Mere generating huge interest income would not result in cancellation of registration u/s 12AA

The brief facts of the case is that the assessee was a registered trust u/s 12A of the Income Tax Act, 1961 (The Act) which was created by the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971 with the preamble to make better provision for the improvement and clearance of slum in the State through redevelopment and from the protection of the occupiers for evacuation and distress warrants. the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971 with the preamble to make better provision for the improvement and clearance of slum in the State through redevelopment and from the protection of the occupiers for evacuation and distress warrants.

Thus the Assessing Officer observed that SRA is indulging in activity which is in the nature of trade, commerce or business or any activity rendering any service in relation to trade, commerce or business for Cess or fees or any other consideration, irrespective of nature of use or application or retention of the income from such activity and thus as per the amended proviso u/s 2(15) it is no longer remains charitable in nature. Thus the Director of Income Tax (Exemption) cancelled/ withdrawal registration granted u/s 12AA(3) w.e.f. the date on which the registration was granted i.e. 01.04.2009.

Being Aggrieved by the order of the Director of Income Tax (Exemption), the assessee is before the tribunal.

The Ld. AR submitted that the nature and purpose, as well as the object of the Slum Rehabilitation Authority, had no point of time has changed which has been duly taken note by the Director of Income Tax (Exemption).

Merely putting the interest income and fees received cannot be the criteria for cancelling the registration with the retrospective effect.

The proviso came into effect from assessment year 2009-10 and the registration was granted to the assessee i.e. Slum Rehabilitation Authority w.e.f. 01.04.2009, therefore, the registration may be restored.

ITAT was of the view that from its objects notified before the Revenue Authority at the time of registration under Section 12A of the Act i.e. from 01.04.2002. Therefore, withdrawing the registration with retrospective effect from the date of grant of registration (i.e. 01.04.2002) by the DIT(E) is bad in law and will not sustain in the eyes of law. It is pertinent to note here that where the receipts are coming under the purview of proviso to Section 2(15) of the Act, then the benefit of exemption to the income for the relevant previous year would not be available to the assessee and the Revenue can brought the said income to tax to secure the interest of the Revenue.

Therefore, it set aside the order passed by the DIT(E).