ITAT Grants A Big Relief to TATA Trust by Allowing To Voluntarily Surrender its Registration

ITAT Grants A Big Relief to TATA Trust by Allowing To Voluntarily Surrender its Registration

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, on 24 March 2021, in the case titled RD Tata Trust (Appellant) v. Principal Commissioner of Income Tax (Respondent) has given a relief to Tata Trust by allowing it to voluntarily surrender its' registration, with effect from 20 March 2015.

The ITAT bench comprising of President Justice PP Bhatt and Vice President Pramod Kumar heard the appeal filed by Tata Trust wherein it observed that "The order of cancellation of registration granted to the assessee under Section 12A must be held to be effective from the date on which the hearing on first show-cause notice was concluded and the show-cause notice issued by the Commissioner was formally acquiesced by the assessee in the said hearing, as without disposing of the said matter, the Commissioner, or his successors, could not have started other parallel proceedings for cancellation of registration obtained under Section 12A."

The tax department in 2019 noted that the act of surrendering the registration was a forced move after six Trusts were found in violation of provisions of the Income Tax rules.

The Appellate Tribunal further recalled its order in a similar case in Navajbai Ratan Tata Trust, wherein it was observed that "The registration having been "obtained" under section 12A was in the nature of a benefit to the assessee, and it was, therefore, entirely at the option of the assessee."

The ITAT added that "An assessee unwilling to avail the "benefit" of registration "obtained" under Section 12A cannot be, directly or indirectly and by actions or by inactions, compelled by the revenue authorities, to continue with the said registration "obtained' by the assessee, particularly when it pertained to the registration obtained in a period prior to the insertion of Section 12AA."

The Appellate Tribunal granted a big relief to six Tata trusts facing a possible tax demand of Rs. 20,000 crore after the order of the tax department regarding the cancellation of registration.

The ITAT said tax authorities ought to have accepted the voluntary action by the trusts to surrender their registration in March 2015, the trusts essentially gave up their tax-exempt status.

It concluded that the cancellation of registration under Section 12A in the instant matter must be held to be effective from 20 March 2015.