THE MANAGEMENT CONSULTANTS ASSOCIATION OF INDIA NOW KNOWN AS THE INSTITUTE OF MAGT. CONSUL. OF INDIA, MUMBAI v. DIRECTORS OF INCOME TAX (EXEMPTION), MUMBAI

I.T.A NO.5680/ MUM/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH MUMBAI. [ CORAM: PRAMOD KUMAR AM AND R.S.PADVEKAR JM ] I.T.A NO.5680/ MUM/2009 ASSESSMENT YEAR: N.A. MANAGEMENT CONSULTANTS ASSOCIATION .. APPELLANT OF INDIA (NOW KNOWN AS THE INSTITUTE OF MANAGEMENT CONSULTANTS OF INDIA) C/0 SHANKARLAL JAIN & ASSOCIATES 12 ENGINEER BUILDING 265 PRINCES STREET MUMABI.-02. PA NO.AAATT 5117 H VS DIRECTOR OF INCOME TAX (EXEMPTION) . RESPONDE NT MUMBAI APPEARANCES: S.L. JAIN FOR THE APPELLANT ASHIMA GUPTA FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE IS AGGRIEVED OF THE REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT 1961 HAVING BEEN CANCELLED BY ORDER DATED 13.8.2009 PASSED BY THE DIRECTOR OF INCOME TAX (EXE MPTION). 2. EVEN THOUGH THE ASSESSEE HAS RAISED SEVERAL GRIE VANCES ACCORDING TO THE LEARNED COUNSEL THE SHORT ISSUE ON WHICH THIS APPE AL CAN BE DECIDED IS WHETHER OR NOT THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTIONS) HAD THE POWERS U/S.12AA(3) TO CANCEL THE REGISTRATION GRANTED UNDER SECTION 12A. IT IS IMPORTANT TO BEAR IN MIND THE I.T.A NO.5680/ MUM/2009 2 FACT THAT THE IMPUGNED CANCELLATION ORDER WAS PASSE D ON 13 TH AUGUST 2009 I.E. PRIOR TO AMENDMENT IN SECTION 12AA(3) W.E.F. 1 ST JUNE 2010 AND THAT DEALING WITH LAW AS IT STOOD PRIOR TO THE SAID AMENDMENT A CO-ORDINATE BE NCH IN THE CASE OF BHARATI VIDYAPEETHA VS ITO (119 TTJ 261) OBSERVED AS FOLLO WS: 8. THE PLEA OF THE ASSESSEE MEETS OUR APPROVAL. IN OUR CONSIDERED VIEW A REGISTRATION GRANTED UNDER S. 12A OF THE ACT CANNOT BE WITHDRAWN OR CANCELLED BY THE CIT BY INVOKING THE PROVISIONS OF S. 12AA(3) OF THE ACT. SEC. 12AA(3) PROVIDES THAT 'WHERE A TRUST OR AN INS TITUTION HAS BEEN GRANTED REGISTRATION UNDER CL. (B) OF SUB-S. (1) AN D SUBSEQUENTLY THE CIT IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR I NSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION AS THE CASE MAY BE HE SHALL PASS A N ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTIT UTION'. A PLAIN READING OF THIS PROVISION SHOWS THAT S. 12AA EMPOWERS THE CIT TO GRANT THE REGISTRATION IN THOSE CASES WHERE THE ASSESSEE APPL IES FOR SUCH REGISTRATION UNDER SUB-S. (1) OF S. 12AA. SEC. 12AA (1) ON THE OTHER HAND PROVIDES THAT THE CIT ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CL. (A) [OR CL. (AA ) OF SUB-S. (1)] OF S. 12A SHALL(A) CALL FOR SUCH DOCUMENTS OR INFORMATION FR OM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATI SFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTI ON AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEH ALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST O R INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES (I) HE SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION OR (II) SHALL IF HE IS NOT SO SATISFIED PASS AN ORDER IN WRITING REFUSING TO REGISTER THE T RUST OR INSTITUTION AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLICANT . A REGISTRATION UNDER S. 12AA(1)(B) IS TO BE GRANTED WHERE CIT IS SATISFIED ABOUT THE OBJECTS AND THE GENUINENESS OF THE ACTIVITIES CARRIED ON BY THE APPLICANT. SEC. 12AA(3) EMPOWERS THE CIT TO CANCEL SUCH REGISTRATIO N IF HE IS SATISFIED THAT ACTIVITIES OF TRUST OR INSTITUTION ARE NOT GEN UINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE T RUST OR INSTITUTION AS THE CASE MAY BE. THE COMBINED READING OF BOTH THE S ECTIONS MAKES IT CLEAR THAT REGISTRATION CAN BE CANCELLED ONLY IN TH OSE CASES WHERE THE REGISTRATION HAS BEEN GRANTED UNDER SUB-S. (1B) OF S. 12AA. THIS SECTION NOWHERE EMPOWERS THE CIT TO CANCEL OR WITHDRAW THE REGISTRATION GRANTED UNDER S. 12A. IN THE ABSENCE OF SUCH POWER IN OUR OPINION THE REGISTRATION GRANTED UNDER S. 12A CANNOT BE WITHDRA WN OR CANCELLED. THIS VIEW IS SUPPORTED BY THE DECISION OF THE TRIBUNAL I N THE CASE OF KAILASHANAND MISSION TRUST VS. ASSTT. CIT (SUPRA) W HEREIN IT WAS HELD THAT S. 12A DOES NOT EMPOWER THE CIT TO WITHDRAW OR CANCEL THE REGISTRATION GRANTED UNDER THE SECTION. THIS VIEW W AS AGAIN TAKEN BY THE TRIBUNAL IN VARIOUS CASES RELIED UPON BY THE LEARNE D COUNSEL FOR THE ASSESSEE. HON BLE UTTARANCHAL HIGH COURT IN THE CASE OF WELHAM BOYS I.T.A NO.5680/ MUM/2009 3 SCHOOL SOCIETY (SUPRA) HAS ALSO HELD THAT THE CIT C ANNOT WITHDRAW OR CANCEL A REGISTRATION GRANTED UNDER S. 12A AS HE C ANNOT BE INFERRED TO HAVE ANY IMPLIED OR INHERENT POWER TO CANCEL THE RE GISTRATION. WE MAY ALSO ADD THAT PROVISIONS OF SUB-S. (3) OF S. 12AA W ERE BROUGHT ON THE STATUTE BOOK W.E.F. 1ST OCT. 2004 BY FINANCE (NO. 2) ACT 2004. THE PROVISIONS OF THIS SECTION ARE SUBSTANTIVE IN NATUR E SINCE THE SAME AFFECT THE VALUABLE RIGHT OF THE ASSESSEE AND THEREFORE I N OUR OPINION ARE PROSPECTIVE AND CANNOT BE GIVEN RETROSPECTIVE EFFEC T IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILL INC. & ORS. VS. CIT (2005) 199 CTR (SC) 320 : (2005) 279 ITR 310 (SC) WHEREIN IT HAS BEEN HELD THAT EVEN THE PROVISI ONS OF AN EXPLANATION CANNOT BE GIVEN RETROSPECTIVE EFFECT UNLESS SPECIFI CALLY PROVIDED BY THE STATUTE. IT IS NOT THE CASE OF THE REVENUE THAT LEG ISLATURE SPECIFICALLY PROVIDED THE RETROSPECTIVE EFFECT OF SUCH PROVISION . THEREFORE IT IS ALSO TO BE HELD THAT EVEN ON THIS GROUND THE PROVISIONS OF S. 12AA(3) CANNOT BE APPLIED TO THE REGISTRATION GRANTED UNDER S. 12A OF THE ACT. WE ALSO FIND THAT THE ISSUE IN APPEAL IS SQUARELY COVERED B Y A NUMBER OF DECISIONS ON THIS ISSUE BY VARIOUS CO-ORDINATE BENC HES AND THERE IS NO CONTRARY DECISION AVAILABLE SO FAR AS THIS ASPECT OF THE MATTER IS CONCERNED. 9. LEARNED DEPARTMENTAL REPRESENTATIVE HAS STATED T HAT SUCH A VIEW WILL MAKE THE PROVISIONS OF THE ACT UNWORKABLE AND THAT THE ONLY WAY TO MAKE THESE PROVISIONS WORKABLE IS TO CONSTRUE THE S COPE OF S. 12AA(3) IN SUCH A MANNER SO AS TO EXTEND ITS SCOPE ALSO TO THE REGISTRATIONS GRANTED UNDER S. 12A. WE ARE THUS URGED TO SUPPLANT THE LAW BY SUPPLYING A CASUS OMISSUS. WE ARE NOT PERSUADED BY THIS PLEA EITHER. CASUS OMISSUS WHICH BROADLY REFERS TO THE PRINCIPLE THAT A MATTER WHICH HAS NOT BEEN PROVIDED IN THE STATUTE BUT SHOULD HAVE BEEN THERE CANNOT BE SUPPLIED BY US AS TO DO SO WILL BE CLEARLY BEYOND THE CALL AND SCOPE OF OUR DUTY WHICH IS ONLY TO INTERPRET THE LAW AS IT EXISTS. HO N BLE SUPREME COURT IN THE CASE OF SMT. TARULATA SHYAM & ORS. VS. CIT 1977 CTR (SC) 275 : (1977) 108 ITR 345 (SC) AT P. 356 HAS OBSERVED AS F OLLOWS : 'WE HAVE GIVEN ANXIOUS THOUGHT TO THE PERSUASIVE ARGUMENTS.. . (WHICH) IF ACCEPTED WILL CERTAINLY SOFTEN THE RIGOUR OF THIS EXTREMELY DRASTIC PROVISION AND BRING IT MORE IN CONFORMITY WITH LOGI C AND EQUITY. BUT THE LANGUAGE OF SECTIONS.... IS CLEAR AND UNAMBIGUOUS. THERE IS NO SCOPE FOR IMPORTING INTO THE STATUTE THE WORDS WHICH ARE NOT THERE. SUCH INTERPRETATION WOULD BE NOT TO CONSTRUE BUT TO AM END THE STATUTE. EVEN IF THERE BE A CASUS OMISSUS THE DEFECT CAN BE REME DIED ONLY BY LEGISLATION AND NOT BY JUDICIAL INTERPRETATION....' . THIS WAS CLEARLY A CASE IN WHICH SUPPLYING A CASUS OMISSUS WOULD HAVE SOFTENED THE RIGOUR OF LAW FOR THE ASSESSEE AND YET HON BLE SUPREME COURT D ECLINED TO SUPPLY THE CASUS OMISSUS. IN A SITUATION LIKE THE ONE THAT WE ARE IN SEISIN OF WHERE ASSESSEE WOULD STAND TO A DISADVANTAGE AS A RESULT OF CASUS OMISSUS BEING SUPPLIED AT LEAST THE SAME IF NOT MORE STRI NGENT YARDSTICKS MUST I.T.A NO.5680/ MUM/2009 4 APPLY. WHEN THE HON BLE SUPREME COURT DECLINES TO SUPPLY CASUS OMISSUS EVEN IN A CASE WHERE THEIR LORDSHIPS HAVE N OTED THAT THE PROVISIONS IN QUESTION ARE EXTREMELY DRASTIC AND SU PPLYING A CASUS OMISSUS WILL MAKE THESE PROVISIONS MORE IN CONFORMI TY WITH LOGIC AND EQUITY IT IS INDEED FUTILE TO SUGGEST THAT SUCH A CASUS OMISSUS CAN BE SUPPLIED BY THIS TRIBUNAL. WE ARE NOT INCLINED TO A CCEPT THE PLEA CANVASSED BY THE LEARNED DEPARTMENTAL REPRESENTATIV E TO THE EFFECT THAT WE SHOULD INTERPRET THE SCOPE OF S. 12AA(3) SO AS T O GIVE IT AN EXTENDED MEANING BEYOND WHAT IS LAID DOWN BY SPECIFIC WORDS OF THE STATUTE. 3. SUBSEQUENT TO THE ORDER SO PASSED BY THE CO-ORDI NATE BENCH SECTION 12AA(3) HAS BEEN AMENDED SO AS TO INCLUDE REGISTRATION GRAN TED U/S.12A AS WELL. HOWEVER THE AMENDMENT SO MADE IS EFFECTIVE FROM 1 ST JUNE 2010 ONLY. 4. WHEN THE ABOVE FACTS WERE POINTED OUT TO LEARNED DEPARTMENTAL REPRESENTATIVE SHE SUBMITTED THAT THE AMENDMENT IN SECTION 12AA(3) SHOULD BE TREATED AS CLARIFICATORY IN NATURE AND ACCORDINGL Y WE MUST PROCEED ON THE BASIS THAT THE COMMISSIONERS POWER UNDER SECTION 12AA(3) EXTE NDED TO CANCELLATION OF REGISTRATION GRANTED U/S.12A AS WELL. IN ADDITION TO THIS ARGUMENT SHE RELIED UPON THE STAND OF THE LEARNED COMMISSIONER AND URGED US TO CONFIRM THE SAME. 5. WE SEE MERITS IN THE SUBMISSIONS OF THE LEARNED COUNSEL. THE ISSUE WITH REGARD TO THE POWERS OF THE COMMISSIONER TO CANCEL REGISTRATION GRANTED U/S.132A IS COVERED BY DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF BHARATI VIDYAPEETH (SUPRA). THERE IS NO DISPUTE THAT THE IMPUGNED ORD ER IS PASSED BEFORE THE AMENDMENT IN SECTION 12AA(3) TO OVERCOME THE STAND SO TAKEN BY INTER ALIA THE CO- ORDINATE BENCHES CAME INTO FORCE. WHILE AMENDMENT CAME INTO FORCE ON 1.6.20`10 THE IMPUGNED ORDER WAS PASSED ON 13.8.2009. WE ARE ALSO OF THE CONSIDERED VIEW THAT THE AMENDMENT STATED TO BE EFFECTIVE FROM 1.6 .2010 UNDER THE PROVISIONS OF LAW CANNOT BE APPLIED RETROSPECTIVELY. IT IS ONLY PROS PECTIVE IN EFFECT. IN VIEW OF ALL THESE FACTOR AS ALSO BEARING IN MIND ENTIRETY OF THE CASE WE DEEM IT FIT AND PROPER TO SET ASIDE THE IMPUGNED CANCELLATION ORDER AS DEVOID OF JURISDICTION. THE CANCELLATION ORDER IS QUASHED. I.T.A NO.5680/ MUM/2009 5 6. AS IMPUGNED CANCELLATION ORDER IS HELD TO BE DEV OID OF JURISDICTION IT IS NOT REALLY NECESSARY TO DEAL WITH OTHER GRIEVANCES OF T HE ASSESSEE DEALING WITH MERITS OR DEMERITS OF IMPUGNED CANCELLATION ORDER. THESE GRI EVANCES ARE RENDERED ACADEMIC. 7. IN THE RESULT THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY 2011 SD/- (R.S.PADVEKAR ) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 24 TH FEBRUARY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE DIRECTOR OF INCOME TAX (EXEMPTIONS) MUMBAI. 4. DEPARTMENTAL REPRESENTATIVE BENCH F MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI I.T.A NO.5680/ MUM/2009 6 I.T.A NO.5680/ MUM/2009 7