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TMI Blog2013 (11) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act – Reliance is placed upon the Hon'ble Madras High Court case of New Life in Christ Evangelistic Association V CIT reported in [1998 (8) TMI 8 - MADRAS High Court], wherein it has been held that at the stage of considering application for registration u/s 12AA, it is not necessary to consider how the applicant would be able to claim exemption u/s 11 or section 12 of the Act. - Decided in favor of Assessee. - ITA No.551/CHD/2009 - - - Dated:- 18-4-2013 - N K Saini And Hari Om Maratha, JJ. For the Appellant : Shri Tej Mohan Singh For the Respondent : Shri Amarveer Singh ORDER:- PER : Hari Om Maratha This appeal of the applicant-society is directed against the order of ld. CIT(Administration)-II, Chandigarh, dated 26.03.2009, vide which he has refused to grant certificate to it u/s 12AA of the Income-tax Act, 1961 ('the Act' for short). 2. Briefly stated, the facts of the case are that the assessee is a society with the name Professional Golf Tour of India (in short PGTI), which is registered under the Society Registration Act, 1860. The founder-members of this society are professional golfers. Earlier, this society applied for registration u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted at the time of hearing. 5. The learned CIT has erred in law and on the facts of the case in forming an opinion that the consultancy paid to Sh Ajay Gupta is hit by provisions of section 13(2)(C)/ Sec 13(3) of the Income Tax Act, 1961. 6. The learned CIT is not justified in mentioning that the PGTI has been formed to protect the best interest of professional golfers of India and abroad when in fact the PGTI had been formed to protect best interest of professional golf in India and abroad. 7. The learned CT has erred in law and on the facts of the case in not verifying the activities carried out by the appellant since inception till date. He has formed his biased opinion on his own presumptions and surmises that board circular no. 395 is not applicable to PGTI. 5. It was argued by ld. AR that the ld. Commissioner has wrongly formed his opinion that membership of the society is restricted to Professional Golfers resident in India and overseas. He argued that the membership of the society is available to all and sundry from any strata of the society in general. He further argued that it is wrong to say that the activities of the society are of commercial nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nature. We extract all the objects and aims of the society which are contained in clause (3) of its Memo of Association as under : (i) To promote interest in the game of Golf in general and professional golf in particular. (ii) To foster and maintain a high standard of professional golf in India. (iii) To promote and arrange for the conduct of professional Golf Tournaments In India, to offer and pay Prize Money and Prizes to Winners, Runners Up and others whose performance in such Events merits reward to advertise such Events and to raise funds therefore from donors, sponsors, advertise television rights and all or any other legitimate means. (iv) To promote and arrange Golf Matches and Competitions in India and internationally and elsewhere and to bear all necessary expenditure in connection therewith. (v) To select teams of Professional Golfers to represent India in International matches and to bear/find sponsor to bear the cost of their travel, board and lodging and expenses incidental to their participation. (vi) To prescribe and interpret rules relating to the conduct of professional Golf and pro-tournaments (vii) To assist in the layout an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the organization, establishment, development, designation, and/or commercialization of golf events, tournaments and competitions within the region including but not limited to the organization, establishment, management and administration of related sporting, social and entertainment activities, and to maintain direct control over these golf events, tournaments, competitions, and related sporting, social and entertainment activities. (xxii) To carry on the business of a holding and investment Association and to undertake and transact all kinds of investment business. As an investment Association to acquire and hold either in the name of the Association or in that of any nominee-any shares, stock, debentures stock, bonds, notes, obligations, or securities .by original subscription, contract, tender, purchase, exchange, underwriting, participation in syndicates or otherwise, and whether or not fully paid up, and to subscribe for the same subject to such terms and conditions (if any) as may be thought fit. (xxiii) To purchase or otherwise acquire patents, patent rights, rights of analogous character, brevets d'invention, concessions, licenses and the like conferring any excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that is why the ld. Commissioner has misconceived that this came is not meant for public at large. At the stage of consideration of registration u/s 12AA in which the objects are primarily to be looked into and of course its activities can also be examined with a view to ascertain if it is really pursuing its objects or not. In our considered opinion, there is nothing on record which suggests that the assessee is not pursuing charitable purpose. The expression charitable purpose is defined in section 2(15) of the Act to include relief of the poor, education, medical relief and advancement of any other object of public utility. The Board has advised that promotion of sports and games can be considered as charitable purpose . The Board has also advised that the advancement of any object which is beneficial to the public or a section of the public as distinguished from an individual or group of individuals would amount to an object of general public utility. Therefore, promotion of sports and games has to be considered as charitable purpose within the meaning of section 2(15) of the Act. The assessee is a society registered under the Societies Registration Act and it is formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, then there is no reason to refuse registration u/s 12AA of the Act. The Hon'ble Madras High Court while deciding case of New Life in Christ Evangelistic Association V CIT reported in 246 ITR 532 (Mad), has held that at the stage of considering application for registration u/s 12AA, it is not necessary to consider how the applicant would be able to claim exemption u/s 11 or section 12 of the Act. 9. The Society had a surplus of Rs.12.48 lacs out of which 85% i.e. Rs.10.61 lacs were required to be applied towards promotion of golf. A perusal of the balance-sheet enclosed at page No.13 of assessee's Paper Book reveals that the sponsorship fee to the tune of Rs.8,95,106/- was yet to be received as on the last day of financial year. This amount as per section 11(1) is deemed to be applied in the current year and shall be actually applied in the year of its receipt. In fact the assessee filed application with the AO as required by provisions of section 11(2) of the Act for the accumulation of un-utilized amount and in this regard, the observation of ld. Commissioner is incorrect. The society filed form No.10 during the course of assessment/appraisal of the application which is suffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y under two conditions: (i) the activities of the trust or institution are not genuine, or ( ) the activities of the trust or institution are not being carried out in accordance with the objects of the trust or institution. Except for under these two conditions, the Commissioner/Director of Income tax cannot cancel the registration which has already been granted earlier. Thus, registration already granted can be cancelled if two conditions under section 12AA(3) are satisfied and not otherwise. From the perusal of the impugned order, it is seen that nowhere the Director of Income tax has recorded any satisfaction that the activities of the assessee are not genuine or are not being carried out in accordance with the objects on which it was granted registration under section 12AA. In absence of such satisfaction, registration under section 12AA cannot be cancelled. Section 12AA(3) does not extend to re-examination of the 'objects' of the trust or institution once registration has been granted under section 12AA. It becomes fait accompli, unless twin conditions provided under sub-section (3) of section 12AA are satisfied. The only reason for cancellation of registration in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it would be seen that none of assessee's receipts can be said to be arising or accruing from the activities which have been carried out for the purpose of business or in the nature of trade or commerce. All its activities are towards promotion of game of golf and other ancillary activities carried are only incidental to the said game only. Any transaction which is incidental or ancillary towards fulfilment of object of other general public utility will not normally amount to business, trade or commerce, unless there is some intention to carry on business, trade or commerce on a permanent basis or with a reasonable continuity. There is no evidence and material on record to show that the activities of the assessee were done on sound and recognized business principle or have been pursuing its business activities with reasonable continuity. If there is some incidental or ancillary receipts during the course of carrying out its promotional activity of game of golf or for maintenance of its club and the facilities, it cannot be held to be in the nature of business, trade or commerce. From the perusal of income and expenditure account, it is seen that the expenditures of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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