Sinhagad Technical Education Society v. CIT

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The Tax Publishers2012 TaxPub(DT) 1731 (Bom-HC) : (2012) 048 (I) ITCL 0395 : (2012) 343 ITR 0023 : (2012) 249 CTR 0045 : (2012) 206 TAXMAN 0314 : (2012) 068 DTR 0099 INCOME TAX ACT, 1961 --Charitable trust--Registration under section 12AConstitutional validity of amendment in section 12AA(3) regardin cancellation of registration under section 12A--CIT issued a noice to assessee under sub-section 3 of 12Aa for cancellation of registration granted under section 12A on the ground that assessee had ceased to carry on activiies of trust in accordance with its objects. The registration was propowed to be withdrawn from assessment year 1999-2000. Therefore, in he instant writ petition before the High Court, assessee challenged the constitutional validity of provisions of section 12AA(3) as amended w.e.f. 1-6-2010 to the extent that they provide for revocation of registration granted under section 12A. It submitted that since power to cancel a registration was first broght on statute book by inserting section 12AA(3) w.e.f. 1-10-2004 therefore, the amendment which had been inserted w.e.f. 1-6-2010 could not go behind the insertion of was section (3) of 12Aa w.e.f. 1-10-2004. Held': The amendment in sub-section (3) of 12Aa empowers the Commissioner to cancel registration of trust which had obtained at any time udner sedction 12A in case where the activities of trust were not genyuine or were not being carried out in accordance with its objects. The mere fact that a part of the requisites for the action under section 12AA(3) was drawn from a time prior to its passing namely registration as a charitable trust under section 12A prior to 2010 would not make the amendment retrospective in operation. The amendment does not take away any vested right nor does it create new obligations in respect of past actions. Such an amendment cannot be regarded as taking away a vested right retrospectively. Alternatively, even if it is construed to be retrospective, it cannot be held to be violative of articel 14. Income Tax Act, 1961 Section 12AA(3) Income Tax Act, 1961 Section 12A Constitution of India, 1950 Articles 14 & 226 IN THE BOMBAY HIGH COURT D.Y. CHANDRACHUD & M.S. SANKLECHA, JJ. Sinhagad Technical Education Society v. CIT Writ Petn. No. 2545 of 2011 1 February, 2012 Petitioner by : Jehangir D. Mistri with Niraj Sheth & Nitin Dhumal, Respondents by : Vimal Gupta, JUDGMENT *D.Y. Chandrachud. J.* A notice was issued to the petitioner under sub-section (3) of section 12AA of the Income Tax Act, 1961, on 3-7-2007 for cancellation of the registration granted to the petitioner, principally on the ground that the petitioner, by charging capitation fees and donations in respect of admissions and by diverting them for personal gain to trustees, has ceased to carry on the activities of the trust in accordance with the objects of the trust. The registration was proposed to be withdrawn with effect from assessment year 1999-2000. 2. The proceedings which were initiated pursuant to the notice to show-cause culminated in an order of the Commissioner (Central), Pune dated 9-10-2007, cancelling the registration under section 12AA(3). The order of cancellation was challenged in appeal before the Tribunal. The Tribunal by its judgment dated 19-9-2008 came to the conclusion that under section 12AA(3), as it then stood, where a trust or an institution had been granted registration under clause (b) of sub-section (1) thereof, the Commissioner was empowered to pass an order cancelling registration on certain specific grounds. The Tribunal held that the section did not empower the Commissioner to cancel or withdraw a registration which was granted under section 12A. In the present case, since the registration had been granted to the petitioner under section 12A, the Tribunal held that there was an absence of jurisdiction. The Tribunal held that the provisions of sub-section (3) which were brought on the statute book with effect from 1-10-2004 by the Finance (No. 2) Act, 2004 could not have retrospective effect. Consequently, the order of the Commissioner was set aside. The Revenue has filed an appeal against the decision of the Tribunal, which has been admitted by a Division Bench of this court on 10-6-2009. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 1731 (Bom-HC) : (2012) 048 (I) ITCL 0395 : (2012) 343 ITR 0023 : (2012) 249 CTR 0045 : (2012) 206 TAXMAN 0314 : (2012) 068 DTR 0099

INCOME TAX ACT, 1961

--Charitable trust--Registration under section 12AConstitutional validity of amendment in section 12AA(3) regardin cancellation of registration under section 12A--CIT issued a noice to assessee under sub-section 3 of 12Aa for cancellation of registration granted under section 12A on the ground that assessee had ceased to carry on activiies of trust in accordance with its objects. The registration was propowed to be withdrawn from assessment year 1999-2000. Therefore, in he instant writ petition before the High Court, assessee challenged the constitutional validity of provisions of section 12AA(3) as amended w.e.f. 1-6-2010 to the extent that they provide for revocation of registration granted under section 12A. It submitted that since power to cancel a registration was first broght on statute book by inserting section 12AA(3) w.e.f. 1-10-2004 therefore, the amendment which had been inserted w.e.f. 1-6-2010 could not go behind the insertion of was section (3) of 12Aa w.e.f. 1-10-2004. Held': The amendment in sub-section (3) of 12Aa empowers the Commissioner to cancel registration of trust which had obtained at any time udner sedction 12A in case where the activities of trust were not genyuine or were not being carried out in accordance with its objects. The mere fact that a part of the requisites for the action under section 12AA(3) was drawn from a time prior to its passing namely registration as a charitable trust under section 12A prior to 2010 would not make the amendment retrospective in operation. The amendment does not take away any vested right nor does it create new obligations in respect of past actions. Such an amendment cannot be regarded as taking away a vested right retrospectively. Alternatively, even if it is construed to be retrospective, it cannot be held to be violative of articel 14.

Income Tax Act, 1961 Section 12AA(3)

Income Tax Act, 1961 Section 12A

Constitution of India, 1950 Articles 14 & 226

IN THE BOMBAY HIGH COURT

D.Y. CHANDRACHUD & M.S. SANKLECHA, JJ.

Sinhagad Technical Education Society v. CIT

Writ Petn. No. 2545 of 2011

1 February, 2012

Petitioner by : Jehangir D. Mistri with Niraj Sheth & Nitin Dhumal,

Respondents by : Vimal Gupta,

JUDGMENT

D.Y. Chandrachud. J.

A notice was issued to the petitioner under sub-section (3) of section 12AA of the Income Tax Act, 1961, on 3-7-2007 for cancellation of the registration granted to the petitioner, principally on the ground that the petitioner, by charging capitation fees and donations in respect of admissions and by diverting them for personal gain to trustees, has ceased to carry on the activities of the trust in accordance with the objects of the trust. The registration was proposed to be withdrawn with effect from assessment year 1999-2000.

2. The proceedings which were initiated pursuant to the notice to show-cause culminated in an order of the Commissioner (Central), Pune dated 9-10-2007, cancelling the registration under section 12AA(3). The order of cancellation was challenged in appeal before the Tribunal. The Tribunal by its judgment dated 19-9-2008 came to the conclusion that under section 12AA(3), as it then stood, where a trust or an institution had been granted registration under clause (b) of sub-section (1) thereof, the Commissioner was empowered to pass an order cancelling registration on certain specific grounds. The Tribunal held that the section did not empower the Commissioner to cancel or withdraw a registration which was granted under section 12A. In the present case, since the registration had been granted to the petitioner under section 12A, the Tribunal held that there was an absence of jurisdiction. The Tribunal held that the provisions of sub-section (3) which were brought on the statute book with effect from 1-10-2004 by the Finance (No. 2) Act, 2004 could not have retrospective effect. Consequently, the order of the Commissioner was set aside. The Revenue has filed an appeal against the decision of the Tribunal, which has been admitted by a Division Bench of this court on 10-6-2009.