Case Law Details
After going through the provisions of section 12AA(3) and section 2(15), we found that before the CIT(A) to withdraw the registration granted u/s 12AA has been provided in sub clause (3) of section 12AA of the Act. The provision of section 2(15) are totally different. Now by the amended provisions of section 2(15) it has been provided that if any year the gross receipts of an institution exceeds Rs. 10 lakhs, (now Rs. 25 lakhs w.e.f. 1.4.2012), then in that case, exemption u/s 11 may not be allowed to the Institution as the activities of the institution will be treated as not charitable if the receipts exceeds the limit. The exemption u/s 11 is to be examined on yearly basis, therefore, the exemption u/s 11 have no effect for granting registration u/s 12AA of the Act.
In the case of Gujarat Cricket Association, Ahmedabad vs DIT(E) (supra), the Tribunal by passing a detailed order has held that the registration cancelled by DIT(E) on the basis of amended provisions of section 2(15) of the Act was not justified as amended provisions does not fall within the permissible limit of section 12AA(3) of the Act and accordingly the order of DIT(E) was considered bad in law and the appeal of the Institution was allowed.
If in any year, the gross receipts of the Institution exceeds Rs. 10 lakhs or Rs. 25 lakhs, as the case may be, then in that year, the Assessing Officer is empowered to examine the allowability of exemption u/s 11 but the same has no effect on granting the registration u/s 12AA of the Act.
INCOME TAX APPELLATE TRIBUNAL , JAIPUR
ITA NO. 100/JP/2012 Asstt. Year : 2009-10 & STAY APPLICATION No. 5/JP/2012 (In ITA NO. 100/JP/2012) Asstt. Year : 2009-10
Rajasthan Housing Board vs The CIT
Date of pronouncement : 04.05.2012
ORDER
PER R.K. GUPTA, J.M.
This appeal and Stay Application filed by the assessee are against the order of CIT relating to Assessment Year 2009-10.
2. The assessee is objecting to withdrawal of registration granted u/s 12AA w.e.f. Assessment Year 2009-10.
3. The brief facts of the case are that M/s Rajasthan Housing Board, the appellant in this case, was granted registration u/s 12AA of the Act on 29.5.2009 w.e.f. 27.3.2008 in pursuance of order of the Tribunal date 3 1.3.2009. The Institution was established by State Government in accordance with the provisions of Rajasthan Housing Board Act, 1970 with the principle objective of providing Housing accommodation to the public at large in the State of Rajasthan. Powers and duties of the Institution are described in section 26 of Chapter–III of R.H.B. Act. Various objects of the company have been mentioned in the order of CIT at page 2 of his order. After going through the objects, the Ld. CIT noted that all these objectives are covered under the last limb of section 2(15) of the Act, i.e advancement of any other objects of general public utility. The CIT further observed that the institution was granted registration on account of carrying out the work for charitable purposes by way of advancement of any other object of general public utility as per prevailing provisions. However, in view of amendment in section 2(15) of the Act by Finance Act 2008 w.e.f. 1.4.2009, the advancement of any other object of general public utility shall not be a charitable purpose in certain circumstances. The CIT discussed the amended provisions of section 2(15) of the Act and the various expenses incurred by the Institution and inferred that as per amended provisions of section 2(15), Institution does not remain a charitable institution, therefore, he issued a letter dated 7/11.10.2010 to the Institution that why registration granted to it be not discontinued w.e.f. 1.4.2009. Detailed reply was field before Ld. CIT. It was submitted that the Tribunal directed to allow registration u/s 12AA by finding out that Institution is a charitable institution. It was further submitted that the order of the Tribunal was passed on 3 1.3.2009, amendment in section 2(15) was, therefore, on the Statute and, therefore, the effect of this amended provision has already been considered by the Tribunal while directing to allow registration u/s 12AA of the Act. However, Ld. CIT was not satisfied with that explanation as provision of section 2(15) have been amended by which it has been provided that if the total receipts exceed of Rs. 10 lakhs of any charitable institution in that case, the Institution cannot be treated as charitable institution in nature. Accordingly, he held that the assessee is not a charitable Institution within the meaning of section 2(15) of the Act and, therefore, he withdrew the registration granted u/s 12AA w.e.f. assessment year 2009-10 onwards. Detailed submissions were filed on behalf of the assessee. It was argued that the registration once granted can be withdrawn in view of the sub section (3) of section 12AA of the Act. Sub Section (3) of section 12AA was also read by Ld. AR. It was further submitted that provision of section 2(15) of the Act have no link with registration u/s 12AA but a direct link of exemption u/s 11 of the Act if receipts of the Institution exceed Rs. 10 lakhs than in that case only exemption u/s 11 may not be allowed in that particular year in which year receipts have been exceeded Rs. 10 lakhs. Reliance was placed in the decision of Tribunal in the case of Cane Development Council, Mawana vs CIT (2010) 128 TTJ (Del) 316 and in the decision of Tribunal in the case of Gujarat Cricket Association, Ahmedabad vs DIT (Exemption) decided in ITA No. 93/Ahd/2011 date 3 1.1.2012. Copies of these orders were also filed. On the other hand, Ld. DR strongly supported the order of CIT who passed order withdrawing registration u/s 12AA of the Act.
4. We have heard the rival submissions and considered them carefully. After considering the submissions and perusing the materials, we found that the appellant Institution deserve to succeed in its appeal. The procedure of withdrawal of registration u/s 12AA has been prescribed in sub section (3) of section 12AA which reads as under:-
“ 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 21996)]] 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.”
5. The amended provisions of section 2(15) is as under:-
“2. Definitions – (15) “Charitable purpose: – includes relief of poor, education medical relief [preservation of environment (including watershed, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest} and the advancement of any other objects of general public utility.”
6. By the amended provisions of Finance Act, 2010 with retrospective effect 01.4.2009, it has been provided in section 2(15) as under:-
“Provided further that the proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakhs rupees or less in the previous year.”
7. Vide Finance Act, 2011 w.e.f. 1.4.2012 the limit of Rs. 10 lakhs was raised to Rs. 25 lakhs.
8. After going through the provisions of section 12AA(3) and section 2(15), we found that before the CIT(A) to withdraw the registration granted u/s 12AA has been provided in sub clause (3) of section 12AA of the Act. The provision of section 2(15) are totally different. Now by the amended provisions of section 2(15) it has been provided that if any year the gross receipts of an institution exceeds Rs. 10 lakhs, (now Rs. 25 lakhs w.e.f. 1.4.2012), then in that case, exemption u/s 11 may not be allowed to the Institution as the activities of the institution will be treated as not charitable if the receipts exceeds the limit. The exemption u/s 11 is to be examined on yearly basis, therefore, the exemption u/s 11 have no effect for granting registration u/s 12AA of the Act.
9. The objectives of the institution have already been examined by the Tribunal who directed to grant registration to the present institution. There is no doubt in this regard. Therefore, Ld. CIT was not justified in holding that in view of amended provisions of section 2(15), the Institution does not remain a charitable institution and, therefore, the objectives of the institution also does not remain as charitable and accordingly withdrawal of registration, in our considered view, was not justified.
10. On similar facts, in the case of Gujarat Cricket Association, Ahmedabad vs DIT(E) (supra), the Tribunal by passing a detailed order has held that the registration cancelled by DIT(E) on the basis of amended provisions of section 2(15) of the Act was not justified as amended provisions does not fall within the permissible limit of section 12AA(3) of the Act and accordingly the order of DIT(E) was considered bad in law and the appeal of the Institution was allowed.
11. In the case of Cane Development Council, Mawana vs CIT (supra) similar view has been expressed by Delhi Bench of the Tribunal. It has been held that objectives of the institution does not fall under the provisions of section 2(15) and therefore, the assessee was entitled to registration u/s 12AA of the Act. In view of the discussion of ours and in view of the decision of Tribunal, we are of the view that Ld. CIT was not correct in withdrawing registration already granted by the order of the Tribunal to the Institution. If in any year, the gross receipts of the Institution exceeds Rs. 10 lakhs or Rs. 25 lakhs, as the case may be, then in that year, the Assessing Officer is empowered to examine the allowability of exemption u/s 11 but the same has no effect on granting the registration u/s 12AA of the Act. Accordingly, we set aside the order of Ld. CIT and restore the registration already granted u/s 12AA of the Act. Thus,, the appeal of the Institution is allowed.
12. Now, we will take up the Stay Petition No. 5/Jaipur/2012. Since we have already allowed the appeal in favour of the assessee, therefore, the stay petition has become infructuous in nature which does not require any adjudication. Accordingly, we dismiss the Stay Petition.
13. In the result, appeal of the Institution is allowed and Stay Petition is rejected.
