Point of Law:
Event of cancellation of registration of a Trust in exercise of powers under sub-section (3) of section 12AA of the Act would arise when 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. Mere breach of the provisions contained in section 11(1)(d) or 13(1)(c) per se would not fall within the either of the two grounds available to the Commissioner to cancel the registration viz. the activity of the Trust not being genuine or not being carried out in accordance with the objects of the Trust.

JUDGMENT :

J.B. Pardiwala, J.

1. This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, 'the Act 1961') is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, 'A' Bench, Ahmedabad, dated 20th January 2012, in the ITA No.36/Ahd/2011.

2. The facts giving rise to this Tax Appeal may be summarised as under :

3. The respondent-assessee is engaged in the activity of administering, controlling and managing the minor ports in the State of Gujarat. The respondent-assessee is registered under Section 12AA of the Act 1961 w.e.f. 1st April 2002. The Commissioner of Income Tax, Gandhinagar, vide order dated 7th December 2010, cancelled the registration of the respondent-assessee as a charitable institution. The order passed by the Commissioner of Income Tax reads thus :

“2. The activity of the assessee is related to levying various fees of charges from the users of the ports under various heads like (1) Port Infrastructure facilities (2) Marine Services (3) Clearing, forwarding and Harboring (4) Storage Area and Land Rental (5) Equipment & Harbor Craft Rental (6) License Fees (7) Income from other Port Services. Similarly, the assessee used to keep payment to various bodies and Govt. of Gujarat by way of fees, charges etc. The description of receipts and expenditure incurred by the assessee shows that the assessee runs its activities in a professional and business like manner from these activities. It is also clear that the assessee derives profit out of various business activities. Thus, there being no free services or utilities to public, the cost of the entire activities being fully recouped, there was no charity meant for public within the meaning of section 2(15) of the IT Act, 1961. As the activities carried out by the Gujarat Maritime Board were more of commercial nature resulting in commercial income, a show cause notice u/s. 12AA(3) of the IT Act was issued vide letter dated 3.9.2010 and 14.10.2010 of this office, proposing to cancel the registration accorded u/s.12AA of the IT Act on 15.6.2005.

3. By the aforesaid show cause notices, amended provisions of section 2(15) of the IT Act by the Amendment Act, 2010 with retrospective effect from 1.4.2008 are specifically pointed out and it was brought to the notice of the assessee that the assessee cease to be a charitable organization which was earlier covered under the forth limb of the charitable purpose i.e. advancement of any other object of general public utility as the aggregate value of receipts which were 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 income from such activity, exceeds the prescribed minimum limit of Rs.10 lakhs for enabling status of charitable institution.

4. It has been found that the assessee while furnishing return of income for A.Y. 2009-10 appended the notes as under :

“The GMB has been granted registration u/s.12AA of the IT Act by the Hon'ble CIT Gandhinagar vide order dt. 15.6.2005 and the computation of income has been arrived at by treating its income as exempt u/s.11 of the IT Act. The status of charitable trust/entity has been claimed by GMB as it holds firm and considered view that inspite of insertion of proviso to Section 2(15) of the IT Act, 1961 by Finance Act 2008 it continues to be as such due to the fundamental nature of its activities and subsisting registration certificate which has not been cancelled by the IT Deptt. by having recourse to section 12AA(3) of the IT Act 1961. GMB has been advised in a legal opinion dt. 29.9.2009 given by a Senior Advocate of Supreme Court of India, it continues to be a charitable trust/entity in view of the above subsisting registration certificate.”

5. In addition to the above, the following claim has been made while filing return of income.