Case Note & Summary
The Petitioner, Sinhagad Technical Education Society, a trust registered under Section 12A of the Income Tax Act, 1961, was issued a notice under Section 12AA(3) on 31 July 2007 proposing cancellation of registration on grounds of charging capitation fees and diverting funds for personal gain. The Commissioner of Income Tax (Central), Pune passed an order on 9 October 2007 cancelling the registration with effect from Assessment Year 1999-2000. The Petitioner appealed to the Income Tax Appellate Tribunal, which by judgment dated 19 September 2008 set aside the cancellation, holding that Section 12AA(3) as it then stood only empowered cancellation of registration granted under clause (b) of sub-section (1) of Section 12AA, not registration granted under Section 12A. The Tribunal also held that the provision, introduced by Finance (No.2) Act 2004 with effect from 1 October 2004, could not have retrospective effect. The Revenue appealed to the Bombay High Court, which admitted the appeal on 10 June 2009. Subsequently, Section 12AA(3) was amended by Finance Act 2010 with effect from 1 June 2010 to include registrations obtained under Section 12A. The High Court, in this judgment, considered the effect of the amendment. The Court held that the amendment is prospective and does not validate the cancellation order passed prior to its enactment. The Court dismissed the Revenue's appeal, affirming the Tribunal's decision that the Commissioner lacked jurisdiction to cancel the registration under the unamended provision.
Headnote
A) Income Tax - Charitable Trust Registration - Cancellation under Section 12AA(3) - Jurisdiction - Prior to amendment by Finance Act 2010, Section 12AA(3) only empowered cancellation of registration granted under clause (b) of sub-section (1) of Section 12AA, not registration granted under Section 12A - The Tribunal correctly held that the Commissioner lacked jurisdiction to cancel registration granted under Section 12A (Paras 2-3). B) Income Tax - Retrospective Effect of Amendment - Section 12AA(3) as amended by Finance Act 2010 - The amendment, which extended cancellation power to registrations obtained under Section 12A, came into effect from 1 June 2010 and is prospective - It cannot be applied retrospectively to validate cancellation orders passed before that date (Para 3).
Issue of Consideration
Whether the Commissioner of Income Tax had jurisdiction under Section 12AA(3) of the Income Tax Act, 1961 (as it stood prior to amendment by Finance Act 2010) to cancel registration granted under Section 12A, and whether the amendment by Finance Act 2010 has retrospective effect.
Final Decision
The High Court dismissed the Revenue's appeal, upholding the Tribunal's decision that the Commissioner lacked jurisdiction to cancel the registration under the unamended Section 12AA(3). The amendment by Finance Act 2010 is prospective and does not apply retrospectively.
Law Points
- Section 12AA(3) as it stood prior to amendment by Finance Act 2010 did not empower cancellation of registration granted under Section 12A
- Amendment by Finance Act 2010 is prospective from 1 June 2010
- No retrospective effect of procedural provisions
