In the case of Kapurthala Improvement Trust vs. CIT: ITA. No. 732 of 2013 (Amritsar) dated June 11, 2015, the issue before the Tribunal was whether registration under Section 12 AA of the IT Act can be withdrawn by invoking provisions of Section 2(15) of the IT Act.
In that case, the assessee trust, incorporated under Punjab Town Improvement Act, 1922, filed application seeking registration under Section 12AA of the Act, which was rejected by CIT. On appeal before the Tribunal, it held that the assessee was entitled to the benefit of registration. The Revenue challenged the order of Tribunal before the High Court but did not succeed. Subsequently, the CIT, in view of amendment in Section 2(15) of the IT Act and relying on the decision of the Amritsar Bench of Tribunal in the case of Improvement Trust Phagwara in ITA No. 274 (Asr) /2013, order dated 23.07.2013, cancelled the registration of the assessee trust granted under Section 12AAby holding that assessee was engaged in commercial activities. On appeal before the Tribunal, the Tribunal while allowing the appeal of the assessee, held thatthe scope of powers of Commissioner under Section 12AA (3) for cancellation of registration already granted is limited in scope, inasmuch as it can only be invoked only when –
- The activities of the trust are not genuine, and
- The activities of the trust or the institution are not being carried out in accordance with the objects of the trust or the institution.
In the absence of fulfilment of any of the aforesaid conditions in the facts of the assessee trust, withdrawal of registration was unwarranted.
The Tribunal, on further examination of the provisions of proviso to Section 2(15) of the IT Act, observed that rider set out under first proviso to Section 2(15) can only come into play on year to year basis and not in absolute terms since it is not only the nature of the activity but also the level of activity which, taken together, determines whether the disabling clause can come into play. The safeguard against the objects of the trust being vitiated insofar as their character of “charitable activities” is concerned is inbuilt in the provisions of Section 13(8) of the IT Act. The impact of the proviso to Section 2(15) will be that the assessee will not be eligible for exemption under Section 11 of the IT Act in respect of income falling within the purview of the former.
Comments: In view of the aforesaid decision, it may be said that once the registration under Section 12AA of the IT Act is granted to the assessee and the activities of the trust are genuine and as per the objects of the assessee, CIT or any other authority is not empowered to cancel registration on ground of involvement of trust in any activity which may not be for charitable purpose.