CIT Vs Mumbai Metropolitan Region Development Authority (Bombay High Court)
In the instant case Tribunal discussed the objects of the assessee i.e.,the respondent and returned a finding of fact that the entire objects are charitable in nature having regard to the meaning of the expression “Charitable purpose” as defined in the Act. Tribunal referred to the decision of Madras High Court in Tamilnadu Cricket Association case (supra) wherein Madras High Court held that the act of granting registration under section 12AA(1) is a result of satisfaction recorded by the Commissioner as regards genuineness of the objects as well as activities of the Trust and once such a satisfaction is arrived at by the Commissioner, cancellation could only be in terms of section 12AA(3) of the Act. Thereafter, Tribunal recorded the finding that order of the Director of Income Tax (Exemptions) did not disclose which activity of the respondent was not genuine or that the respondent was not genuine. Tribunal also recorded that there was no material in the said order explaining that activities of the respondent are not being carried out in accordance with its objects.
On careful reading of the order passed by the Director of Income Tax (Exemptions) as well as the order passed by the Tribunal, we do not find any error or infirmity in the view taken by the Tribunal. Insofar the view taken by the Director is concerned that respondent is directly hit by the proviso to Section 2(15) of the Act, we are of the view that such satisfaction may lead to denial of exemption to the respondent in the assessment proceeding for the relevant assessment year but certainly cannot be a ground for cancellation of registration under section 12AA(3). The competent authority under section 12AA(3) must be satisfied that the activities of the Trust are not genuine or that the activities are not being carried out in accordance with the objects of the Trust or the Institution. Such satisfaction must be recorded as a matter of fact on the basis of specific materials on record. Merely saying that the activities of the respondent is hit by the proviso to section 2(15) of the Act, would not lead to automatic cancellation of registration as that is not a ground provided under section 12AA(3) of the Act for cancellation of registration.
A perusal of the order passed by the Director would go to show that no such finding was recorded by the Director that the activities of the respondent Trust are not genuine or that the activities are not being carried out in accordance with the objects of the respondent Trust. What the Director had done was that he took the view that the respondent was hit by the proviso to section 2(15) of the Act and therefore, it was deemed that respondent Trust had become non-genuine. Such a view is wholly untenable being contrary to the mandate of section 12AA(3) of the Act and was rightly interfered with by the Tribunal.
Insofar contention of learned standing counsel for the revenue that this issue is being considered by the Supreme Court, we are in agreement with the submission made by learned senior counsel for the respondent/assessee that the question before the Supreme Court is whether at the time of cancellation of registration on 31st December, 2008 Commissioner had the power to cancel registration since sub-section (3) of section 12AA was inserted by the Finance Act, 2010 with effect from 1st June, 2010. Therefore, the issue in JIS Foundation(supra) is materially different from the issue arising in the present appeal.
Therefore, on thorough consideration we are of the view that there is no error or infirmity in the order passed by the Tribunal. Consequently no question of law, much less any substantial question of law, arises therefrom.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. Heard Mr. Ashok Kotangle, learned standing counsel, Revenue for the appellant; and Mr. S.E. Dastur, learned senior counsel along with Mr. Madhur Agarwal and Mr. A.K. Jasani, learned counsel for the respondent/assessee.
2. This appeal has been preferred by the Revenue under section 260A of the Income-tax Act, 1961 (briefly “the Act” hereinafter) against the order dated 5th April, 2017 passed by the Income Tax Appellate Tribunal, “B” Bench, Mumbai (briefly “the Tribunal” hereinafter) in Income Tax Appeal No.625/Mum/2012 for the assessment year 2009-10.
3. The appeal has been preferred on the following two questions stated to be substantial questions of law:—
