No cancellation of registration us 12AA(3) since inception in absence of cogent material

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows :

41. The ld. PCIT cancel led the registration basically on two premises,

1) There has been a violation of clause (ii) of the para 4 of the trust deed and

2) Violation of provision of Section 2(15) of the Act while carrying out the activity.

The two reasons given by the ld. PCIT are also being examined.

42. The clause (ii) of the para 4 of the trust deed reads “Trust shall not be involved in any activity which promotes violence, terrorism, fanaticism or political favouritism between the political party verses another. Trust’s objective is strictly humanitarian with no pol itical agenda of any sort whatsoever.”

On going through the above clause, and on going through the record before us, it cannot be said that the trust has involved in any activity which promoted violence, terrorism, fanaticism or political favouritism. Hence, the observation of the ld. PCIT can be said to be based on wrong facts.

43. Regarding the applicability of provisions of Section 2(15) as per the provisions charitable purpose includes education and since the assessee is in the activity of imparting education, the observation of the ld. PCIT is also cannot be held to be valid based on the provisions of the Act. For the sake of brevity and ready reference, the provisions of Section 2(15) of the Act are reproduced as under:

“Section 2……….

(15) “charitable purpose” includes relief of the poor, education,[yoga,] medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other 69 object of general public utility:

[Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless—

(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;]]”

44. The ld. PCIT, did not have record of activities which are not in accordance with the objects of the trust. The entire order of the ld. PCIT is based on the appraisal report of DDIT(Inv.) only. We do not find mention of any material being referred by the ld. PCIT and its applicability to any of the provisions of Section 2(15) and/or Section 12AA(3) while revoking the registration. The Act envisages where a trust or an institution has been granted registration u/s 12AA(1)(b) or has been obtained registration at any time u/s 12A. The ld. PCIT can cancel the registration if the conditions mentioned therein are not satisfied or the activities of the trust are not genuine or the activities are not carried out in accordance with the objects of the trust. We do not find that the ld. PCIT has brought out any of the conditions laid down as above.

45. Hence, keeping in view the entire facts of the case, that there have been deficiencies in the infrastructure as found by the first report which were found to have been rectified by the second committee comprising of Addl. Secretary, GoI Dean AIIMS, Addl . DG, DGHS, and keeping in view the fact that MCI has granted due permission for the academic session 2010-11, keeping in view the fact of non-sanction of prosecution of Sh. Ketan Desai, keeping in view the order of the Hon’ble High Court of Delhi , dropping the proceedings till sanction is received, keeping in view the submission of the revenue that no prosecution is pending against the assessee as on now, keeping in view the aims & objects of the trust are in consonance with the provisions of Section 2(15) of the Act, keeping in view that there has been no violation of clause (ii) para 4 of the trust deed as al leged by the ld. PCIT, we hereby hold that the order of the ld. PCIT dated 27.10.2017 cancelling the registration since inception, u/s 12AA(3) of the Act is legally not valid. Before departing, we hereby clarify that,

1) The order of the ld. PCIT cancelling the registration since inception is hereby revoked.

2) The order has been passed in accordance with the provisions of the Income Tax Act, 1961 and shall not impact the outcome of any proceeding under any other Acts promulgated under Constitution of India.

3) The revenue shall be at liberty to approach the Tribunal for re-institution of the appeal on re-commencement of trial against Sh. Ketan Desai which has been since dropped.

46. In the result, the appeal of the assessee is allowed.

Order Pronounced in the Open Court on 03/09/2020.