By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
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9. 2013-TIOL-256-ITAT-BANG
Kodava Samaj vs. DIT(e)
ITA No. 200/Bang/2012
Assessment Year: 2009-10.
Date of Order: 08-02-2013
S/s. 2(15), 12A, 12AA(3) – In proceedings u/s. 12AA(3) it is not open to the DIT(e) to re-examine the objects of the trust to see if the same were charitable in nature.
Facts The assessee, a society registered under the Societies Registration Act, was granted certificate of registration u/s. 12A vide order dated 27-06- 1980. As per the Memorandum of Association, the main objects for which the assessee was formed were to preserve, protect and maintain, the traditional customs, culture, heritage and language of the Kodavas; to promote and advance the social, cultural, economic, educational, physical and spiritual progress and development of the members of the Samaja; etc. The DIT(E), in view of the proviso to section 2(15) which came into effect from 01-04-2009, was of the view that the certificate of registration granted to the assessee u/s. 12A should be cancelled by invoking the provisions of section 12AA(3), because, according to him, the assessee society was carrying on activity in the nature of trade, commerce or business. He held this view for the reason that the assessee was running schools & colleges but its predominant object was not education. Also, the assessee was running a recreation club having a liquor bar and provided tables for playing cards. He held that such activities cannot be called “charitable”. He also held that the assessee cannot take the plea that it is a charitable organisation since it is running a school and surplus, if any, generated from other activities is utilised for the development of education. For these reasons, the DIT(E) cancelled the registration by passing an order u/s 12AA(3).
Aggrieved, the assessee preferred an appeal to the Tribunal.
Held
The Tribunal noted that the power to cancel registration already granted u/s. 12AA of the Act is contained in section 12AA(3) of the Act which states that the registration which has already been granted can be cancelled only in two situations mentioned in the section viz. (i) that the activities of the trust or institution are not genuine; and (ii) the activities of the trust or institution are not being carried out in accordance with the objects of the trust or institution. The Tribunal noted that there is no finding in the order of DIT(E) on the satisfaction of any of the two conditions mentioned in section 12AA(3). The Tribunal observed that from the facts noted by DIT(E) it does not follow that the activities of the trust are not genuine or that the activities are not being carried out in accordance with the objects. It also noted that the second proviso to the definition of “charitable purpose” provides that even if there are receipts from commercial activities below Rs. 25 lakh, it will still be considered to be a “charitable purpose”. It held that it is not open to the DIT(E) in an action u/s. 12AA(3) of the Act to examine the objects of the trust to see if the same were charitable in nature. That has already been done when registration was granted to the assessee u/s. 12AA(1) of the Act. It is not open to the DIT(E) to re-examine the objects of the trust in proceedings u/s. 12AA(3) of the Act. It noted that this proposition is supported by the following decisions, relied upon by the assessee –
(i) CIT v Sarvodaya Ilakkiya Pannai 343 ITR 300 (Mad)
(ii) Chaturvedi Har Prasad Educational Society v CIT 46 DTR (Lucknow)(Trib) 121
(iii) Bharat Jyoti v CIT 63 DTR (Lucknow)(Trib) 409. (iv) Karnataka Badminton Association v DIT(E) ITA No. 1272/Bang/2011, order dated 22.11.2012
The Tribunal quashed the order passed by DIT(E) u/s. 12AA(3).
