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2016 (6) TMI 499 - AT - Income TaxRegistration U/s 12A cancelled - profit motive / commercial activity - The assessee claimed that even if there are certain substantial amendments in object, the assessee deserved registration continue on the ground that the activities are yet charitable in nature - Held that - The amended objects were not voluntary change. The assessee has to follow the said laws related to sports activities. The comparison given by the ld CIT in his order dated 28/03/2013 does not show any fundamental deviation from the original charitable activities to non-charitable activities. The assessee s object to promote the cricket in the State by providing/involving various activities at the district level to state level through coaching provided by coaches, ground and facilities etc. Therefore, the assessee s activities are charitable. At the time of registration, the ld CIT has to consider Section 12AA(3) and he has to consider two conditions for rejection of registration granted (i) the activities of the trust are not genuine, (ii) are not being carried out in accordance with the object of the trust as the case may be. The ld CIT has not found any infirmity in the activities carried out by the RCA as non- genuine or not being carried out as per object of the trust. It is also a fact that the game of cricket become very potential with reference to revenue compared to other games, therefore, the revenue generated by the RCA are substantial but this ground cannot be used to cancel the registration granted by the ld CIT as predominant object of the trust is charitable and substantial revenue generated is incidental to the main object. If, the ld Assessing Officer found any violation in application of fund, he can make disallowance U/s 11 of the Act. Thus, we are of the considered view that the ld CIT was not right in withdrawing the registration granted U/s 12A of the Act. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of CIT under Section 12AA(3) of the Income Tax Act. 2. Substantial amendments in the constitution/main objects of the appellant. 3. Application of provisions of Section 12AA(3) of the Act. 4. Withdrawal and cancellation of registration granted under Section 12A(a). 5. Application of the proviso below Section 2(15) of the Act from A.Y. 2009-10 onwards. 6. Nature of activities of the appellant trust—whether commercial or charitable. 7. Adverse findings contrary to the facts and material on record. 8. Adverse comments for earlier years beyond the scope of Section 12AA(3). Issue-wise Detailed Analysis: 1. Jurisdiction of CIT under Section 12AA(3): The appellant argued that the CIT lacked jurisdiction to decide the issue under Section 12AA(3) as the ITAT had directed the CIT to examine the facts under Section 12AA(1) with a view to grant registration afresh. The Tribunal noted that the CIT's actions were beyond the scope of the directions given by the ITAT, and thus, the order was bad in law. 2. Substantial Amendments in Constitution/Main Objects: The CIT observed that the objects of the appellant had undergone changes in 1999 and 2005, and the appellant failed to seek fresh registration based on the amended memorandum and rules. The Tribunal compared the objects as per the 1999 and 2005 memoranda and found that the amendments did not fundamentally deviate from the original charitable activities. The amendments were necessitated by changes in the Rajasthan Sports Act, 2005, and were not voluntary. 3. Application of Provisions of Section 12AA(3): The CIT invoked Section 12AA(3) to withdraw the registration, citing substantial amendments and commercial nature of activities. The Tribunal held that the CIT's invocation of Section 12AA(3) was not justified as the amendments did not alter the charitable nature of the appellant's activities. 4. Withdrawal and Cancellation of Registration under Section 12A(a): The CIT withdrew the registration granted under Section 12A(a) from A.Y. 2005-06 onwards. The Tribunal found that the CIT's decision was not based on any infirmity in the activities carried out by the appellant. The predominant object of the trust remained charitable, and substantial revenue generated was incidental to the main object. 5. Application of Proviso below Section 2(15) from A.Y. 2009-10 Onwards: The CIT applied the amended provisions of Section 2(15) from A.Y. 2009-10 onwards, arguing that the appellant's activities were commercial. The Tribunal disagreed, noting that the appellant's activities were charitable and any revenue generated was incidental to the main charitable object. 6. Nature of Activities—Commercial or Charitable: The CIT held that the appellant's activities were commercial and profit-making. The Tribunal found that the appellant's activities were charitable and any commercial elements were incidental. The Tribunal emphasized that the predominant object was charitable, and substantial revenue generation did not alter this fact. 7. Adverse Findings Contrary to Facts and Material on Record: The appellant argued that the CIT's findings were contrary to the facts and material on record. The Tribunal agreed, noting that the CIT's conclusions were not supported by the evidence presented. 8. Adverse Comments for Earlier Years Beyond Scope of Section 12AA(3): The CIT made adverse comments for earlier years, which the appellant argued were beyond the scope of Section 12AA(3). The Tribunal agreed, noting that such comments were unwarranted and without jurisdiction. Conclusion: The Tribunal allowed the appeal, holding that the CIT was not justified in withdrawing the registration granted under Section 12A. The appellant's activities were found to be charitable, and any revenue generated was incidental to the main object. The Tribunal emphasized that the CIT's actions were beyond the scope of the directions given by the ITAT and not supported by the evidence on record.
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