|The Tax Publishers2020 TaxPub(DT) 4769 (Mad-HC)
INCOME TAX ACT, 1961
Section 12AA(3) Section 2(15) Sections 11 & 12
Retrospective cancellation of the registration of the assessee was wholly without jurisdiction and assessee cannot be vexed repeatedly on the same issue and reason for invoking the power under sub-section (3) of section 12AA was wholly unsustainable and also DIT(E) had not recorded his satisfaction that the activities of the assessee trust were not genuine, nor he had made any observation that the assessee had carried out activities which were not covered in the Trust Deed or in the judgment and decree in C.S. No. 90 of 1961.
Charitable trust - Cancellation of registration - Donation to educational institutions for purpose of education - Satisfaction not recorded by DIT(E)
Assessee was a public charitable trust. The assessee Trust was constituted by a Memorandum of Association and subsequently by Supplementary Deed . The CIT by order, granted registration to the assessee. The DIT(E) examined the records and noted the objects and activities of the assessee Trust. It was stated in the records that the assessee did not run any school or college, though such purposes have been formulated as the main objects of the Trust, the Trust engaged itself in the business of publishing the Tamil News business commitments 'Dina Thanthi' and also job works for printing were undertaken as business commitments. The DIT(E) held that it appears that the activity of the assessee was hit by proviso to section 2(15) and the prima facie activities of the Trust were no longer charitable in nature. The DIT(E) by cancelled the registration granted to the assessee Trust with effect from 1-4-2009 (assessment year 2009-10), i.e., from the date of introduction of the proviso to section 2(15). The DIT(E) stated in its order that it is undisputed fact that the assessee was not running an educational institution by itself was only giving donation to another Trust. Tribunal held that there was distinction between carrying on of charitable activity and donations for charitable purpose and that the assessee Trust having not carried out any charitable activity but only carrying on business activity was not entitled for registration. With these observations and findings, the appeal was dismissed by the Tribunal. The only issue to be decided was as to whether the activities of the assessee of giving only donation to Educational Institution can be said to be educational. Held: DIT(E) failed to record his satisfaction as required to be done under sub-section (3) of section 12AA. The satisfaction should be on the activities of the Trust and finding should be rendered as to how such activities were not genuine. The activities of the assessee-trust have not been disputed, nor there was any allegation of non genuine activities. Therefore, by referring to the amendment to the proviso to section 2(15) and referring to the meaning of the word 'education' as spelt out in certain decisions, cannot be construed to be a satisfaction, which was contemplated under sub-section (3) of section 12AA. Circular No. 1 of 2011 will clearly show that the amendment brought out in section 12AA is applicable with effect from 1-6-2010, i.e., from the assessment year 2011-12 and subsequent years. Therefore, the retrospective cancellation of the registration of the assessee was wholly without jurisdiction and the assessee could not be vexed repeatedly on the same issue and reason for invoking the power under sub-section (3) of section 12AA was wholly unsustainable, without any basis and suffers from perversity at writ large on the face of the order. Unfortunately, the Tribunal misdirected itself by addressing a wrong question without taking note of the earlier decisions rendered in the assessee's own case. DIT(E) had not made any observation that the assessee had carried out activities which were not covered in the Trust Deed or in the judgment and decree in C.S. No. 90 of 1961. The DIT(E) committed gross error in restricting the meaning of the word 'education' and did not appreciate the effect of the decision in Loka Shikshana Trust, which was considered in several other subsequent decisions. Above all, the DIT(E) and the Tribunal violated the rule of consistency by showing utter disregard to the judgments of the Supreme Court and this Court in the assessee's own case on the very same subject and the orders of the DIT(E) and the Tribunal have to be termed to be 'utterly perverse'. To say the least, the Tribunal's justification would amount to judicial indiscipline for not following the decision of the Supreme Court and this Court in the assessee's own case. The DIT(E) failed to adhere to the instructions issued by the CBDT which was binding on the DIT(E).
Applied:CIT v. Sitaldas Tirathdas (1961) 41 ITR 367 (SC) : 1961 TaxPub(DT) 145 (SC) and CIT v. Bijli Cotton Mills (P) Ltd. (1979) 116 ITR 60 (SC) : 1979 TaxPub(DT) 812 (SC). Followed: i>CIT v. Thanthi Trust (1982) 137 ITR 735 (Mad-HC) : 1982 TaxPub(DT) 369 (Mad-HC), (1999) 239 ITR 502 (SC) : 1999 TaxPub(DT) 51 (SC), (2001) 247 ITR 785 (SC) : 2001 TaxPub(DT) 1078 (SC), CIT v. Thanthi Trust 1999) 239 ITR 502 (SC) : 1999 TaxPub(DT) 51 (SC) : 1999 TaxPub(DT) 0291 (Mad-HC); (1995) 215 ITR 879 (Mad) : 1995 TaxPub(DT) 0979 (Mad-HC); (1995) 213 ITR 626 (Madras) : 1995 TaxPub(DT) 0886 (Mad-HC); (2001) 247 ITR 0785 (SC) : 2001 TaxPub(DT) 1078 (SC); (1999) 238 ITR 0635 (Mad) : 1999 TaxPub(DT) 0928 (Mad-HC); (1995) 213 ITR 0639 (Mad) : 1995 TaxPub(DT) 0887 (Mad-HC) Relied:(1980) 13 ITR 611 (SC) : 1980 TaxPub(DT) 676 (Mad-HC), (2000) 246 ITR 188 (Guj) : 2000 TaxPub(DT) 1345 (Guj-HC), Hiralal Bhagwati v. CIT, Director of IT(E) v. Gujarat Cricket Association (2019) 419 ITR 561 (Guj-HC) : 2019 TaxPub(DT) 7213 (Guj-HC), CIT(E) v. Mumbai Metropolitan Region Development Authority (2020) 115 Taxmann.com 71 (Bom-HC) : 2020 TaxPub(DT) 804 (Bom-HC), Goa Industrial Development Corporation v. CIT (2020) 116 Taxmann.com 42 (Bombay) : 2020 TaxPub(DT) 796 (Bom-HC), DIT(E) v. Khar Gymkhana (2016) 385 ITR 162 (Bom) : 2016 TaxPub(DT) 2877 (Bom-HC), DIT(E) v. Seervi Samaj Tambaram Trust (2014) 362 ITR 199 (Mad-HC) : 2013 TaxPub(DT) 534 (Guj-HC), Ananda Social & Educational Trust v. CIT (2020) 114 Taxmann.com 693 (SC) : 2020 TaxPub(DT) 1340 (SC), CIT v. Sisters of Our Lady of Providence Education Society (2015) 122 DTR 0194 (All-HC) : 2015 TaxPub(DT) 149 (All-HC), CIT v. J.K. Charitable Trust (1991) 59 Taxman 602 (All-HC) : 1992 TaxPub(DT) 0430 (All-HC), CIT v. Sarladevi Sarabhai Trust (1988) 172 ITR 698 (Guj.) : 1988 TaxPub(DT) 1113 (Guj-HC), CIT v. Trustees of the Jadi Trust (1982) 133 ITR 0494 (Bom.) : 1982 TaxPub(DT) 491 (Bom-HC), CIT v. Ram Memorial Foundation (2004) 269 ITR 0035 (Del-HC) : 2004 TaxPub(DT) 1639 (Del-HC), CIT v. Kutchi Dasa Oswal Moto Pariwar Ambama Trust (2014) 362 ITR 0192 (Guj.), CIT v. Hindusthan Charity Trust (1983) 139 ITR 913 (Cal-HC.) : 1983 TaxPub(DT) 0589 (Cal-HC), Director of Income Tax (E) v. Chartered Accountants Study Circle (2012) 347 ITR 0321 (Mad) : 2012 TaxPub(DT) 2094 (Mad-HC), CIT v. Shri Aurobindo Memorial Fund Society (2001) 247 ITR 93 (Mad-HC) : 2001 TaxPub(DT) 165 (Mad-HC), CIT v. Matriseva Trust (2000) 242 ITR 0020 (Mad-HC) : 2000 TaxPub(DT) 571 (Mad-HC) and Asstt. CIT v. Agra Dev Authority (2018) 90 Taxman.com 282 (All) : 2018 TaxPub(DT) 739 (All-HC).
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