOUSING AND AREA DEVELOPMENT AU THORITY,DIT-E,MUMBAI HAD WITHDRAWN THE REGISTRATION GRANTED TO THE ASSESSEE ON THE SIMILAR GROUNDS.WHILE DECIDING THE APPEAL IN FAVOUR OF THE ASSESSEE,TRIBUNAL HELD THAT EVEN THOUGH THE OBJ ECTS OF THE INSTITUTIONS WERE NO LONGER TOWARDS A CHARITABLE PURPOSE IN VIEW OF THE AMENDED LAW,REGIS TRATION U/S.12A COULD NOT BE REVIEWED OR WITHDRAWN IN ABSENCE OF STIPULATION IN SECTION 12AA (3)REGARDING CONTINUING SATISFACTION.WE FURTHER FIND THAT ISSUE OF WITHDRAWAL OF REGISTRATION HAS B EEN CONSIDERED IN THE CASE OF KAPOOR EDUCATIONAL SOCIETY(SUPRA).ONE OF US WAS PARTY TO THE THAT DECI SION.WHILE DECIDING THE MATTER,LUCKNOW BENCH HAD HELD AS UNDER: 7.WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. IT UN ADMITTED FACT THAT THE ASSESSEE SOCIETY WAS GRANTED REGISTRATION UNDER S. 12A OF THE ACT BY THE LEARNE D CIT, LUCKNOW ON 1ST MARCH, 1999 AND THE SAID ORDER WAS EFFECTIVE FROM 1ST APRIL, 1998. SEC. 12AA WAS INTRODUCED IN THE ACT BY THE FINANCE (NO. 2) ACT, 1 996 W.E.F. 1ST APRIL, 1997 AND WHEN THE SAID ORDER UNDER S.12A WAS PASSED IN THE ASSESSEES CASE ON 1ST MARCH, 1999, THE LEARNED CIT HAD ONLY TWO OPTIONS UNDER THIS SECTION I.E.,EITHER HE WOULD REGISTER TH E TRUST/ INSTITUTION OR HE WOULD REFUSE REGISTRATIO N FOR THE REASONS GIVEN IN HIS ORDER.IT IS OBSERVED THAT THER E WAS NO POWER WITH THE CIT AT THE RELEVANT TIME TO CANCEL THE REGISTRATION AFTER HAVING ONCE GRANTED I T. NOW,THE POWER HAS BEEN GIVEN TO THE CIT BY INSER TING S. 12AA(3) BY FINANCE ACT, 2004 AND THE NEWLY INSER TED SECTION WAS MADE EFFECTIVE FROM 1ST OCT., 2004. SEC. 12AA(3) READS AS UNDER: SEC.12AA(3)WHERE A TRUST OR AN INSTITUTION HAS BEE N GRANTED REGISTRATION UNDER CL.(B) OF SUB-S.(1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER S.12A AS IT STOOD BEFORE ITS 3 ITA NO.409/MUM/2012 THE NORTH INDIAN ASSOCIATION. AMENDMENT BY FINANCE(NO. 2) ACT, 1996 (33 OF 1996) AND SUBSEQUENTLY THE CIT IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION AR E NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUC H TRUST OR INSTITUTION. 8.IN THE CASE OF OXFORD ACADEMY FOR CAREER DEVELOPM ENT (SUPRA), A DISPUTE AROSE WHETHER S. 12AA(3) HAS RETROSPECTIVE EFFECT AND WHETHER THE CIT COULD CANC EL THE REGISTRATION GRANTED TO A TRUST/INSTITUTION PRIOR TO 1ST OCT., 2004. THE HONBLE JURISDICTIONAL HIGH COURT-LUCKNOW BENCH IN THE CASE OF OXFORD ACADEMY FOR CAREER DEVELOPMENT (SUPRA) HELD (HEAD NOTES) AS UNDER: THE ORDER CANCELLING THE REGISTRATION GRANTED TO A TRUST OR INSTITUTION UNDER S.12AA QUASI JUDICIAL ORDER DOES NOT FALL WITHIN THE CATEGORY OF ORDERS M ENTIONED UNDER S. 21 OF THE GENERAL CLAUSES ACT, 1897,WHICH PROVIDES THAT THE POWER CONFERRED ON AN AUTHORITY TO ISSUE ORDERS INCLUDES THE POWER TO RESCIND SUCH ORDERS, AND THE CIT WOULD NOT HAVE POW ER TO RESCIND THE ORDER PASSED BY THE CIT EARLIER GRANTING THE REGISTRATION TO A TRUST OR INS TITUTION.SEC.12AA(3) WAS INCORPORATED W.E.F.1ST OCT.,2004, TO EMPOWER THE CIT TO CANCEL THE REGISTR ATION GRANTED TO A TRUST OR INSTITUTION. THE OBJECT OF THIS PROVISION IS NOT CLARIFICATORY OR EXPLANATO RY.SO PRIOR TO THAT DATE, THE AUTHORITIES GRANTING REGISTRATION HAD NO INHERENT POWER TO WITHDRAW OR R EVOKE THE REGISTRATION ALREADY GRANTED. IN THE ABOVE DECISION,THE HONBLE HIGH COURT HAS CL EARLY HELD THAT S.12AA(3) HAS NO RETROSPECTIVE EFFE CT AS IT IS NEITHER EXPLANATORY NOR CLARIFICATORY IN N ATURE AND THE CIT HAS NO POWER TO RESCIND THE ORDER PASSED BY THE CIT PRIOR TO 1ST OCT., 2004 . NOW THERE IS AN AMENDMENT TO S. 12AA(3) BY THE FINA NCE ACT,2010, WHICH HAS INSERTED THE PHRASE OR HAS OBT AINED REGISTRATION AT ANY TIME UNDER S. L2A AFTER THE WORDS SUB-S. (1) AS APPEARING IN S.12AA(3).THIS A MENDMENT HAS BEEN MADE APPLICABLE AND EFFECTIVE FROM 1ST JUNE, 2010. KEEPING IN VIEW THE RATIO LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF OXFO RD ACADEMY FOR CAREER DEVELOPMENT (SUPRA) AND ALSO THE AMENDMENT OF S. 12AA(3) BY THE FINANCE ACT, 2010 W.E.F. 1ST JUNE, 2010, IT IS AMPLY CLEAR THAT 12AA(3) IS PROSPECTIVE IN NATURE AND IF ANY TRUST/INSTITUTION HAS BEEN REGISTERED PRIOR TO 1ST OCT.,2004 EITHER UNDERS.12A OR12AA, THE CIT HAS NO POWER TO CANCEL THE REGISTRATION UNDER S.12AA(3).IN THE INSTANT CASE, REGISTRATION TO THE ASSESSEE SOC IETY WAS GRANTED ON 1ST MARCH, 1999 I.E., MUCH PRIOR TO 1ST OCT., 2004 WHEN S. 12AA(3) WAS INTRODUCED AND MADE EFFECTIVE FROM 1ST OCT., 2004 AND THE CIT HAD NO JURISDICTION TO CANCEL THE REGISTRATION GRANTED TO THE ASSESSEE SOCIETY UNDER S.12A AND THAT THE ORDER PASSED BY THE CIT UNDER S.12AA(3)WITHOUT JURISDICTION, BAD IN LAW AND LIABLE TO BE QUASHED. WE ACCORDINGLY QUASH THE IMPUGNED ORDER OF THE LEARNED CIT CANCELLING THE REGISTRATION GRANTED TO THE ASSESSEE SOCIETY UNDER S. 1 2A OF THE ACT ON 1S T MARCH, 1999. THE APPEAL OF THE ASSESSEE STANDS ALLO WED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE ;DATE OF REGISTRATION OF THE TRUST AND THE EFFECTIV E DATE OF APPLICABILITY OF THE AMENDMENT;AND FOLLOWIN G THE DECISIONS OF THE COORDINATING BENCHES WE DECIDED THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE-TRUST. AS A RESULT,AP PEAL FILED BY THE ASSESSEE STANDS ALLOWED. 3 &4 ' 3/ . !5 . !/ 67. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER,2013 . %'8 . 12( ' # 9 :%' 20 FNLACJ FNLACJ FNLACJ FNLACJ , 2013 2 . ;. SD/- SD/- ( . . - H.L.KARWA) ( !'#$ !'#$ !'#$ !'#$ / RAJENDRA) / PRESIDENT ' ' ' ' %& %& %& %& /ACCOUNTANT MEMBER / MUMBAI, :%' /DATE: 20 TH DECEMBER,2013 SK %'8 %'8 %'8 %'8 . .. . +/< +/< +/< +/< ='<(/ ='<(/ ='<(/ ='<(/ / COPY OF THE ORDER FORWARDED TO : 4 ITA NO.409/MUM/2012 THE NORTH INDIAN ASSOCIATION. 1. ASSESSEE / )* 2. RESPONDENT / +,)* 3. THE CONCERNED CIT (A) / > ? , 4. THE CONCERNED CIT / > ? 5. DR B BENCH, ITAT, MUMBAI / <@; +/' CH CHCH CH , . . # . 6. GUARD FILE/ ; A ,