9911796707
TMI Blog2014 (12) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner erred in exercising his jurisdiction u/s 12AA(3) of the Act in the absence of any factual or legal justification. 3. In brief, the relevant facts can be summarized as follows. The assessee is constituted by a Memorandum of Association and registered under the Societies Registration Act, 1860 on 30th March, 1968. The assessee also obtained registration under the Bombay Public Trust Act, 1950 in 1977. Assessee was registered with the Commissioner of Income Tax, Pune u/s 12A(a) of the Act as a 'charitable institution' vide order dated 09.12.1991. The main objects of the appellant association, as revealed by the Memorandum of Association placed at pages 5 to 12 of the Paper Book, interalia, include promotion, development and control of the game of cricket and generally improve the standards of the game in the specified areas of the State of Maharashtra. The objects of the appellant are contained in clause 4 of the Memorandum of Association, and the same read as under :- "4. OBJECTS : The objects of the Association shall be as under :- (a) To encourage physical education, foster and maintain friendly and cordial relationship through sport tournaments and competitions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso was inserted, which implied that a 'charitable purpose' in the nature of "advancement of any other object of general public utility" shall no longer be considered as a 'charitable purpose' if it involves carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration irrespective of the nature of use or application or retention of income from such activity. According to the Commissioner, the activities of the assessee fell for consideration in the aforesaid prescription contained in the proviso to section 2(15) of the Act, as amended by the Finance Act, 2008. Subsequently, the impugned order reveals the Commissioner issued further notices in continuation on 09.08.2009, 17.12.2009, 30.12.2009, 11.01.2010, 27.07.2010 and 09.03.2012. In the course of hearings before him, the Commissioner also confronted the assessee that certain amendments to the objects clause after the grant of registration in 1991 were made by the assessee and not intimated to the Department and therefore on this count also assessee was show-caused as to why the regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Commissioner does not have unfettered powers to cancel the registration and that the cancellation can be effected only on the grounds specified in section 12AA(3) of the Act. In support of this proposition, reliance has been placed on the following decisions : (i) CIT vs. Sarvodaya Ilakkiya Pannai, (2012) 343 ITR 300 (Mad); (ii) CIT vs. Ved Niketan Dham, (2013) 219 taxmann.com 115 (P&H); and, (iii) Tamil Nadu Cricket Association vs. Director of Income Tax (Exemptions), (2013) 86 CCH 0212 (Mad). 8. It is sought to be canvassed that the alleged infringement of the amended section 2(15) of the Act has no relevance in the context of the grounds contained in section 12AA(3) of the Act for cancellation of registration. As per the appellant, the requirement as to whether objects of a trust or institution fall within the ambit of the amended section 2(15) of the Act is not a factor for cancellation or withdrawal of registration u/s 12AA(3) of the Act and in support reliance has been placed on the following decisions of the Tribunal:- (i) HP Government Energy Development Agency vs. CIT, (2010) 46 DTR 126 (Chad.); (ii) Vidarbha Cricket Association vs. CIT, ITA No.3/Nag/2010 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in the present case. 10. On the other hand, the learned CIT-DR has justified the action of the Commissioner to cancel the registration originally granted to the assessee on 09.12.1991 u/s 12A of the Act. According to her, over a period of time the object of promoting and developing the game of cricket has yielded to activities whereby assessee was promoting the game of cricket on commercial basis and in a manner which amounted to entertainment. In this context, reference has been made to the manner in which T-20 matches are conducted. According to her, the conduct of the game of cricket in the manner done by the assessee, and which has been pointed out by the Commissioner in the show-cause notice, namely, holding of tournaments of BCCI for which payments are received from BCCI, clearly offended the amended provisions of section 2(15) of the Act. The point made on behalf of the Revenue is that even if the activities of the assessee are for advancement of an object of general public utility, but they do not remain for 'charitable purpose' because of the disability contained in the first proviso to section 2(15) of the Act inserted by the Finance Act, 2008 w.e.f. assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of 'charitable purpose' as per section 2(15) of the Act. In contrast, at the time of cancelling of registration u/s 12AA(3) of the Act, the Commissioner has to satisfy himself only about the two conditions prescribed therein, namely, that the activities are not genuine or that the activities are not being carried out in accordance with the objects of the trust or institution, as the case may be. Pertinently, the satisfaction that the objects of the trust or institution are compliant with the definition of 'charitable purpose' contained in section 2(15) of the Act is not a condition prescribed in section 12AA(3) of the Act which envisages cancellation of registration; whereas, the same is one of the factors on which the Commissioner is required to be satisfied at the time of grant of registration. It is quite well understood that a statutory authority has no power, jurisdiction or discretion to go beyond the statutory provisions. In other words, no power can be assumed in the absence of any specific provision. On the basis of the aforesaid, it can be deduced that section 12AA(3) permits cancellation of registration granted to a trust or society only if the Commissioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haritable institution' u/s 12A of the Act on 09.12.1991. It is only on 07.08.2009 that a notice was issued by the Commissioner u/s 12AA(3) of the Act pointing out that assessee was promoting sport activity on a commercial basis by holding various tournaments of BCCI viz. Ranji Trophy Matches, World Cup Trial Matches, Twenty-Twenty Tournaments, etc. for which BCCI was making payments to assessee. According to the Commissioner, the aforesaid was a commercial activity so as to be hit by the proviso to section 2(15) of the Act as inserted by the Finance Act, 2008. The case of the Revenue rests on the amendment made to section 2(15) of the Act by insertion of the first proviso, which reads as under :- "2(15) charitable purpose includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons put-forth by the Commissioner in this case to cancel registration already granted to the assessee under section 12A of the Act. In this direction, we have carefully perused the impugned order, wherein the Commissioner has primarily examined the application of revised definition of charitable purpose under section 2(15) as amended by the Finance Act, 2008 with effect from 1.4.2009. The ultimate conclusion of the Commissioner in paragraph 17 of the impugned order is pertinent, which is reproduced as under: '17. In view of the amended provisions of sec.2(15), I is seen that assessee 's activities can no longer be regarded as charitable activities. Especially the proviso to sec. 2(15) is violated by assessee and hence, it cannot be regarded as a charitable society engaged in charitable purposes. I have duly considered the nature of activities, the sources of income, the activities on which expenditure was made, surplus generated existence of profit motive, commercial exploitation of assets, fees and charges collected, nature of other income and other activities and case law before coming to a final conclusion, the assessee Vidarbha Cricket Association cannot be held to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. However it would be open for the A.O. to consider the issues raised in the impugned order, if so advised, in the course of the relevant assessment proceedings." 18. Similar situation also arose before the Rajkot Bench of the Tribunal in the case of Saurashtra Cricket Association vs. CIT, (2013) 40 taxmann.com 527, wherein also the action of the Commissioner u/s 12AA(3) of the Act has been found to be untenable, and the relevant discussion is as under :- "16. Rival submissions were considered. Admittedly, in the present case, the Registration has been cancelled by CIT, Rajkot-2, Rajkot on the basis of amended provisions of Section 2(15) of the Income-tax Act, 1961; therefore we are of the considered opinion that the action taken by the ld CIT, Rajkot-2, Rajkot does not fall within the permissible limits of Section 12AA(3) of the Income-tax Act, 1961 and therefore, the impugned order is bad in law. Similar view is taken by the Ahmedabad "A" Bench of ITAT, Ahmedabad in the case of Gujarat Cricket Association (supra) and the ratio of the said judgment is squarely applicable to the facts of the present case also. With regard to the judgment of ITAT, Chennai "B" Bench in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd :- "32. Thus in contrast to Section 12AA(1)(b) of the Income Tax Act, 1961, where the grant of registration requires satisfaction about the objects of the trust as well as genuineness of the activities, for the cancellation of the registration under Section 12AA(3), all that it is insisted upon is the satisfaction as to whether the activities of the trust or institution are genuine or not and whether the activities are being carried on in accordance with the objects of the trust. Thus, even if the trust is a genuine one i.e., the objects are genuine, if the activities are not genuine and the same not being carried on in accordance with the objects of the trust, this will offer a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in Section 12AA(1) and 12AA(3) of the Act, as the case may be. 33. Registration of the trust under the Act, confers certain benefits from taxation under the provisions of the Act. The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly laid down und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s context, we have observed that the Commissioner is not empowered to examine the applicability of amended section 2(15) of the Act for the purposes of invoking his power of cancellation enshrined in section 12AA(3) of the Act. Our observation has to be understood in the context of the requirements of section 12AA(3) of the Act alone. The issue raised by the Commissioner is certainly relevant for examining assessee's claim of exemption under sections 11 and 12 of the Act in relation to impugned receipts which, in our opinion, can be a subject-matter of assessment proceedings before the Assessing Officer. It is for the Assessing Officer to take note of all the relevant aspects while considering claim of the assessee, if any, for exemption u/s 11 of the Act in relation to the impugned activities. Be that as it may, for the present it would suffice to hold that the Commissioner could not have cancelled the registration by invoking section 12AA(3) of the Act, by examining the applicability of section 2(15) of the Act as amended by the Finance Act, 2008 w.e.f. 01.04.2009. Thus, the aforesaid action of the Commissioner is held to be untenable. 22. Another factor which has been pressed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t opined that such changes were required to be examined by the Revenue authorities so as to enable the assessee to continue availing the benefits under sections 11, 12, and 13 of the Act. 24. In our considered opinion, it would be appropriate to deduce that merely because of an addition to the objects clause made without intimation to the Department, the registration cannot be ipso facto cancelled in terms of section 12AA(3) of the Act, unless a case is made out by the Commissioner that additional objects do not fit-in with the existing objects or that such activities are in-genuine. In other words, even where the assessee has made some additions to the objects clause post-registration u/s 12A, the Commissioner has to make out a case as to how does the two conditions contained in section 12AA(3) of the Act are met so as to justify cancellation of registration. In-fact, in the present case, such a finding of the Commissioner is conspicuous by its absence. Pertinently, the assessee had canvassed before the Commissioner that the additional objects also not envisage any activity different from those being carried out on the basis of existing objects. Accordingly, we are unable to upho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruct, operate and maintain the said stadium and other facilities." 26. In the background of the above changes in the objects clause, the plea of the assessee was that there is no change in the objects in the real sense. In-fact, it has been sought to be made out that the aforesaid clauses do not reflect objects of the assessee organization but are only means or powers to achieve the objects contained in the Memorandum of Association. In this context, a reference has been made to the judgement of the Hon'ble Bombay High Court in the case of Deccan Gymkhana (Oldest Trust) vs. CIT, 262 ITR 459 (Bom) and also the decision of the Ahmedabad Bench of the Tribunal in the case of DIT (Exemption) vs. N. H. Kapadia Education Trust vide ITA No.1321/Ahd/2011 dated 03.02.2012. Reliance has also been placed on the judgement of the Hon'ble Supreme Court in the case of CIT vs. Federation of Indian Chambers of Commerce and Industry, 130 ITR 186 wherein the Hon'ble Supreme Court has appreciated the distinction between the 'purpose' of a trust and the 'powers' conferred upon the trustee as incidental to carrying out the purpose. 27. On this aspect, the learned CIT-DR has referred to the ultimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee also contended that the facts in the present case are quite distinct from those in the case of BCCI (supra) and therefore the observations of the Mumbai Bench of the Tribunal have to be understood in that context. According to the assessee the amendments made to the Memorandum of Association of the BCCI were substantive as noted by the Tribunal. The changes noted in the BCCI (supra) included amendment to rules and regulations in order to promote commercial interests towards administration of IPL Championship League, etc., which obviously is not a situation in the present case. In the present case, the learned counsel specifically submitted that in the period under review assessee has not organized any IPL matches. We have considered the distinction brought out by the appellant and found force in the same. The amendments which have taken place in the Memorandum of Association of the assessee has been adverted to by us in the earlier paras. A perusal of the same does not show that any fundamental change has taken place in the objects undertaken by the assessee. Therefore, factually speaking, the observations of the Tribunal in the case of BCCI (supra) are not attracted in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of trade, commerce or business etc. (iii) In your case during the course of assessment proceedings you have submitted objects of the society constituted on 29.10.2004, whereas the registration u/s 12A was granted to your concern in the year 1991. The Assessing Officer has failed to examine as to whether there was any change in the objects and structure of the assessee and if so, whether such change has any direct bearing on taxability of income of the trust." 38. Pertinently, the Commissioner, after examining the record of proceedings, was of the view that the Assessing Officer had failed to examine two issues, namely, nature of receipts of Rs. 21,04,23,032/- being T.V. subsidy received from BCCI in the context of the amended definition of 'charitable purpose' in section 2(15) of the Act; and secondly, that whether there was any change of the objects/structure of the assessee and if so whether such changes had any direct bearing on the taxability of assessee's income. In sum and substance, the charge made by the Commissioner is that the Assessing Officer failed to enquire into the applicability of the amended provisions of section 2(15) of the Act with respect to the (i) T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its structure and it was submitted that the so-called changes were only a tool to achieve the originally approved objects. Before the Commissioner as well as before us, it has been submitted that the Assessing Officer had raised certain issues in the context of the changed objects also and after having gone through the explanation furnished by the assessee, he had accepted the position that such changes did not have any bearing on the taxability of assessee's income. 41. As per the Commissioner, the Assessing Officer ought to have examined the nature of subsidy received from BCCI because according to the Commissioner the decision of the Mumbai Bench of the Tribunal in the case of BCCI vs. ITO vide ITA No.1285/Mum/2010 dated 30.03.2012 held that BCCI could not claim automatically the benefits of section 12A of the Act registration with amendments having been carried out in its objects clause. As per the Commissioner, "any receipt or consideration flowing unctuously from BCCI has to be held to be ineligible for exemption under sections 11 to 13 of the Act". Secondly, as per the Commissioner consequent to the change in objects of the assessee society after the grant of registrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of being heard and after making or causing to be made such enquiries as he may deem necessary, pass such order thereon including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The aforesaid power has been invoked by the Commissioner in the present case, as according to him, the assessment order dated 30.12.2011 (supra) is erroneous as well as prejudicial to the interests of the Revenue within the meaning of section 263 of the Act qua (i) failure to enquire into the applicability of amended meaning of expression "charitable purpose" in section 2(15) of the Act; and, (ii) failure to take cognizance of change in objects of the assessee society after the grant of registration in 1991, and examine if such changes had any bearing on the taxability of assessee's income. 44. The phraseology of section 263 of the Act makes it clear that the competence of the Commissioner to invoke the revisionary jurisdiction u/s 263 of the Act is founded on satisfaction of two conditions, namely, that (i) the order of the Assessing Officer sought to be revised is erroneous; and, (ii) that such order is prejudicial to the interests of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order was not present. As per the Hon'ble Bombay High Court, under aforesaid circumstances, assessment order could not be held to be erroneous merely because it did not contain an elaborate discussion on the issue raised by the Commissioner. 45. It would also be relevant at this point to refer to the judgement of the Hon'ble Punjab & Haryana High Court in the case of Hari Iron Trading Co. vs. CIT, (2003) 263 ITR 437 (P&H). The Hon'ble High Court emphasized the phraseology of section 263(1) of the Act to say that it required the Commissioner to exercise his power only after examining "the record of any proceeding under the Act". Notably, the expression "record" in section 263(1) of the Act has been defined in clause (b) of the Explanation to include all records relating to any proceeding under this Act available at the time of examination by the Commissioner. In this background, the Hon'ble High Court opined that it is not only the assessment order but the entire material available on record which has to be examined before arriving at a conclusion as to whether or not the Assessing Officer has examined an issue. The Hon'ble High Court explained that the aforesaid exercise was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 03.10.2011. Case discussed. He is requested to furnish following information/documents. - Details of one day test matches, T-20 matches, IPL matches conducted during the year, with amount of ticket sales/gate collection made. - Grounds owned by MCA and rent received from ground, rooms, etc. - Amount of fees received for providing any services to IPL Franchisees, etc.. - Income from ground advertisement, if any, received during the year. - Details of subsidy received from BCCI of Rs. 21 crore with purpose of subsidy and also a note as to why receipts from BCCI should not be taxed in view of amendment to sec. 2(15). - Income from any advertisement from logos on uniforms & kit materials of Ranji Trophy, etc.. - Income from corporate boxes books for viewing cricket matches, if any. - Details of club activities with membership fees, membership contribution, restaurant income, income from banquet hall, sports facilities provided during the year. - Details of MPL tournament and income earned therefrom with copy of MPL agreement. The above information to be furnished within three weeks. Sd/- Sd/- R.R. Pethe, CA & AR ITO 05.12.2011 In continuation Shri R.R. Pethe, CA & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the application of amended provisions of section 2(15) of the Act vis-à-vis subsidy by way of share in T.V. rights received from BCCI of Rs. 21,04,23,032/-. Before parting, we may also refer to a Office Note appended below the assessment order dated 30.12.2011 (supra), which has been placed on record. The said Office Note reads as under :- "OFFICE NOTE :- 1. The case was studied from point of view of amended provisions of section 2(15) w.e.f. 01.04.2009 i.e. from this year onwards. Total receipts of the assessee during the year are Rs. 22,52,33,762/-. It is seen that receipts during the year are mainly on account of subsidy for shares in TV rights from BCCI of Rs. 21,04,23,032/-. Since it is not a direct receipt of MCA, it is not hit by the amended provisions of section 2(15). Further, tournament receipts of Rs. 1,20,30,286/- are also received from BCCI for various tournaments conducted on behalf of BCCI such as Ranji trophy, C.K.Nayadu trophy, Cooch Behar Trophy, Deodhar trophy, Duleep trophy, Vijay merchant trophy, Vinoo Mankad trophy and various other tournaments for different age groups from U/13 to U/19 for men and women. 2. Besides above, assessee has received int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planations furnished by the assessee thereof copies of which have been placed on record, belie the assertions of the Commissioner. In-fact, the queries raised by the Assessing Officer show that he had show-caused the assessee as to why the receipts on account of tournaments, etc. were not to be taxed considering the amendments to section 2(15) of the Act. Further, the Assessing Officer made enquiries with regard to the one day matches, T-20 matches, IPL conducted during the year, and also rent earnings from the ground owned by the assessee. It has been pointed out that the aforesaid queries are in the background of the charge sought to be made by the Commissioner that the change in object/structure of the assessee reflects carrying on commercial activities. 51. We have carefully examined the entire factual matrix on this aspect and find that it is difficult to uphold the charge made by the Commissioner of non application of mind by the Assessing Officer on this aspect. In-fact, the Office Note No.3 recorded by the Assessing Officer clearly shows that he examined the case of the assessee for grant of exemption u/s 11 of the Act in the context of the advent of new cricketing tournam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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