12AA Registration can’t be revoked merely because Trust exceeded limit prescribed u/s 2(15) in One Year: ITAT [Read Order]

The Mumbai ITAT recently held that merely because in one year the income of assessee- Trust exceeded the limit prescribed under section 2(15), by itself could not warrant the cancellation of registration of Trust under section 12AA of the Income Tax Act, 1961.

The bench comprising Pawan Singh, Judicial member, and B.R. Baskaran, Accountant member were ruled so while hearing the case between M/s Mumbai Port Trust versus DIT (Exemption).

The issue in the instant case was regarding the cancellation of registration of Assessee-trust under section 12AA by DIT (Exemption) was restored by the order of tribunal on appeal. Later DIT (Exemptions) on the proposal received from ADIT (Exemptions) Mumbai, for cancelling the registration on the ground that the assessee has carried activities in the nature of trade, commerce or business etc. and gross receipts therefrom are in excess of Rs. 10 lakh.

In return, the Assessee contended that provision of section 2(15) implied that only the income from Business & Profession is not eligible for exemption under section 11 of the Act, whereas the Income from Other Sources is eligible for exemption under section 11.

Aggrieved by the order of DIT (E), the assessee has filed the present appeal before this tribunal and bench heard both the parties’ contention and perused the CBDT Circular no 21/2016 regarding cancellation/withdrawal of registration wherein crystal clear mentioning that temporary excess of receipts beyond the specified cut-off in one year may not necessarily be the outcome of alteration in the very nature of the activities of the trust or institution requiring cancellation of registration already granted to the trust or institution.

The bench also cited various court orders regarding the same and observed that “The status of registration under section 12AA will not be affected as recognized under sub-section (8) of section 13, on the availability of receipts in excess of the prescribed limit. The assessee will be disentitled for exemption under section 11 if the income of the assessee from the activities is hit by the proviso to section 2(15) in any Assessment Year”.