FORTESS, MUMBAI V. COMM OF INCOME TAX(EXEMPTION), MUMBAI

MA 261/MUM/2023

AI Insights

The case revolves around a Miscellaneous Application (MA) filed by the assessee, Fortess, against the order of the Income Tax Appellate Tribunal which initially did not adjudicate on all aspects of their appeal concerning the registration under section 12AB of the Income Tax Act, 1961. The primary issue was whether the CIT (Exemptions) could impose conditions on the registration that were not explicitly provided for in the law. The Tribunal referenced several precedents, including the case of Chamber of Indian Charitable Trust Vs. PCIT, which clarified that such conditions could not be imposed. The Tribunal's decision rectified the oversight in the initial ruling and aligned it with established legal precedents.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299227 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 15-06-2023
• Assessment Year: misc
• Appeal Filed On: 27-03-2023
• Other Referred Cases: Chamber of Indian Charitable Trust Vs. PCIT, Saifee Burhani Upliftment Trust vs. CIT, Bai Hirabai Jamshetji Tata Navsari Charitable Institution Vs CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 12; 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI AMARJIT SINGH, AM MA. No. 261/Mum/2023 (Arising out of ITA. No.2201/Mum/2021 (निर्धारण वर्ा / Assessment Year: 2022-23 to 2026-27) Fortess 1306-1307, Lodha Supremus Senapati Bapat Marg, Lower Parel, Mumbai-400013. बिधम/ Vs. CIT (Exemptions) 6 th Floor, Cumballa Hill, MTNL Building, Pedder Road, Mumbai-400026. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAAAF4811F (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 16/06/2023 घोषणा की तारीख /Date of Pronouncement: 21/08/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is a Miscellaneous application preferred by the assessee against the order of this Tribunal in ITA. No.2200 to 2201/Mum/2021 dated 21.10.2022. 2. At the outset, the Ld. AR of the assessee Shri Sukhsagar Syal brought to our notice that even though in the caption of the impugned order both appeals (ITA. No.2200 & 2201) has been mentioned, the Tribunal omitted to adjudicate ITA No. 2201/Mum/2021 and the Tribunal had disposed off only ITA. No. 2200/Mum/2021 regarding the grievance of the assessee in respect of section 80G of the Income Tax Act, 1961 (hereinafter “the Act”). On examining the impugned order and the records, we find merit in the MA filed by the assessee, and find that the Tribunal did not pass order in the case of ITA. No. 2201/Mum/2021 which was regarding registration under section 12AB Assessee by: Shri Sukhsagar Syal Revenue by: Shri Soumendu Kumar Dash (Sr. AR) MA. No.261/Mum/2023 A.Y. 2022-23 to 26-27 Fortess 2 of the Act. Further we find that assessee’s grievance in that appeal was against the action of the Ld. CIT(E) imposing conditions while issuing order granting registration u/s 12AB of the Act dated 21.10.2022. Since, we have not decided the impugned action of Ld. CIT(E) issuing registration u/s 12AB of the Act subject to condition stated therein, which omission on our part is found to be mistake apparent on record and so proceed to adjudicate the grounds raised in assessee’s appeal ITA. No. 2201/Mum/2021 regarding grant of registration u/s 12AB of the Act. 3. The Ld. AR of the assessee Shri Sukhsagar Syal brought to our notice that issue raised in the appeal is no longer res-interga. According to him, this Tribunal has already taken a view on this issue as to whether the Ld. CIT(E) while granting the registration/approval u/s 12AB of the Act can impose conditions or not and drew our attention to the Tribunal’s decision in the case of Chamber of Indian Charitable Trust Vs. PCIT in ITA. No. 2168 & 2169/Mum/2021 wherein this Tribunal vide order dated 28.09.2022 has passed the order on this precise issue by holding as under: - “31. We have heard both the parties and perused the relevant provisions of law and the judicial decisions cited before us. Let us first address the initial objection of the Revenue that this Tribunal is not empowered to look into the vires of the conditions stipulated in Form 10AC notified in terms of Rule 17A of the Rules. As held by the Hon’ble Supreme Court (Constitutional Bench) in the case of L Chandra Kumar Rao vs. UOI (1997 AIR SC 1125), that even though this Tribunal is MA. No.261/Mum/2023 A.Y. 2022-23 to 26-27 Fortess 3 indeed a creature of the Statute, it is empowered to test the vires of subordinate legislation and rules. The relevant portion of the judgment rendered by the Hon’ble Apex Court is as follows: “The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this power of the Tribunals will be subject to one important exception. The Tribunals shall not entertain any question regarding the vires of their parent statutes following the settled principle that a Tribunal which is a creature of an Act cannot declare that very Act to be unconstitutional.” 32. Having held so, we now proceed to adjudicate the objections/grounds raised by the assessee in this appeal against the conditions stipulated by the Ld. CIT(E) in his order at Sl No. 10 passed in Form 10AC. Having regard to the rival submissions, we agree with the Ld. AR that the language employed in Section 12AB of the Act does not suggest that while granting registration u/s 12A of the Act the Ld. PCIT/CIT is empowered to stipulate any conditions subject to which registration shall be granted. We are unable to agree with the Ld. CIT-DR’s contention that the Ld. CIT(E) was justified in stipulating these conditions as it was set out in prescribed Form 10AC, which at serial 10 says about “conditions subject to which registration being granted”. For the elaborate contentions set out by the Ld. Sr. Counsel, as already discussed above, and the case laws cited according to us, the Form prescribed by the CBDT in terms of Rule 17A cannot over-ride or expand the scope of the statutory provision contained in Section 12AB of the Act, we agree with the Ld. AR that the subordinate/delegated legislation which is placed before the Parliament in terms of section 296 of the Act, does not elevate MA. No.261/Mum/2023 A.Y. 2022-23 to 26-27 Fortess 4 such subordinate legislation to the level of the law enacted by the Parliament, as held by the Hon’ble Supreme Court in the case of Bharat Hari Singhania Vs CWT (supra) and the Hon’ble Karnataka High Court in the case of V. Verghese and Anr. Vs DCIT (supra). Moreover, as rightly pointed out by the Ld. Sr. counsel, it was the relevant Rule as prescribed by the statute, i.e. Rule 17A that was placed before Parliament u/s 296 of the Act and not the Form. We note that there is no mention of conferring of power upon the Ld. CIT to stipulate conditions for granting registration in Rule 17A (already reproduced above) of the Rules. Hence, the contention of the Ld. CIT-DR, that the conditions stipulated at Sl No. 10 of Form 10AC had been placed and impliedly approved by the Parliament cannot be accepted. Even otherwise, if the said Form was indeed placed before the parliament, in view of Hon’ble Supreme Court decision in the case of Hukum Chand Vs UOI (supra), it cannot stipulate anything more than what is contained in the extant section/ provision of law as enacted by the Legislature [ie. in this case, Section 12AB of the Act]. We thus agree with the submissions of the Ld. Sr. counsel that the Ld. CIT(E) could not have been empowered to stipulate conditions while granting registration in Form 10AC, which is otherwise not expressly provided in provisions contained in Section 12AB of the Act. 33. Further, It is noted that this issue at hand, stands covered in favour of the assessee by the decision of the co-ordinate bench of this Tribunal in the case of Saifee Burhani Upliftment Trust vs. CIT (supra). In the said decision, two grounds, as extracted herein-below were raised before the Tribunal- “1. That appellant is entitled to Regular Registration for 5 years as mandated under section 12 AB and DIT was MA. No.261/Mum/2023 A.Y. 2022-23 to 26-27 Fortess 5 wrong in granting only provisional registration to the appellant. 2. That conditions are imposed for registration u/s 12 AB are unwarranted, unjustified and without authority of law.” 34. Insofar as the first ground was concerned, this Tribunal in that case i.e. Saifee (supra) noted the scheme of section 12A and section 12AB of the Act and concluded that if a Trust was already registered under section 12AA of the Act prior to the promulgation of the Relaxation Act, such a trust would be entitled to a regular registration and not a provisional registration, which had been granted to the assessee in that case. To that extent, the Tribunal remanded the matter back to the Commissioner to consider the application under section 12A(1)(ac)(i), i.e., regular registration as opposed to provisional registration, and further directed the Commissioner to grant registration in accordance with that provision. In so far as the second question regarding imposition of conditions was concerned, the Tribunal held that section 12AB of the Act does not authorise the Commissioner to impose any conditions while granting registration. In this regard, the relevant para 11 of the decision is reproduced herein-below- “However, in the present case, the assessee trust was already holding certificate dated 30.10.2009 issued under section 12AA of the Act. We noticed that section 12AB(1)(a) of the Act, which deals with grant of Regular Registration for a period of 5 years does not authorise the Principal Commissioner or Commissioner to impose any conditions for grant of such registration.” 35. Similar view expressed by the coordinate Bench of this Tribunal in the case of Bai Hirabai Jamshetji Tata Navsari MA. No.261/Mum/2023 A.Y. 2022-23 to 26-27 Fortess 6 Charitable Institution Vs CIT (141 taxmann.com 120). The relevant findings of the Tribunal are as follows: “7. As a plain look at the above statutory provision shows, under the scheme of the Act, all that the Commissioner of Income Tax, or the Principal Commissioner of Income Tax- as the case may be, is empowered, in the process of exercising discretion for the registration of a charitable institution in terms of an application under section 12A(1)(ac)(i)- that the application in question admittedly is, is to "(i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about—(A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects". Once he does so, he may take a call on grant of registration, or decline to grant the registration, (ii) "after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub- clause (i)". The Commissioner has the authority to, upon such exercise being completed, to "(A) pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard". So far as the questions of objects of the trust and genuineness of activities are concerned, these are subjective calls, and obviously, there cannot be any conditions attached to the findings thereto; either one is satisfied with the objects of the trust and about the genuineness of the activities, or one is not. The finding on this aspect cannot be conditional... 8. However, on a perusal of conditions subject to which the registration is granted, we find these conditions are with respect to the conduct of the trust and the circumstances in which the registration granted to the appellant can be cancelled. These are the matters which are regulated by the specific provisions of law, and the observations of the learned Commissioner, no matter how well intended, cannot have the independent force of law. If the conditions set out in the registration order have the MA. No.261/Mum/2023 A.Y. 2022-23 to 26-27 Fortess 7 sanction of the law, irrespective of these conditions being attached to the registration of the trust or not, the law has to take its course, but when the scheme of the law does not visualize these conditions being part of the scheme of the registration being granted to the applicant trust, learned Commissioner cannot supplement the law by laying down these conditions either. 9. Learned Commissioner ought to have realized the limitation of the role he plays when the registration of trust, under section 12A, comes up for his consideration. As we have seen earlier, while looking at the scheme of section 12AB, there is a limited role that the learned Commissioner could have played under section 12AB(1). It was open to him to "call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about—(A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects" and then proceed to take a call on whether to grant the registration under section 12A or not "after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i)". As to when and how should cancellation of the registration be made, it is not for the learned Commissioner to decide at the point of time of granting the registration. There are specific provisions of law which govern the cancellation of registration, and these provisions can neither be diluted or supplemented by the learned Commissioner. The consequences of any lapses by the assessee, even with respect to the points covered by these conditions, cannot simply be, or confined to be, cancellation of the registration, as is stated in the impugned, unless the law specifically so provides. To give a simple example, learned Departmental Representative cannot even seriously argue that if the appellant fails to quote PAN in its communication with the income tax department, this lapse per se can be reason enough for the cancellation of registration under section 12A, but then, going by the words of the impugned order, that is what the impugned order states. That brings home the short point that no matter what the conditions attached to the MA. No.261/Mum/2023 A.Y. 2022-23 to 26-27 Fortess 8 registration granted under section 12A state, these conditions are to be tested on the scheme of the law, and, if that be so- as indeed is the case, these conditions serve no purpose in law. We are therefore unable to see any legally sustainable merits in the approach adopted by the learned Commissioner. 10. Learned Commissioner's guidance about the conduct of the assessee- which is what in substance, the conditions attached to the registration, signify, cannot be treated, no matter how well intended is it, as a condition attached to the registration, nor this fact per se will govern, or limit, the consequences of lapses in this regard. While the assessee will be well advised to bear in mind and carefully examine his conduct vis-à-vis the points made by the learned Commissioner, these observations cannot be construed as legally binding in the sense that non- compliance with such guidance will not have any consequence, unless and beyond what is specifically envisaged by the statute- such as in section 12AB(4) and (5) as indeed elsewhere, nor the implications of not doing what is set out in the conditions will remain confined to the cancellation of registration when the law stipulates much harsher consequences. To this extent, and in these terms, the legal effect of these conditions, as visualized in the conditional grant of registration dated 24th September 2021, stands vacated.” 36. Respectfully following the above decisions (supra), we hold that the Ld. CIT(E) could not have stipulated conditions on his own (other than what is stipulated in law) while granting registration under section 12AB of the Act as the scheme of the law does not visualize these conditions being part of granting of registration to charitable trusts. Accordingly, the grounds raised in the appeal by the assessee stands allowed. 37. We may however clarify that our above findings vacating the action of Ld. CIT(E) of stipulation of conditions in the impugned order, will not and cannot have any consequence, in case the assessee is at any time found to be at fault for the violations specified in Section 12AB(4) and (5) of the Act, MA. No.261/Mum/2023 A.Y. 2022-23 to 26-27 Fortess 9 which implications may lead to cancellation of registration or any other harsher consequences, as may be stipulated in law.” 4. Respectfully following the Tribunal’s decisions in the case of Chamber of Indian Charitable Trust as cited (supra), we hold that the Ld. CIT(E) did not enjoy the power to impose any conditions on his own (other than what is stipulated in law) while granting the registration u/s 12AB of the Act. Therefore, the assessee’s appeal (ITA. No. 2201/Mum/2021) is allowed as noted (supra). 5. In the result, Miscellaneous application filed by the assessee is allowed. Order pronounced in the open court on this 21/08/2023. Sd/- Sd/- (AMARJIT SINGH) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुुंबई Mumbai; दिनाुंक Dated : 21/08/2023. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुुंबई / ITAT, Mumbai 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file.