Income Tax Appellate Tribunal - Kolkata
The Technological Institute Of Textile ... vs Assessee on 18 March, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA
[Before Shri Mahavir Singh, JM & Shri Waseem Ahmed, AM]
I.T.A Nos.689&690/Kol/2011
Assessment Years: ------
The Technological Institute of Textile Vs. Director of Income-tax, Exemption,
& Science. (PAN:AAATT3233A) Kolkata
(Appellant) (Respondent)
Date of hearing: 18.02.2016
Date of pronouncement: 18.03.2016
For the Appellant: Shri R. N. Bajoria, Sr. Advocate
For the Respondent: Shri G. Mallikarjuna, CIT
ORDER
Per Shri Mahavir Singh, JM:
Both these appeals filed by assessee are arising out of separate orders of DIT(E), Kolkata vide M. No. DIT(E)/Kol/u/s. 12A/2010-11/2870-72 and DIT(E).Kol/80G(5)(vi)/2010-11/2873- 75 dated 28.03.2011 passed u/s. 12AA(3) and 80G(5)(vi) of the Income-tax Act, 1961 (hereinafter referred to as the "Act").
2. The two interconnected issues in these two appeals of assessee is as regards to cancellation of registration u/s. 12AA(3) of the Act and cancellation of grant of certificate u/s. 80G(5)(vi) of the Act by DIT(E), Kolkata.
3. Briefly stated facts are that the assessee society is running an educational institute and running courses of B.Tech, M.Tech and MBA etc. The assessee is also running a textile division which is engaged in production of cloth and manufacturing of yarns, which is attached to the very institution. According to DIT(E), as per the Income & Expenditure Account of textile division/unit for the year ended 31.03.2008, 31.03.2009 and 31.03.2010 it incurred huge losses. According to DIT(E), these losses were set off against the income of educational institute and accounts are maintained as a single unit and not separately for both the units. According to DIT(E), the institution is engaged in the business activity and all the losses of textile unit are adjusted against the receipt of the educational institution. Hence, the institution is doing business as well as engaged in educational activity. Accordingly, according to DIT(E), in view of the proviso to section 2(15) of the Act, which came into effect from 01.04.2009 and 2 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
in view of nature of activities of assessee society, the registration granted to assessee society u/s. 12AA is withdrawn. The relevant finding of DIT(E) for concluding this reads as under:
"Therefore, I conclude that the assessee institution is running on profit motive and it is running the full fledged business units of manufacturing cloths and yarn. The ground is very clear that every year it is incurring loss which is being adjusted with the receipts of educational institution. The institution is catering both business as well as education whereas both cannot run together. The institution is also hit by the proviso to section 2(15) of the I. T. Act, 1961. Education comes within the meaning of the object defined u/s. 2(15) but the proviso debars those institution which has the business activity and as per second proviso, the business of manufacturing cloths and yarns which has the complete set up for manufacturing business and the receipts is running in several crores of rupees (Rs.6.71 crore in 2010, Rs.8.90 in 2009 and Rs.8.90 in 2008). As per proviso to section 2(15), the objects of the institution would not qualify for charitable activity and this will amount to an object of profit making. The institution is hit by proviso to section 2(15) and would not be the charitable institution and, therefore, registration granted is cancelled u/s. 12AA(3) of the I. T. Act from AY 2010-11."
Similar is the finding in respect to ITA No. 690/Kol/2011 while cancelling the certificate issued u/s. 80G(5)(vi) of the Act . Aggrieved against the orders of DIT(E) on both the issues, assessee came in appeals before Tribunal.
4. The Ld. Counsel for the assessee Shri R. N. Bajoria, Sr. Advocate stated the history of the Society that it came into existence vide certificate dated 06.12.1985 issued by Registrar of Firms/Societies and as non-trading corporation, West Bengal by certificate dated 06.02.1985. According to Ld. Counsel, the one and only object of the Society was to run an educational institution and other incidental or ancillary activities connected to such educational institution and required for carrying on such educational activities was also carried out i.e. textile division. This is apparent from Memorandum of Association of the institution and the relevant clauses were referred to by Ld. Counsel. He further explained that this institution/society enjoys benefit of registration u/s. 12AA of the Act since AY 1986-87. The Society is also enjoying the benefit of deduction u/s. 80G of the Act since AY 1986-87 and which was renewed from year to year till 31.03.2010. Ld. Counsel referred to the exemption u/s. 10(23C)(vi) of the Act since its inception and orders for exemption u/s. 10(23C)(vi) of the Act has been allowed by different CITs. According to him, the only ground for which registration has been cancelled by DIT(E), Kolkata vide his order u/s. 12AA(3) dated 28.03.2011 is that the society is hit by the amendment brought in section 2(15) of the Act by the Finance Act, 2008 cancelling the registration u/s. 12AA of the Act. Ld. Counsel for the assessee argued that the assessee society/institution is not hit by the amendment as brought in the statute under section 2(15) of the Act because, as already stated above, the only activity of this institution/society has been to run an educational 2 3 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
institution and to impart education. Ld. Counsel for the assessee referred to Board Circular No.11/2008 dated 19.12.2008, which reads as under:
"Section 2(15) of the Income Tax Act, 1961 ('Act') defines "charitable purpose" to include the following:-
(i) Relief of the poor
(ii) Education
(iii) Medical relief, and
(iv) the advancement of any other object of general public utility.
An entity with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of 'charitable purpose'. Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso which states that the 'advancement of any other object of general public utility' shall not be a charitable purpose if it involves the carrying on of -
(a) any activity in the nature of trade, commerce or business; or
(b) 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.
2. The following implications arise from this amendment -
2.1 The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities.
2.2. 'Relief of the poor' encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section 11(4A) or the seventh proviso to section 10(23C) which are that
(i) the business should be incidental to the attainment of the objectives of the entity,and
(ii) separate books of account should be maintained in respect of such business. Similarly, entities whose object is 'education' or 'medical relief' would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above.
34 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is 'advancement of any other object of general public utility' i.e. the fourth limb of the definition of 'charitable purpose' contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity.
3.1. There are industry and trade associations who claim exemption from tax u/s 11 on the ground that their objects are for charitable purpose as these are covered under 'any other object of general public utility'. Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants.
Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). 3.2. In the final analysis, however, whether the assessee has for its object 'the advancement of any other object of general public utility' is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business."
5. Ld. Counsel for the assessee also referred to the report of JCIT, Bhiwani Range, Bhiwani dated 31.10.2011, which was obtained by CCIT, Kolkat-III, while adjudicating an application for grant of renewal of exemption u/s. 10(23C)(vi) of the Act, in order to ascertain the veracity of the facts and to make field enquiries and to obtain report from the field officers. The relevant report he referred to, which reads as under:
"As directed by your good' self, I have visited at the premises of the Technological Institute of Textile & Sciences situated at Birla Colony, Bhiwani on 14.09.2011 for conducting of spot enquiries regarding activities carried out by the Textile Unit at Bhiwani and whether the textile unit is carrying on any business activity or is being maintained only 4 5 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
for imparting practical training to the students and is a part and parcel of carrying on educational activities.
At the time of visit, I found that the boundary wall of the Engineering College and Textile Mills is common and the mill building is situated around 150 to 160 meters only and some laboratories/workshops are located in the mill building where the students of Textile Engineering are taking practical training. When I visited the mill building I have personally seen that the group of textile engineering students was taking practical training regarding textile technology.
It is fact that raw material is purchased and TIT'S Mill has running on job work basis for Grasim Industries Ltd., Nagda, and also manufacturing its product i.e. yarn which is negligible in quantity. I met Mr. P.D.Kaushik, Vice President of the TIT'S, he told me that the income earned by TIT'S Mill is being used solely for the advancement of education of the TIT & S Engineering Institute and TIT Senior Secondary School. At present there are 570 students doing Engineering Degree (1st, 2nd, 3rd & 4th year) in textile and 31 students are doing Master degree in textile engineering from the Institution.
From the spot enquiries and visit, it is revealed that the mill is useful for Practical Training and also for their projects and research work for the textile engg. students.
It is evident from the above that for the purpose of imparting practical training to the students and conducting research in and perfecting the processes necessary and incidental to the manufacture of textiles, the trust established a textile unit being the internal part of the college like a hospital in a medical college or an agricultural farm attached to an agricultural University. The textile unit is being run for practical training under actual mill working conditions.
6. On the other hand, the Ld. Sr. DR Shri G. Mallukarjuna, first of all, took us to the order passed by DIT(E) u/s. 12AA(3) of the Act wherein income and expenditure account for the year ended 31.03.2008 and 31.03.2009 and 31.03.2010 are discussed, wherein huge losses incurred in textile division was referred to and the same was adjusted against the income of the assessee. According to him, this manufacturing unit i.e. textile division is incurred huge loss regularly and it is in no way helping the educational institution. He also relied on the proviso to section 2(15) of the act as brought out by Finance Act, 2008 w.e.f. 01.11.2009 relevant to AY 2010-11. According to him, the society/institution is squarely covered under the proviso and assessee is not entitled for registration u/s. 12AA(3) of the Act and DIT(E) has rightly cancelled the registration because there is no charity done by assessee. Hence, the same is not qualified for charitable activities rather this will amount to an object of profit making. Accordingly, he opposed the appeal of the assessee.
56 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
7. We have heard rival submissions and gone through facts and circumstances of the case. As explained by Ld. Counsel for the assessee, which was not rebutted by revenue, the Technological Institute of Textile & Science was established in the year 1943 for giving technical and formal education and since then a Textile Mill was attached with the Institute to give practical training to the students. Uptill 1985, the Institute continued as a part of Birla Education Trust and in the year 1985 it was separated from Birla Education Trust. Since 1985, the Institute has been enjoying independently exemption u/s. 10(22)/10(23C)(vi) of the Act. From the objects of the Institute, we find that it maintained a Textile Mill for practical training to the students and conducting the research in textile technology was a part of the main objects itself. Since the institute has been enjoying benefit of exemption u/s. 10(22)/10(23C)(vi) since 1985, independently from the date when it was separated from 'Birla Education Trust' with a textile mill being maintained for practical training to the students. It is not new as far as running and maintenance of textile mill for practical training to the students is concerned. At present there are about 1700 students enjoying technical education and practical training in Textile Mill Division in the Institute as explained. The assessment of this Institute for different assessment years i.e. from A. Y. 1998-99 has been completed with full knowledge of textile mill being run to impart practical training. As regards applicability of amendment to Sec. 2(15) with effect from 1.4.2008, as explained and submitted in detail by the assessee such amendment has been made only with a view to curb the activities of charitable institution carrying on "objects of General Public Utility". This matter has been amply clarified by the Central Board of Direct Taxes by different circulars which have been already reproduced above. Even the Objects and Memorandum explaining the finance bill has amply clarified that such amendments did not affect at all the objects of "Relief to the poor, education and medical help" and since this institution is only carrying on educational activities since 1943 and is still carrying on only educational activities and since the amendment to Sec. 2(15) did not affect the educational activities carried on by this institution and consequently the relevant exemption.
8. We find that the CCIT, Kolkata-III, vide his order No. CCIT-III/10(23C)(vi)/11-12 dated 30.11.2011 has granted exemption u/s. 10(23C)(vi) of the Act and also held that the assessee institute is existing for educational purposes and for this he observed as under:
67 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
"7. I have carefully gone through the detailed submissions made by the Authorized Representative of the assessee-society and the facts as obtained in this case. This is a fact that the Textile Division is attached to the Institute for a long time and, besides, the Institute has been enjoying the benefit of exemption u/s.10(22)/10(23C)(vi) since 1985. There is nothing incriminating on record to suggest that the Textile Mill is being used for any purpose other than imparting practical training to the trainees for their projects and research work for the textile engineering students. Besides, in the last three financial years i.e. assessment year 2008-09, 2009-10 & 2010-11 the textile unit has been incurring losses. The conclusion drawn by DIT (Exemption), Kolkata, that loss of the textile unit is being adjusted against the income from educational activity is apparently not based on proper appreciation of facts and evidently all the relevant facts having a bearing in this case have not been brought to the notice of the DIT (Exemption), Kolkata. The report on the basis of spot enquiry from the field officers at Bhiwani also clarifies that the students of Textile Engineering take practical training regarding textile technology in the manufacturing unit.
7.2 There is sufficient and acceptable merit in the contentions of the assessee- society. The following significant facts emerge from the submissions of the Authorized Representative of the assessee-society ;-
(i) The surplus accruing to the society in the course of imparting technical education is not a profit making activity and is only incidental to the main & dominant object of the society, i.e., imparting education including technical education. In any case, the textile unit has been incurring huge losses since the last four financial years. But even if there are profits as a result of ancillary activities, the same is also used for educational purposes, the main object, and not for the personal benefit of any person and thus there is no deviation from the main object of the assessee-society.
(iii) The textile unit has been in existence for long and was mainly for the purpose of imparting technical /practical training to the students.
(iv) The profits, if any, from the textile unit were used for the purpose of education only. The society along with the textile unit has been granted exemption u/s. 10(22) & 10(23C)(vi) of the Act since a number of years by the Department.
(v) Practical training for award of a degree in all fields of technical education like medicine & agriculture is a pre-requisite and the concerned institutions may on other own make necessary arrangements for imparting such training.
The Textile Division attached to the institute is an integral part of the technological institute and is like a hospital to a medical college or an agricultural farm attached to an agricultural college.
8. In view of the above observations and in exercise of the powers conferred on me by virtue of sub-clause (vi) of clause (23C) of section 10 of the Income-tax, 1961 read with Rule 2CA of the IT Rules, 1962, I, the Chief Commissioner of Income tax, Kolkata III, Kolkata, hereby accord approval for grant of renewal of notification for exemption to "The Technological Institute of Textile & Sciences, 9/1. R.N. Mukherjee Road, Kolkata-700 001" for the purpose of the said section for the Assessment Years 2011-12 & onwards subject to the conditions mentioned hereunder:
(a) the activities of the Society are genuine and are in accordance with the deed/memorandum of association of the Society and the rules regarding the objectives and the activities of the Society as well as in conformity with the provisions of Section lO(23C)(vi.) of the Income Tax Act and are carried out in accordance with all or any of, the conditions subject to which it is approved;7
8 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
(b) the Society applies its income, or accumulates its income for application, wholly and exclusively, for the objects for which it is established and application of its income must be in accordance with the Third Proviso to section 10(23C) of the Income Tax Act;
(c) the Society ,will, not invest or deposit its funds (other than voluntary contributions received and. maintained in the form of jewellery, furniture etc) for any period during the previous years relevant to the assessment years mentioned above otherwise than in any one or more of the forms or modes specified in sub section (5) of section 11 of the I. T. Act, 1961;
d) This approval will not apply in relation to any income being profits and gains of business, unless the business is incidental to the attainment of the objectives of the Society and separate books of accounts are maintained in respect of such business;
(e) the Society will regularly file its return of income before the Income-tax authority in accordance with the provisions of the Income-tax Act, 1961;
(f) that in the event of its dissolution, its surplus and asset will be given to an organization which, exists solely for similar purposes and not for the purposes of profit and no part of the same will go directly or indirectly to any of the beneficiaries of the Society or anybody specified in section 13(3) of the Income-tax Act, 1961;
(g) the approval shall not apply in relation to anonymous donations in terms of the fifteenth proviso to section 10(23C) of the Income Tax Act read with Section 115BBC of the Act;
(h) the approval granted shall be subject to the provisions of the proviso to section 143(3) of the Income Tax Act;
(i) the approval shall be void if it is subsequently found that it has been obtained by fraud or misrepresentation of fact;
(j) the above approval is given only for the purpose of section 10(23C)(vi) of the Income-tax Act, 1961 and not for any other purpose and the same is liable to be withdrawn if it is subsequently found that the activities of the Society are not genuine or if they are not carried out in accordance with all or any of the condition subject to which it was approved;
(k) as and when there, is a move to amend or alter the deed of the Society, prior approval of the CCIT may be sought along with the draft of the proposed amended deed and no such amendment may be effected until and unless the approval is accorded."
9. We find from the above facts of the case that the DIT(E), Kolkata while cancelling registration vide order u/s. 12AA(3) of the Act and also withdrawal/rejection of certificate of exemption u/s. 80G(5)(vi) of the Act vide orders dated 08.03.2011 only on the basis that the assessee is doing business in production cloths and manufacturing of yarn. From this business, according to DIT(E), the assessee has turnover of several crores of rupees but earning huge losses which are eventually set off against the profits generated from this institute carrying on activity of education. According to him, the institution accordingly is hit by the proviso to section 2(15) of the Act as inserted by Finance Act, 2008 w.e.f. 01.04.2009 for and from AY 8 9 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
2009-10. Accordingly, the DIT(E) cancelled the registration granted u/s. 12A of the Act by invoking the provisions of section 12AA(3) of the Act from AY 2010-11.
10. We have gone through the order of CCIT, Kol-III u/s. 10(23C)(vi) of the Act wherein he has noted the fact that the assessee society is running an educational institute running courses of B. Tech, M. Tech & MBA. There is also a textile division engaged in production of cloths and manufacturing of yarn attached to the institute. He has also noted the fact that this organization is wholly and solely engaged in imparting education only and has no other activities. According to him, the textile division attached to the institution is only for imparting practical training to the students, which is part and parcel of carrying on educational activities that for such higher technology, education imparting of such practical training is must for the educational activities. He also noted that the textile division is for giving practical training to the students of this institute has been engaged since long and this division is approved for exemption by CBDT and different CCITs and this fact of textile division being part of educational activity for giving practical training has been recognized by this Department since long. Even now before us it was explained that the amendment to section 2(15) of the Act by inserting proviso was introduced by Finance Act, 2008 w.e.f. 01.04.2009 is only with respect to, "the advancement of any other object of general public utility" . According to assessee, this amendment has three limbs of charitable objects i.e. relief to the poor, education and medical relief, which are left completely out of the purview of such amendment. The primary object of the society is to provide education including technical education and this object is being achieved by the society by running educational institute directly. The Technological Institute of Textile and Science, Bhiwani, TIT Sr. Secondary School, TIT Primary School and TIT Kindergarten School, which are educational institutes and run directly by the society. The practical training for a prescribed duration is a prerequisite for award of degree in almost all the fields of technical education and such institutions by themselves make necessary arrangement for such training like the assessee.
11. In view of these facts, the circular cited by assessee of CBDT Circular No. 11/2008 dated 19.12.2008 clearly discussed the implication arising from the insertion of proviso to section 2(15) of the Act by the Finance Act, 2008 w.e.f. 01.04.2009 vide para 2.1, which is reproduced above in para 4 at page 3 of this order wherein it is clearly said that where the purpose of a trust or institution is relief for the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves the carrying on of commercial activities. We find that 9 10 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
the working of the mill for practical training always result in the production/manufacture of goods. The assessee explained that in the training institute for deaf, dumb and blind where training is imparted for such persons in the manufacture of furniture and similar items. Goods come into existence during the course of such training activities and these goods are sold in the market resulting in surplus. Such activities are carried on in the course of the actual carrying out of the primary purpose for which the institute is set up i.e. imparting the education and cannot be said to be an activity for profits in any sense of the term. As a matter of fact, said activities and the surplus resulting there from are only incidental to the dominant object of the Institute. Similarly the surplus accruing to the society on the sale of goods produced during the course of and/or attributable to such training imparted to the students in the factory are only incidental to the carrying on of/or in fulfillment of the primary object of the society i.e. education imparting, and in no way it can be said to be an activity for profit.
12. In similar circumstances, Hon'ble Madras High Court in the case of The Tamil Nadu Cricket Association vs. The Director Of Income Tax (Exemption) & Ors. (2014) 360 ITR 633 (Mad) has examined the proviso added to section 2(15) of the Act by the Finance Act, 2008 w.e.f. 01.04.2009 and also proviso to sub-section (3) of section 12AA by the Finance No. 2 Act, 2004 for cancellation of registration and Hon'ble High Court decided the issue as under:
"22. We had already extracted in the preceding paragraph, the objects of the association. Going by the objects , we find that the trust falls under the head of "any other object of general public utility" and hence falls within the meaning of charitable purpose under Section 2(15) of the Act.Section 2(15) of the Act defines "charitable purpose" as it originally stood at the time of grant of registration as under:-
" 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility."
23. Section 2(15) was amended under Finance Act,2008, with effect form 1.4.2009 by substituting the following provision which reads s under:
"2. Definitions.
....
(15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including waterheds, 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 or business, or any activity of rendering any service in relation to any trade, 10 11 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
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;)
24. Section 2(15) as it stood prior to 1983 defined 'charitable purpose' to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The phrase "not involving the carrying on of any activity for profit" was omitted from the Section by the Finance Act 1983, with effect from 01.04.1984, consequent on the amendment to Section 11, where under profits and gains of business in the case of charitable or religious trust and institutions would not be entitled to exemption under that Section, except in cases where the business fulfilled the conditions underSection 11 (4). The Section was once again amended by substitution in the year 2008 under theFinance Act, 2008, with effect from 01.04.2009, streamlining the definition of 'charitable purpose', considering the fact that taking advantage of the phrase 'advancement of any other object of general public utility', number of entities operating on commercial lines claimed exemption on their income either under Section 20(23c) or under Section 11 of the Act. Thus, to limit the scope of this expression, Section was amended in the year 2008 that the advancement of any other object of general public utility shall not be a charitable purpose, if the object involved the carrying on of any activity in the nature of trade, commerce or 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. Though the section as it stood prior to the substitution in 2008 contained no provision as in the proviso under the 2008 amendment, yet the Supreme Court held that that if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity: vide CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) (referred to in the decision reported in (1980) 121 ITR 1(Addl. Commissioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association). Thus if the dominant object or the primary object was charitable, the subsidiary object for the purpose of securing the fulfillment of the dominant object would not militate against its charitable character and the purpose would not be any the less charitable. The amendment in the year 2008 made a drastic amendment to deny the status of a charitable purpose to an institution with the object of general public utility, having any activity in the nature of trade, commerce or 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.
25. Proviso to Section 2(15) of the Income Tax Act states that if the objects involve the carrying on any activity in the nature of 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, the status of the institution will not be one for 'charitable purpose'.
26. The Central Board of Direct Taxes, in paragraph 3.2 pointed out to the scope of the circular as under:-
" In such a case, the object of 'general public utility' will be only a mask or a device to hide the true purpose, which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is 'charitable purpose' within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business."
27. Thus, the anxiety of the Parliament in introducing the proviso to Section 2(15) of the Act is only to check those institution, which attempt to gain exemption under the cloak of a trust.
28. Section 11 of the Act states that income from property held for religious or charitable purposes shall not be included in the total income of the previous year. Section 12 deals with income of trusts or institutions from contributions. Section 12A deals with making application for registration of the trust/association so that the said institution will have the benefit of exemption under Section 11 and 12 of the Act.
1112 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
29. Section 12AA of the Act prescribes procedure for registration. As per this, on receipt of the application for registration, the Commissioner is to call for such documents or information from the trust or institution in order to satisfy himself about the genuineness of activities of the trust or institution. The Section further empowers the Commissioner to make such enquiry as he deems necessary in this regard. Once the Commissioner is satisfied himself about the objects of the trust or institution and the genuineness of the activities of the trust, he has to pass an order in writing registering the trust or institution; if he is not so satisfied, he has to pass an order in writing refusing to register the trust or institution.
30. Section 12AA(3) of the Act inserted with effect from 01.10.2004 under the Finance (No.2) Act, 2004 and the amendment inserted by Finance Act, 2010, with effect from 01.06.2010 therein empowering the Commissioner to cancel the registration granted under the stated circumstances, reads as under:-
Provision inserted under Finance Act, 2004:
Section 12AA(3):- Where a trust or an institution has been granted registration under clause
(b) of sub-section (1) and subsequently the Commissioner 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.
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.
31. After amendment in the year 2010, Section 12AA(3) of the Income Tax Act reads as follows:
"Section 12AA(3):- Where a trust or an institution has been granted registration under clause
(b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996) and subsequently the Commissioner 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:
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard."
32. Thus in contrast to Section 12AA(1)(b) of the Income Tax Act, 1961, where the grant of registration requires satisfaction about the objects of the trust as well as genuineness of the activities, for the cancellation of the registration under Section 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given inSection 12AA(1) and 12AA(3) of the Act, as the case may be.
33. Registration of the trust under the Act, confers certain benefits from taxation under the provisions of the Act. The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly laid down under Section 11 as well as in Section 12 of the Act. Section 11 of the Act specifically points out the circumstances under which income of the trust is not to be included in the total income of the previous year of the person. So too, Section 12of the Act on the income derived from property held for charitable or religious purposes.
34. Thus, when the assessee is in receipt of income from activities, which fits in with Sections 11and 12 of the Act as well as from sources which do not fall strictly with the objects of the trust, would not go for cancellation of registration under Section 12AA of the Act on the sole 12 13 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
ground that the assessee is in receipt of income which does not qualify for exemption straight away by itself. All that ultimately would arise in such cases is the question of considering whether Section 11 of the Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with the genuineness of the activity or the activities not in conformity with the objects of the trust. As rightly pointed out by learned Senior counsel appearing for the assessee, as is evident from the reading of Circular No.11 of 2008 dated 19.12.2008, the object of the insertion of first proviso to Section 2(15) of the Act was only to curtail institution, which under the garb of 'general public utility', carry on business or commercial activity only to escape the liability under the Act thereby gain unmerited exemption under Section 11 of the Act.
36. In the decision reported in (2012) 343 ITR 23 (Bom) (Sinhagad Technical Education Society V. Commissioner of Income Tax (Central), Pune & Anr), the Bombay High Court held as follows:
"As a result of the amendment, which has been brought about by the Finance Act of 2010, Subsection (3) of Section 12AA has been amended specifically to empower the Commissioner to cancel a registration obtained under Section 12A as it stood prior to its amendment by theFinance (No.2) Act, 1996. SubSection (3) was inserted into the provisions of Section 12AA by theFinance (No.2) Act, 2004 with effect from 1 October 2004. As it originally stood, under subsection (3), a power to cancel registration was conferred upon the Commissioner where a trust or an institution had been granted registration under clause (b) of subsection (1) of Section 12AA. The Commissioner, after satisfying himself that the objects of the trust or an 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, was vested with the power to pass an order in writing cancelling the registration of such trust or institution. By the Finance Act of 2010, subsection (3) was amended so as to empower the Commissioner to cancel the registration of a trust or an institution which has obtained registration at any time under Section 12A (as it stood before its amendment by theFinance (No.2) Act, 1996). As a result of the amendment, a regulatory framework is now sought to be put in place so as to cover also a trust or an institution which has obtained registration under Section 12A as it stood prior to its amendment in 1996.
...........
power under Section 12AA(3) can be exercised by the Commissioner in respect of a trust registered prior to 1 June 2010. The mere fact that a part of the requisites for the action underSection 12AA (3) is 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."
37. As already pointed out earlier, the question as to whether the particular income of trust is eligible for exemption under Section 12 of the Act is a matter of assessment and this Court had pointed out in the decision reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai, as under:-
" In order to avail the benefit of exemption under Section 11 of the Income Tax Act, 1961, a Trust can make an application to the Commissioner for registration under Section 12A of the Income Tax Act, 1961. On receipt of the said application for registration of a trust or institution, the Commissioner should satisfy himself about the genuineness of the activities of the trust or institution. In order to satisfy himself, the Commissioner may also make such enquiry as he may deem necessary in that behalf. In the event the Commissioner satisfies himself that the trust is entitled to registration keeping in mind the objects, shall grant registration in writing in terms ofSection 12AA(1)(b)(i) of the Income Tax Act, 1961. In the event the Commissioner is not satisfied, he shall refuse such registration in terms of Section 12AA(1)(b)(ii) of the Income Tax Act, 1961. Once such a satisfaction is arrived at by the Commissioner to grant, such registration cannot be cancelled by following the very same provision of section 12AA(b)(i) of the Income Tax Act, 1961 to go into the genuineness of the activities of the trust. However, the Commissioner is empowered to revoke the certificate in terms of Section 12AA(3) of the Income Tax Act, 1961. As Commissioner is empowered to 13 14 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
revoke the certificate in terms of section 12AA(3) of the Income Tax Act, 1961. As per the said provision, in the event the Commissioner is satisfied subsequently i.e., after registration that the activities of such trust or institution are not genuine or not being carried out in accordance with the objects of the trust or the institution as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution."
38. After the grant of registration, if the Commissioner is satisfied subsequently that the activities of the institution are not genuine or they are not carried on in accordance with the trust/ institution, he could pass an order in writing cancelling the registration of such trust or institution.
39. Referring to Section 11 and 12A of the Act, this Court pointed out that the act of granting registration under Section 12AA(1) itself is a result of a satisfaction recorded by the Commissioner as regards the genuineness of the objects of the trust as well as the activities of the trust and once a satisfaction is arrived at by the Commissioner, the cancellation could only be in terms of Section 12AA(3) of the Income Tax Act, 1961.
40. This Court pointed out that the cancellation made in the case of assessee therein was not on the ground that the activities were not genuine, but the activities of the trust in publication and sale and spread of Sarvodaya Literature and Gandhian Ideologies was not the objects of the trust. This Court pointed out that the cancellation was made not on the ground that the activities of the trust were not genuine but the activities of the trust were not in accordance with the objects of the trust; when the trust was registered with definite objects, carrying on such activities would be in terms of the objects for which registration was granted.
41. Referring to Section 12AA of the Income Tax Act, 1961, this Court has held as under:-
" 9. Under section 12AA, the Commissioner is empowered to grant or refuse the registration and after granting registration, would be empowered to cancel and that too, only on two conditions laid down under Section 12AA(3) of the Income Tax Act, 1961. Whether the income derived from such transaction would be assessed for tax and also whether the trust would be entitled to exemption under section 11 are entirely the matters left to the assessing officer to decide as to whether it should be assessed or exempted."
42. In the light of the law declared by this Court in the above said decision, we do not find that the scope of Section 12AA(3) of the Act is of any doubt for a fresh look. It is relevant herein to point out that in two other assessee's case, the Income Tax Appellate Tribunal, Ahmedabad Bench-A rendered in the case of Gujarat Cricket Association Vs. DIT (Exemption) in ITA.No.93(Ahd)/2011 dated 31.01.2012 and that of the Nagpur Bench rendered in the case of M/s.Vidarbha Cricket Association Vs. Commissioner of Income-tax-I, Nagpur in ITA.No.3/Nag/10 dated 30.05.2011, considered the said decision reported in 343 ITR 300 in the case of CIT Vs. Sarvodaya Ilakkiya Pannai rendered under Section 12AA(3) of the Act. On appeal before the respective High Courts, the decision of the Income Tax Appellate Tribunal was confirmed.
43. Leaving that aside, there being no dispute raised by the Revenue as to the genuineness of the trust, or as to the activities of the trust not being in accordance with the objects of the trust, the question of cancellation under Section 12AA of the Act does not arise. We further hold that at the time of grant of registration on 28.3.2003, the same was made taking into consideration the objects of the institution fitting in with the definition of 'charitable purpose' defined underSection 2(150 of the Act and the substitution of the Section itself came only 2008, with effect from 01.04.2009. As rightly pointed out by the learned senior counsel appearing for the assessee, the circular clearly brings out the object of the amendment and the amended provision has no relevance to the case . The power regarding cancellation, hence has to be seen with reference to the registration and the object satisfying the definition on 'charitable purpose', as it stood at the time of registration and not by the subsequent amendment to Section 2(15) of the Income Tax Act.
44. Learned Standing counsel appearing for the Revenue placed heavy reliance on the proviso toSection 12AA(3) of the Act and submitted that when the assessee has income received from 14 15 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
conduct of the matches, which are commercial in nature, as had been found by the Income Tax Appellate Tribunal, the objects of the trust ceased to be charitable. He submitted that going by the definition of Section 2(15) of the Act, rightly, the Commissioner assumed jurisdiction underSection 12AA(3) of the Act to cancel the registration. He further pointed out that for the finding to be recorded that the activities of the trust are not genuine, one must necessarily look into the objects of the association; if the objects of the association reveal commercial nature in the conduct of matches, the association cannot be one for charitable purpose as defined underSection 2(15) of the Act. Thus, there could be no inhibition for the Commissioner to assume jurisdiction to issue show cause notice calling upon the assessee to state whether the association is genuine or not. He further submitted that on looking at the activities of the association, the Commissioner had rightly come to the conclusion that the assessee's registration was liable to be withdrawn.
45. We do not accept the submission of learned Standing counsel appearing for the Revenue. As rightly observed by learned Senior counsel appearing for the assessee, the Revenue granted registration under Section 12AA of the Act satisfying itself as to the objects of the association befitting the status as charitable purpose as defined under Section 2(15), as it stood in 2003 and after granting the registration, if the registration is to be cancelled, it must be only on the grounds stated under Section 12AA(3) of the Act with reference to the objects accepted and registered under Section 12AA, as per the law then stood under the definition of Section 2(15) of the Income Tax Act. Even therein, Courts have defined as to when an institution could be held as one for advancement of any other object of general public utility. Thus, if a particular activity of the institution appeared to be commercial in character, and it is not dominant, then it is for the Assessing Officer to consider the effect of Section 11 of the Act in the matter of granting exemption on particular head of receipt. The mere fact that the said income does not fit in withSection 11 of the Act would not, by itself, herein lead to the conclusion that the registration granted under Section 12AA is bad and hence, to be cancelled.
46. It may be of relevance to note the language used in the definition "charitable purpose"
inSection 2(15) of the Act, which states that charitable purpose includes relief of the poor, education, medical relief and advancement of any other object of general public utility. The assessee's case falls within the phrase of the definition general public utility. In the decision reported in (2000) 246 ITR 188 in the case of Hiralal Bhagwati Vs. Commissioner of Income Tax, the Gujarat High court considered the said phrase in the context of Section 12AA registration and held that registration of the charitable trust under Section 12AA of the Act is not an idle or empty formality; the Commissioner of Income-tax has to examine the objects of the trust as well as an empirical study of the past activities of the applicant; the Commissioner of Income-tax has to examine that it is really a charitable trust or institution eligible for registration; the object beneficial to a section of the public is an object of "general public utility". The Gujarat High Court held that to serve as a charitable purpose, it is not necessary that the object must be to serve the whole of mankind or all persons living in a country or province; it is required to be noted that if a section of the public alone are given the benefit, it cannot be said that it is not a trust for charitable purpose in the interest of the public; it is not necessary that the public at large must get the benefit; the criteria here is the objects of general public utility. Thus, the Gujarat High Court held that in order to be charitable, the purpose must be directed to the benefit of the community or a section of the community; the expression "object of general public utility", however, is not restricted to the objects beneficial to the whole of mankind; an object beneficial to a section of the public is an object of general public utility; the section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature.
47. The above said decision (2000) 246 ITR 188 - Hiralal Bhagwati Vs. Commissioner of Income Tax) came up on April 18, 2000. Evidently, the Revenue has not gone on appeal as against this judgment. In the decision reported in (2008) 300 ITR 214(SC) in the case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, reference was made about this decision and the Apex Court pointed out that the Revenue did not challenge this case and it attained finality.
48. It is no doubt true that the decision reported in (2008) 300 ITR 214(SC) in the case of Assistant Commissioner of Income Tax Vs. Surat City Gymkhana, was in the context of Section 15 16 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
10(23) of the Income Tax Act, 1961, nevertheless, the fact remains that the understanding of the scope of the expression "general public utility" would nevertheless is of relevance herein. Admittedly when the assessee was granted registration, the Revenue recorded its satisfaction that the objects are of charitable purpose. Thus only possible enquiry under Section 12AA of the Act for cancellation is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust. If any of the income arising on the activities are not in accordance with the objects of the trust, the assessees income, at best, may not get the exemption under Section 11of the Act. But this, by itself, does not result in straight rejection of the registration as 'trust' under Section 12AA of the Act. Consequently, we reject the prayer of the Revenue that Section 12AA(1) of the Income Tax Act, 1961 must be read along with Section 12AA(3) of the Income Tax Act, 1961 before considering the cancellation.
49. As far as the unreported decision of this Court in T.C(A).No.91 of 2013 dated 29.04.2013 (Gowri Ashram Vs. Director of Income Tax (Exemptions) is concerned, on which heavy reliance was placed by the Revenue, the said decision relates to the rejection of the registration at the threshold of the application filed for registration. So too the decision of the Apex court reported in 315 ITR 428 in the case of Commissioner of Income Tax Vs. National Institute of Aeronautical Engineering Educational Society, wherein, rejection was made on the threshold of application for registration made by the assessee. The decisions relied on is thus distinguishable and has no relevance to the facts of the present case.
50. As far as unreported decision of this Court in T.C(A).No.91 of 2013 dated 29.04.2013 (Gowri Ashram Vs. Director of Income Tax (Exemptions) is concerned, while rejecting the appeal filed by the assessee on the rejection of the application for registration, this Court observed that it was open for the assessee Society to renew its application as and when it expanded the objects of the Society and were approved by the competent Court. The rejection order passed by the Revenue was on the ground that the objects of the trust were not charitable in character. This decision also has no relevance to the case on hand.
51. As already noted in the preceding paragraphs, considering the provision under Section 12AA(3) of the Act, the cancellation or registration in a given case could be done only under the stated circumstances under Section 12AA(3) of the Act and in the background of the definition relevant to the particular year of registration. As rightly pointed out by the assessee, Revenue does not allege anything against the genuineness of the objects of the assessee or its activities. It rests its order only on the ground of the assessee receiving income from holding of matches which according to the assessee were not held by it. Thus, as regards the question as to whether the particular income qualified under Section 11 of the Act or not is not the same as activity being genuine or not. In the circumstances, we do not agree with the view of the Income Tax Appellate Tribunal that the order passed by the Director of Income Tax (Exemptions) was in accordance with the provisions of the Income Tax Act, 1961. He viewed that the conduct of test matches and ODI are in the nature of commerce or business. Though the assessee claimed their activities for promotion of sports, he held that the dominant feature is evident from the huge profits received and hence the amount received from BCCI as subsidy are commercial. As regards conducting of IPL Matches, he pointed out that though no services are rendered by the assessee for conducting the matches, the ground where the matches are played are given for rent which is a commercial venture. The subsidy received from BCCI included mainly TV Advertisements sold by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of Section 2(15)of the Act after the amendment come in effect from 01.04.2009.
52. As rightly pointed out by the assessee, the Revenue does not question the objects of the Association as not genuine or are in accordance with the objects. All that the Revenue stated was that the nature of receipt could not be called a subsidy. Thus Revenue came to the conclusion that the objects and activities could not come within the meaning of 'charitable purpose' under Section 2(15) of the Act.
53. On going through the materials, the Income Tax Appellate Tribunal pointed out that instead of promoting and developing the game of cricket, the assessee was promoting and developing cricket as an entertainment and the tickets are highly priced; here, the assessee has 16 17 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
shifted the activities of general public utility to commercial activity for generating revenue; the public merely participate to view costly matches; hence the conditions of Section 12AA(3) were satisfied. The Income Tax Appellate Tribunal agreed with the Director of Income Tax (Exemptions) that the expression 'subsidy from BCCI' was a misleading nomenclature and it was a share from the revenue collected by BCCI from the sale of telecast rights. The surplus from IPL Season-I worked out to 8.5% of the total receipts. It further held that 78% of the total receipt came out of advertisement revenue.
54. The Income Tax Appellate Tribunal pointed out that the physical aspect of the game was one in accordance with the objects of the assessee and the activities are genuine. However, the matches held were not in advancement of any specific object of general public utility. The pattern of receipt is commercial in character and the matches conducted are not in accordance with the objects of the Association. Thus, it rejected the assessee's case and held that both the conditions under Section 12AA(3) of the Act stood attracted.
55. As seen from the observation of the Income Tax Appellate Tribunal, although generally it accepted the case of the assessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipt apparently led the Income Tax Appellate Tribunal and the Revenue to come to the conclusion that the activities are commercial and hence by Section 2(15)proviso to the Act, the receipt from BCCI could not be called as subsidy. As for the observation of the Income Tax Appellate Tribunal that the twin conditions stood satisfied is concerned, it is not denied by the Revenue that at the time of granting registration, the Commissioner had satisfied himself about the objects of the trust and the genuineness of the activities as falling within the meaning of 'charitable purpose', as it stood in 2003. The Revenue does not deny as a matter of fact that the objects remain as it was in 2003 and there is no change in its content to call the assessee's object as not genuine. There are no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility.
56.The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC(International Cricket Council). BCCI allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State Association is entitled to all in-stadia sponsorship advertisement and beverage revenue and it incurs expenses for the conduct of the matches. BCCI earns revenue by way of sponsorship and media rights as well as franchisee revenue for IPL and it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking Section 12AA read with Section 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the Association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Income Tax Appellate Tribunal's view that it is an entertainment and hence offended Section 2(15) of the Act does not appear to be correct and the same is based on its own impression on free ticket, payment of entertainment tax and presence of cheer group and given the irrelevant consideration. These considerations are not germane in considering the question as to whether the activities are genuine or carried on in accordance with the objects of the Association. We can only say that the Income Tax Appellate Tribunal rested its decision on consideration which are not relevant for considering the test specified under Section 12AA(3) to impose commercial character to the activity of the Association. In the circumstances, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under Section 12AA(3) of the Act."
13. In view of the above decision of Hon'ble Madras High Court, wherein the amendment brought in section 12AA(3) by adding a proviso by Finance No. 2 Act, 2004 and by Finance Act, 2008 adding proviso to section 2(15) of the Act have been discussed in great detail and laid down the principles that registration granted u/s. 12A of the Act cannot be withdrawn or cancelled by DIT by invoking the provisions of section 12AA(3) of the Act. Section 12AA(3) 17 18 ITA No.689 & 690/Kol/2011, The Technological Institute of Textile & Science, AY -----
of the Act empowers the DIT to cancel the registration granted u/s. 12AA(1)(b) of the Act if he is satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the object of the trust or institution, as the case may be. The combined reading of both the sections of section 12AA(3) and 12AA(1)(b) of the Act makes it clear that registration can be cancelled only in those cases where registration has been granted u/s. 12AA(1)(b) of the Act but it no where empowers DIT to cancel or withdraw the registration granted u/s. 12AA of the Act. Similar is the position in respect to exemption/rejection u/s. 80G(5)(vi) of the Act in the present case in the given facts and circumstances. Accordingly, we quash the orders passed by DIT(E) cancelling the registration u/s. 12AA(3) and rejection/exemption granted u/s. 80G(5)(vi) of the Act dated 08.03.2011. Appeals of the assessee are allowed.
14. In the result, both the appeals of assessee are allowed.
Order pronounced in the open court on 18.03.2016
Sd/- Sd/-
(Waseem Ahmed) (Mahavir Singh)
Accountant Member Judicial Member
Dated : 18th March, 2016
Jd. Sr. P.S
Copy of the order forwarded to:
1. Appellant - M/s. The Technological Institute of Textile & Science, C/o Salarpuria Jajodia & Co., 7, C.R. Avenue, Kolkata-700072.
2. Respondent - DIT, Exemption, Kolkata.
3. DIT , Kolkata
4. DR, Kolkata Benches, Kolkata /True Copy, By order, Asstt. Registrar.
18