Learned Counsel For The Revenue Has Submitted. That The Activities Of The Trust Must Fall Within The! Expression ‘Charitable Purpose’ As Defined Under Section v. Director Of Income-Tax (Exemptions )’, (2006) 285 Itr 327 (Karn

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23 DAY OF SEPTEMBER 2020. PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A. NCO.659 OF 2013 BETWEEN: THE DIRECTOR OF INCOME TAX(EXEMPTIONS), C.R. BUILDINGSQUEENS ROAD, BANGALORE-560001. ... APPELLAN[. (BY SRI. E.1. SANMATHI, ADV.,) AND: M/S. BOOK ROOMNO.2, MAHATMA GANDHI ROADBANGALORE. ... RESPONDENT (BY SRI. MAHESH, FOR SRI. VANI H, ADV.) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT OF ORDER DATED 08.08.2013 PASSED IN NO.114/BANG/2012 FOR THE ASSESSMENT YEAR 2009-10,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO:(1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN.» (II) SET ASIDE THE COMMON APPELLATE ORDER DATED 08-08-2013 PASSED BY THE ITAT, B’ BENCH, BANGALORE IN APPEAL|PROCEEDINGS ITA NO.114/BANG/2012 DATED 08-08-2013, AS|SOUGHT FOR IN THIS APPEAL. THISITACOMINGONFOR.HEARING,THISDAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING:JUDGMENT This appeal under Section 260A of the Income Tax)Act, 1961 (hereinafter referred to as the Act for short)Nas been preferred by the revenue. Tne subject matterof the appeal pertains to the Assessment year 2009-10. The appeal was admitted by a bench of this Court videorder dated 25.04.2014 on the following substantialquestion of law: “Whether the Income Tax Appellate|Tribunal was right in setting aside the orderpassed by the Director of Income Tax(Exemptions) under section 12AA(3) of theAct even when the _ said authority hapassed the order within the parameters ofSaid section and further as the activates ofthe assessee does not fall under the [imb“Education” and given the fact that theassessee is not carrying on any activitieswhich are charitable in nature, for the purpose for which such registration wasgranted and its predominant activity iscommercial in nature?” 2 |Facts leading to filing of the appeal brieflystated are that assessee is a Trust, which wasconstituted as per Trust deed dated 10.04.2000. Themain object of the Trust is to procure and promote sale.of all items of publications, audio / video cassettes,calendars, diaries, greeting cards, stationery items andother products of public interest. The assessee appliedfor registration under Section 12A(a) of the act and wasgranted the same vide order dated 22.08.2000. TheDirector of Income Tax (Exemption) on perusal of detailsof income and expenditure accounts filed by theassessee for the Assessment Years 2009-10 and 2010-11 came to the conclusion that major portion of thereceipts of the assessee are from commercial activitieslike sale of books, CDs and other items. The Director ofIncome Tax (Exemption) issued a notice under Section 12AA(3) of the Act to the assessee to show cause as to.why the registration granted to it under Section 12A(a)of the Act be not cancelled. The Director of Income Tax!(Exemption) by an order dated 20.12.2011 inter aliaheld that though the original registration of the Trust forwholly charitable trust, but the activities of the Trust arenot for charitable purposes as per amended provisions ofSection 2(15) of the Act. The Director of Income Tax(Exemption) vide order dated 20.12.2011 cancelled theregistration of the assessee. Being aggrieved, theassessee filed an appeal. The Tribunal by an order dated08.08.2013 set aside the order passed by the Director ofIncome Tax (Exemption) and allowed the appealpreferred by the assessee. In the aforesaid factualbackground, this appeal has been filed. 3 Learned counsel for the revenue has submitted.that the activities of the Trust must fall within the!expression ‘charitable purpose’ as defined under Section 3 Learned counsel for the revenue has submitted.that the activities of the Trust must fall within the!expression ‘charitable purpose’ as defined under Section 2(15) of the Act and the Tribunal grossly erred inholding that even though the activities of the Trust arenot covered by the main provision but are covered bythe proviso, therefore, the activities of the Trust arecharitable. It is also argued that the Director of IncomeTax (Exemption) has rightly passed an order that theassessee does not carry on any charitable activity as it is”engaged in selling books and CDs and the Tribunalgrossly erred in interfering with the order of the Directorof Income Tax (Exemption). In support of aforesaidSubmission, learned counsel for revenue has placedrellance on decision of this court In ‘SANUJEEVAMMAHANUMANTHE GOWDA CHARITABLE TRUST VS.DIRECTOROF|INCOME-TAX|(EXEMPTIONS )’,(2006) 285 ITR 327 (KARN). 4On the other hand, learned counsel for theassessee submitted that the definition of ‘charitable|purposes’ in Section 2(15) of the Act includes any other object of general public utility and the expression has awide connotation. It Is submitted that the condition|precedent for invocation of power under’ Section12AA(3) of the Act have not been fulfilled. It is furthersubmitted that the order passed by the Director ofIncome Tax (Exemption) is per se bad in law. 5.|We have considered the submissions madeby learned counsel for the parties and have perused therecord. Section 12AA(3) of the Act reads as under: 12AA(3)-Where a trust or an institutionhas been granted registration under clause|(b) of sub-section (1) 6for has obtained|registrationat|dhhytimeUnder section12A and subsequently the Commissioner is Satisfied that the activities of such trust or§institution are not genuine or are not being|carried out in accordance with the objects of|the trust or institution, as the case may De,he shall pass an order in writing cancelling|the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or|institution has been given a_e reasonablopportunity of being heard. 6.|It is well settled legal principle that if theconditions in which power is to be exercised are alsoSpecified by the statute, then on fulfillment of thoseconditions only the power conferred becomes annexedwith the duty to exercise the power in that manner. Inthis connection, reference may be made to the decisionof the Supreme Court in-THE OFFICIAL LIQUIDATORVS. DHARTI DHAN (P) LTD. AIR 1977 SC 740andINDIRA SAWHNEY & ORS. Vv. UNION OF INDIA AIR1993 SC 47/7In the light of aforesaid well settled legal |principle, it is evident that power under Section 12AA(3)of the Act can be invoked only on fulfillment of theconditions viz., (a) if the activities of such trust orinstitution are not genuine (b) the activities of trust orinstitution not being carried out in accordance with the object of the trust or institution. The Tribunal inparagraph 8.3 of the order has recorded a finding that.the Director of Income Tax (Exemption) has no whererecorded a finding with regard to aforesaid twoconditions, wnichn is asine qua nonfor exercise oftpowers under Section 12AA(3) of the Act. Therefore, theTridDunal has rightly set aside the order passed by theDirector of Income Tax (Exemption). In)KARNATAKAINDUSTRIAL AREA DEVELOPMENT BOARDsupra, It.has been held that even if the case of the assessee fallswith first proviso to Section 2(15) of the Act, the benefitof registration under Section 12A of the Act ts notavailable. However, the aforesaid aspect has to beconsidered by the Assessing Officer and on this groundthe registration cannot be cancelled. In view of preceding analysis, the substantialquestion of law is answered accordingly.| �5�9-2�72/439!�9-2�011203�;0.3/�056�./�-272>?� 6./<.//26�� //� ����������������������