Precondition for cancellation of registration of trust is that activities of trust are not genuine or are not being carried out, in accordance with its objects which was not so in the case of assessee

HIGH COURT OF PUNJAB AND HARYANA

IT Appeal No. 70 of 2013
CM No. 9341 -CII OF 2013

Commissioner of Income-tax -I, Ludhiana...............................................................Appellant.
v.
Ved Niketan Dham, Public Charitable Trust ...........................................................Respondent

RAJIVE BHALLA AND DR. BHARAT BHUSHAN PARSOON, JJ.

Date :AUGUST 21, 2013

Appearances

Rajesh Katoch for the Appellant.

Section 12AA of the Income Tax Act, 1961- Trust — Registration of Trust — Precondition for cancellation of registration of trust is that activities of trust are not genuine or are not being carried out, in accordance with its objects which was not so in the case of assessee

FACTS

Assessee trust was granted registration u/s 12AA, thereafter, assessee filed an application for approval u/s 80G(5)(v). CIT directed the A.O. to submit a report with respect to activities of trust. A.O. submitted a report that expenses incurred by assessee were primarily religious in nature. CIT issued a show cause notice to assessee for cancellation of registration. After considering the reply of assessee, CIT cancelled the registration the ground that assessee publishes a monthly magazine to propogate the ideology of Vedas for advancement of Hindu religion, it does not fall within the expression "general public utility". On appeal by assessee, Tribunal held in favour of assessee on the ground that no finding has been recorded that activities of trust were not genuine, thus, CIT was not empowered to cancel registration. Being aggrieved, Revenue went on appeal before High Court.

HELD

that on a perusal of section 12AA(3) it was found that a precondition for cancellation of registration were the findings that activities of trust were not genuine or were not being carried out, in accordance with objects of the trust. Thus, before cancelling registration, a Commissioner was required to record a finding that activities of trust were not genuine or were not being carried out, in accordance with objects of the trust. A perusal of the order passed by CIT revealed that he did not record any finding as required by section 12AA(3). Tribunal, therefore, rightly reversed the order passed by the CIT. In the result, appeal was answered in favour of assessee.

ORDER

Rajive Bhalla, J. - Allowed as prayed.

CM No. 9341-CII of 2013
Income Tax Appeal No.70 of 2013

2. The revenue challenges order dated 22.6.2012 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B' Chandigarh on the following substantial questions of law:—

"(i)		Whether on the facts and law, the Hon'ble Income Tax Appellate Tribunal was justified in holding that the satisfaction of condition of sections 11 to 13 of the Act is not to be gone into by the Commissioner of Income-tax while granting registration u/s 12AA of the Act, whereas such examination would allow Commissioner of Income Tax to satisfy himself about the genuineness of the aims and objects of the Trust/Society and genuineness of its activities as enumerated in Sub-clause (b) of clause (1) of Section 12AA?
(ii)		Whether on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was justified in directing the Commissioner of Income Tax to grant Registration to the Trust u/s 12AA of the Act, where the funds of the trust are utilized for the benefit of the trustee while the funds was supposed to be invested in the modes specified in Section 11(5)?
(iii)		Whether on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was justified in holding that the activities of the Trust are genuine even the trustee and their successor were long life members while being a public Trust, it can not opt for life long status for one single trustee or his heir?
(iv)		Whether on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was justified in accepting that the assessee is a Trust and also a Society and is governed by different laws whereas the Commissioner of Income-tax has concluded that the status of the assessee is very ambiguous as it is a Trust and it is also a society."

2.1 The facts that have given rise to this appeal are that the assessee-trust was granted registration under Section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the "Act") on 17.10.2003. The assessee, thereafter, filed an application in Form No.10G for approval under Section 80G(5)(v) of the Act on 19.02.2009.

3. The Commissioner of Income Tax, Ludhiana, directed the Assessing Officer to submit a report with respect to the activities of the trust. The Assessing Officer submitted a report that expenses incurred by the assessee are primarily religious in nature. The Commissioner of Income Tax issued a show-cause notice to the assessee for cancellation of registration. After considering the reply, the Commissioner cancelled the registration by holding that as the assessee publishes a monthly magazines to propagate the ideology of Vedas etc. for advancement of Hindu religion, it does not fall within the expression "general public utility". Aggrieved by this order, the assessee filed an appeal. The Income Tax Appellate Tribunal allowed the appeal, set aside order passed by the Commissioner by holding that as no finding has been recorded that activities of the trust are not genuine, the Commissioner was not empowered to cancel registration.

4. We have heard counsel for the appellant and are of the firm opinion that questions of law framed by the revenue do not arise for adjudication.

5. A trust is registered under Section 12AA of the Act after due consideration of its activities. Section 12AA(3) of the Act empowers the Commissioner to cancel registration if the activities of the trust or institution are not genuine or are not being carried out, in accordance with the objects of the trust or the institution. Section 12AA(3) of the Act reads as follows:—
"Procedure for registration.

(1) & (2)**

(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."

6. A perusal of Section 12AA(3) of the Act, reveals that a precondition to cancellation of registration are findings that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. Thus, before cancelling registration, a Commissioner is required to record a finding that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. A perusal of the order passed by the Commissioner reveals that he did not record any finding as required by Section 12AA(3) of the Act. The Income Tax Appellate. Tribunal, therefore, rightly reversed the order passed by the Commissioner. We find no reason arising whether from arguments advanced or from the order passed by the Commissioner to take a different view.

7. In view of what has been stated hereinabove, we find no merit in the appeal and dismiss the same.

[2013] 219 TAXMAN 115 (P and H)