Charitable institution – Registration u/s 12AA of ITA, 1961 – Cancellation of registration – No finding that activities of charitable institution were not genuine or that they were not carried out in accordance with its objects – Mere resolution of governing body to benefit followers of a particular religion – Cancellation of registration not justified

18. St.
Michaels Educational Association vs. CIT; [2019]
417 ITR 469 (Patna) Date
of order: 13^th August, 2019

Charitable institution – Registration u/s 12AA of ITA,
1961 – Cancellation of registration – No finding that activities of charitable
institution were not genuine or that they were not carried out in accordance
with its objects – Mere resolution of governing body to benefit followers of a
particular religion – Cancellation of registration not justified

The
assessee was an educational institution running a high school and was granted
registration u/s 12AA of the Income-tax Act, 1961 in April, 1985. In August,
2011 the Commissioner issued a show-cause notice proposing to cancel
registration and cancelled the registration exercising powers u/s 12AA(3) of
the Act.

The
Tribunal upheld the order of the Commissioner cancelling the registration.

But the
Patna High Court allowed the appeal filed by the assessee and held as under:

‘(i)      A plain reading of the enabling power vested
in the Commissioner in section 12AA(3) would confirm that it is only in two
circumstances that such power can be exercised by the Principal Commissioner or
the Commissioner:

(a) if the
activities of such trust or institution are not found to be genuine; or (b) the
activities of such trust or institution are not being carried out in accordance
with the objects of the trust or institution. Where a statute provides an act
to be done in a particular manner it has to be done in that manner alone and every
other mode of discharge is clearly forbidden.

(ii)      The ground for cancellation of
registration is that in some of the subsequent governing body meetings some
resolutions were passed for the benefit of the Christian community. The order
of cancellation has been passed by the Commissioner without recording any
satisfaction, either on the issue of the activities of the school being not
genuine or that they were not being carried out in accordance with the objects
for which the institution had been set up. The order of cancellation of the
registration was not valid.’