Author: Khushi J Prajapati
The ITAT has held the cancellation of the trust’s registration under section 12A ruling that trust activities deviated from its stated objectives and the trust failed to meet the criteria for a stay.
ITAT examined the lawfulness and power of Principal Commissioner of Income Tax (PCIT), Central-2 located in Delhi through an order dated 30th September, 2023 which had annulled REGISTRATION of LIFE Trust under Section 12A of IncomeTax Act. The assessee contested PCIT’s jurisdiction insisting on improper transfer of jurisdiction and also stated that cancellation order cannot apply retrospectively.
They additionally argued that their operations conformed with their stated goals while citing an analogous case where a stay was granted. The ITAT also pointed out that Board Notification No. 70/2014 negated these jurisdiction arguments put forth by the assessment since it provided PCITs with jurisdiction over cases assigned to their subordinate Assessing Officers.
The tribunal observed that earlier pronouncements including the Young Indian case supported the authority held by PCIT to cancel registrations retrospectively if the trust’s action contradicted its objectives.
In conclusion, the ITAT determined that the taxpayer did not satisfy the essential prerequisites for a stay since they were not able to demonstrate a prima facie case in their favor. Thus, the tribunal denied the stay application and supported the PCIT’s order to revoke the registration.
Facts
Delhi-based NGO, LIFE Trust, had its registration under Section 12A of the Income Tax Act canceled by the PCIT, Central-2, Delhi. On September 30, 2023, a cancellation order was issued. The analysis of this decision is based on the survey that was conducted by the Income Tax Department. According to the findings from their investigations, these activities are not aligned with their original goals and objectives. For example, it was revealed that it engaged Earth Justice and other international organizations in opposing Indian coal mines and thermal power projects.
Reasons For Registration Cancellation
The PCIT in his order discussed about as to how LIFE is working and its relationship with different entities and specially Earth Justice, an organization situated in USA i.e. outside India to show that the assessee trust was not working as per the objects of the Income Tax Act.
Activities of LIFE reflect that it is making all efforts to stop coal based Indian Thermal Power Plants (TPPs) and coal mine projects. It is involved in seeking report on coal mines, TPPs and filing cases in different Indian courts. The PCIT noted that they were able to stop various mines and power projects.
The PCIT noted that the LIFE and its members were aware of its illegal activities and their results and they were afraid of being caught. In one email dated 21.11.2016 Mr. Ritwick (ritwick@lifeindia.net.in) expressed to Mr. Matin Wagnerm of Earth Justice at his mail i.e. wagner@earthjustice.org) that they will be going to come under Indian intelligence organization’ scanner. Mail is; ‘My view is that Earth Justice is likely to be put under the scanner of Indian intelligence organization just like Sierra Club and Greenpeace. As of now the Indian Government is not much aware of Earth Justice, however, this may change if they find that there is a positive response to the call given by Earth Justice. This is my personal opinion. The actual reaction may be different. However, the probability of the above reaction is quite high.
LIFE trust is being used as an instrument by Earth Justice to stall the coal mines and Thermal Power Projects. For these purposes, Earth Justice is making strategies; -engaging an international treaty body; applying an international human rights strategy; such as engaging one or more UN special rapporteurs; using one of the complaint process under the international financial institutions; pressurizing private banks or investors, strategies to bring pressure from foreign governments etc.
Earth Justice is also involved in targeting Indian entities undertaking projects outside India.
In litigation matters drafts are being shared by LIFE to Earth Justice for vetting and suggestions. The draft of replies to be filed before various authorities in India are forwarded by LIFE to Earth Justice for their vetting and are filled before the said authority only after vetting by Earth Justice. LIFE trust, Earth Justice, E-law, Green Peace were having active coordination on furthering litigation in India on TPPs and coal projects. The PCIT noted that Earth Justice is not litigant in India however, it is being updated on legal status of different cases related to coal mines/TPPs by LIFE.
LIFE and Earth Justice are closely linked entities. In their relationship, Earth Justice seems to be master and LIFE is providing services to its master. LIFE is working at the behest of Earth Justice. Earth Justice is guiding LIFE what to do and what not to do.
LIFE’s (Assessee) Contentions
In the Stay Petition, the assessee submitted that Legal Initiative for Forest and Environment Trust is a Charitable organization registered in Delhi vide Trust Deed registered on 27.05.2008, and was working for environmental causes across India. The work of the assessee in safeguarding the environment has been recognized both nationally and globally. In 2021, the assessee was awarded the ‘Right Livelihood award’, also known as the ‘Alternate Nobel Prize’, at Stockholm, Sweden. The assessee trust has always functioned with a very high degree of probity and transparency. The assessee trust had duly filed its audit returns with utmost transparency and accountability.
The order dated 30.09.2023 was illegal and ought to be set-aside for lack of jurisdiction and the registration could not have been cancelled with retrospective effect unless the statute expressly provided the same. It was submitted that the power under Section 12AB(4) of the Act can only be exercised by the Commissioner or Pr. Commissioner of Income Tax, as the case may be, appointed in this behalf by the Board in terms of Rule 17A(5) of the Income Tax Rules, 1962. In this regard, Central Board of Direct Tax (CBDT) vide its Notification No. 52/2014 dated 22.10.2014 had created a specific jurisdiction on territorial basis in regard to the provisions generally dealing with claim of exemptions under Sections 10, 11, 12, 13A and 13B of the Act. In Delhi, such jurisdiction and the power to pass orders thereunder are vested with the Commissioner of Income Tax (Exemption), Delhi-2 by the said notification and therefore the order canceling the registration by the Pr. CIT, Central-2, New Delhi by assuming jurisdiction was prima facie bad in law and liable to be set- aside. Only the jurisdiction of the Assessing Officer of the assessee trust to conduct assessment in the case of the assessee trust was transferred and not the jurisdiction of the prescribed authority for grant or revocation of registration under Section 12A/12AA/12AB.
Conclusion
ITAT dismissed the appeal and held that the claim for exemption by the assessee on account of suffering irreparable loss and balance of convenience is also not satisfied because prima facie the facts on record suggest that the activities of the trust in stopping coal based Indian Thermal Power Plants and Coal Mine projects will cause irreparable loss to the nation rather than the assessee. Therefore, the assessee fails to satisfy the test of irreparable loss caused to it by the cancellation order dated 30.09.2023. Consequently, the balance of convenience is also not in favor of the assessee.
Case Details
Case Name – Legal Initiative for Forest & Environment (LIFE Trust) vs PCIT Central-2 Delhi
Court – Income Tax Appellate Tribunal Delhi Bench
ITAT Appeal No – SA NO 129/DEL/2024 (Arising out of ITA No 3241/Del/2023)
Judicial Members – Shri Kul Bharat & Shri Brajesh Kumar Singh Accountant Member
Date of Pronouncement – 09-08-2024