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TMI Blog2018 (1) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... g the game of golf and having been granted registration u/s 12A w.e.f. 15.06.1999, we see no reasons to cancel the same particularly when the objects and the activities of assessee at the time of grant of registration and cancellation thereof remains the same. In these circumstances, we do not concur with the order of ld. CIT withdrawing, the registration u/s 12AA(3) of the Act. The ground of assessee is allowed. - ITA No. 442/JP/2012 - - - Dated:- 27-12-2017 - SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM For The Assessee : Shri P.C. Parwal, CA For The Revenue : Shri Virendra Mehta, CIT-DR ORDER PER BHAGCHAND, AM The assessee has filed an appeal against the order of the ld. CIT, Jaipur-II, Jaipur dated 28-03-2012 raising following ground. That the ld. CIT, Jaipur-II, Jaipur erred in withdrawing the registration granted u/s 12AA/12A vide order dated 27- 07-1999 u/s 12AA(3) read with section 293C of the I.T. Act, 1961 from the initial year, the registration was granted. 2.1 Brief facts of the case are that the assessee society was constituted on 18.10.1972 with the object to promote the game of golf and to run maintain the golf course ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled the reply However, the ld. CIT did not accept the contention of the assessee by giving the following findings (Pg 4 to 7 of CIT order):- ( a) The object at S.No. (a) provide that the activity will be for and amongst the members of the club which shows that the activity is not for the benefit of public at large but for the benefit of the members of club only. ( b) The other object of the club is to promote, develop and popularize the game of golf which though is a charitable object but no substantial expenditure has been incurred for the same. Most of the expenditure has been incurred on running and maintenance of golf club where only members are allowed to play the game. No expenditure has been incurred to popularize the game in general public. Though it is claimed that facility of playing golf can be availed by a person who is not a member but in such case more green fees is charged on daily basis in comparison to fees charged from member of club, which is subscription only. The objects mentioned at clause (f) (g) authorizes the club to do any activity which may be charitable or may not be charitable. In fact the club is indulged in carrying out commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration was granted by his predecessor CIT after satisfying himself about the objects of the society and the genuineness of its activities and the second is whether the CIT is correct in withdrawing the registration already granted by holding that activities of the society are not charitable though at the same time accepting that part of its activities are charitable. 2. So far as the first issue is concerned, power to withdraw the registration by CIT is provided in the statue by Finance (No.2) Act, 2004 w.e.f. 01.10.2004 whereby sub-section (3) is inserted to section 12AA to provide that where a trust or institution has been granted registration under sub-clause (b) of sub section 1 and subsequently the Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Thereafter, an amendment was made in this sub-section by FA, 2010 w.e.f 01.06.2010 to also empower the Commissioner to cancel the registration where it was obtained at any time under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder any of the clauses of sub-s. (1) of s. 12A. In that view of interpretation, there was no power vested with the CIT to cancel or withdraw the registration granted to the assessee under s. 12A(a) in the year 1974. Oxford Academy for Career Development Vs. CCIT Ors. (2009) 315 ITR 382 (All.) (HC) Sec. 12AA(3) was incorporated w.e.f. 1st Oct, 2004, to empower the CIT to cancel the registration granted to a trust or institution. The same is not applicable retrospectively and in the assessee's case for the assessment years under consideration. The object of this provision is not clarificatory or explanatory, so prior to that date, the authorities granting registration had no inherent power to withdraw or revoke the registration already granted. The order cancelling the registration granted to a trust or institution under s. 12AA being a quasi-judicial order does not fall within the category of orders mentioned under s. 21 of the General Clauses Act, 1897, which provides that the power conferred on an authority empowers to issue orders including the power to rescind such orders and the CIT would not have power to rescind the order passed by the CIT earlier grantin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g carried out in accordance with the objects of the trust or institution. None of the observations mentioned in the order of CIT and summarised in para 3 above, lead to any conclusion that the activity of the club are not genuine or are not carried out in accordance with its objects. The various observations of the CIT are explained as under:- ( a) From the plain reading of the object of the club as stated above, it can be noted that the main object of the club is to promote, develop and popularize the game of golf as is envisaged in clause (b) to (e) of its object. Clause (a) of the object provides for physical and mental recreation and social entertainment for and amongst the members of the club. This clause cannot be interpreted to mean that the activity of the club is for the benefit of members only. In fact any person who becomes the member of the club has to pay the membership fees and such membership fees are applied for the promotion of the game of golf. From the figures of income expenditure account mentioned at Pg 1 2 of the order, it can be noted that against the subscription and other fees of ₹ 101.21 lacs, the expenditure on maintenance of golf course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal Receipts (in Rs.) Expenditure on game of golf (in Rs.) % of Total Revenue Other Incidental Expenditure (in Rs.) Surplus/Deficit (in Rs.) 2004-05 47,75,829/- 37,47,282/- 78.46% 3,31,852/- 6,96,695/- 2005-06 50,36,483/- 41,52,464/- 82.44% 1,29,477/- 7,54,542/- 2006-07 58,18,782/- 48,70,949/- 83.7% 1,54,295/- 7,93,538/- 2007-08 1,01,06,556/- 81,68,511/- 80% 2,79,676/- (16,58,369/-) 2008-09 1,38,01,237/- 1,17,48,273/- 85% 9,89,150/- 10,63,814/- 2009-10 2,17,44,448/- 1,83,80,032/- 84% 9,58,771/- 24,05,645/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anted, section 12AA(3) does not extend to re-examination of the objects of the trust or institution. It becomes fait accompli, unless twin conditions provided under sub section (3) of section 12AA are satisfied. The insertion of proviso would not have any bearing on section 12AA(3) since it does not extend to the objects of the trust or institution but only to its activities as stated therein. None of the assessee s receipts, i.e. receipts from members, catering and bar, green fees, amenities income, interest, etc. can be said to be arising or accruing from the activities which have been carried out for the purpose of business, trade or commerce. All its activities are towards promotion of game of golf while other ancillary activities carried are only incidental to the said game only. Activities carried out by the assessee for promotion of the game of golf or for maintenance of its club resulting in incidental or ancillary receipts cannot be held to be in the nature of business, trade or commerce. Even otherwise, this aspect has to be examined in the course of assessment proceedings and not for the purpose of cancellation of registration u/s 12AA(3). That apart, all its activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Thus, CIT had not been able to make out case that activities of assessee-trust were not genuine. In case any of activities of assessee- club seems to be commercial in nature to CIT, but that was not dominant activity of assessee, it was for AO to consider while giving exemption u/s 11 and not for CIT for cancellation of registration once granted u/s 12A. Order passed by CIT u/s 12AA(3) cancelling registration granted u/s 12A was not as per law. Tamilnadu Golf Federation Vs. ACIT ITA No.712/Mds/2014 dt. 14.01.2016 The Hon ble ITAT at Para 7 8 of its order has given the following findings:- 7. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee-society is registered u/s 12AA of the Act as charitable institution. The main object of the society is to promote the sport of golf in the State of Tamilandu. The assessee is also organizing coaching camps for the benefit of golfers in other parts of the State. In fact, the Assessing Officer has reproduced the object of the assessee-society at pages 2 3 of his order. This object clearly shows that the assessee is engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment fee, sponsorship fees etc. are in the course of its carrying on the charitable activity. Therefore, the activity of the assessee is not similar to commerce or trade. CIT Vs. Delhi Golf Club Ltd. ITA No.1757 of 2010 dt. 30.03.2011 (Del.) (HC) Facts:- The respondent/assessee is a premier Golf Club and is given charitable character by the Income-Tax authorities as it is registered u/s 12A of the Income-Tax Act because of the reason that its main activity is to promote the game of golf in India. During the assessment proceedings, the AO noticed that the assessee had received certain sum as fees from casual members at a higher rate than its permanent members. Such casual members were also not eligible for other facilities like permanent members. Therefore, the AO was of the view that the assessee was maintaining a golf course and was exploiting the same commercially by allowing non-members to play on the same for a fee. Accordingly, he treated such activity as commercial activity, though incidental for the attainment of its object. Since the assessee had not maintained separate books of accounts for such activity, the AO rejected the exemption u/s 11 to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otive. In spite of this consistent finding of the department itself in the past, without any cogent reason, the AO has held that because the assessee was not maintaining separate books of accounts of such casual members it was a business income of the assessee not liable for exemption. ( f) There is no finding by the AO to the effect that activities of the club during the year were not covered by the definition provided u/s 2(15). In order to satisfy the requirement of being an object of general public utility within the meaning of section 2(15) of the Act, it is not necessary that the benefit should reach each and every person of the country or the state. It is sufficient if it reaches a sizable number of members of the public. In view thereof, promotion of sports and games is considered to be a charitable activity within the meaning of section 2(15) of the IT Act, 1961. Therefore, an association or institution engaged in the promotion of sports and games can claim exemption u/s 10(23) of the Act relating to exemption from tax of sports associations and institutions having their object the promotion control regulation and encouragement of specified sports and games. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration u/s 12A was granted to assessee. Thus, fact of assessee being a charitable institution was not in dispute and DIT(E) agreed that assessee was carrying on activity of general public utility . It was also not case of DIT(E) that assessee was not carrying on its activities in accordance with the objects for which it was founded. Thus, twin conditions mandatorily required for invoking jurisdiction u/s 12AA(3) by DIT(E) were not satisfied. It was not case of revenue that assessee was carrying on trade, commerce or business under garb of the activity being general public utility . Amount received by assessee from ground booking charges, health club charges, income from corporate boxes, lawn booking income, sponsorship money and sale of tickets, advertisement, souvenirs and other such receipts do not result in assessee being held as undertaking activities in nature of trade, commerce or business since these receipts were intrinsically related, interconnected and interwoven with charitable activity and cannot be viewed separately. ( d) As regards sponsorship income from T , it was held that assessee had to perform many activities and for this purpose it had to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th club facility and these receipts cannot be termed as an activity in the nature of trade, commerce or business . Thus all receipts of assessee were intrinsically linked with activity of organizing matches and tournaments for the promotion of cricket. User charges were required for maintaining facilities that were provided as part of the infrastructure for conducting activities of assessee. Also contribution received by way of sponsorship, advertisement, sale of tickets etc. and user charges do not convert charitable activity into trade, commerce or business activity. Thus, order passed by DIT(E) cancelling registration u/s 12A is quashed. Rajasthan Cricket Association Vs. CIT ITA No.544/JP/13 dt. 09.06.2016 (ITAT Jaipur) The relevant finding of the Tribunal is as under:- At the time of (withdrawal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities of the society are not charitable. 2.5(3) In respect of the first issue, we find that power to withdraw the registration by CIT is provided in the statue by Finance (No.2) Act, 2004 w.e.f. 01.10.2004 whereby sub-section (3) is inserted to section 12AA to provide that where a trust or institution has been granted registration under sub-clause (b) of sub section 1 and subsequently the Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Thereafter, an amendment was made in this sub-section by FA, 2010 w.e.f. 01.06.2010 to also empower the Commissioner to cancel the registration where it was obtained at any time under section 12A. Thus, w.e.f. 01.06.2010 only, the Commissioner has a power to cancel the registration granted u/s 12A. Further, section 293C referred by the CIT was inserted by Finance (No.2) Act, 2009 w.e.f. 01.10.2009 to provide that income tax authority has power to withdraw the approval even when a provision to withdraw such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committee the finding of court is given. The relevant part of the decision of the committee and the finding of court for ready reference is reproduced as under:- The Government in engaging in this exercise, constituted a committee, consisting of the following members: ( i) State Minister for Tourism, Art Culture. ( ii) State Minister for sports and Youth Affairs. ( iii) Chairman, Rajasthan Sports council. ( iv) Secretary, Urban Development and Housing. ( v) Secretary, Tourism, Art Culture. ( vi) Jaipur Development Commissioner. ( vii) President, Rambagh Golf Club. ( viii) President, Rajasthan Polo Club. The Committee has a composite representation in as much as various departments and bodies as also associations that had concern with the utilization of the RambaghComplex, were duly represented.On 11.08.2000, after a prolonged discussion, a settlement was arrived at in the meeting, by which, it was unanimously accepted that the JDA was the owner of the entire land. The area in question would be used as a city level park, an 18-hold golf-course, including a club-house and a polo ground. The JDA would engage a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment passed by the Hon ble Single bench in view of the settlement, arrived at between the parties. Thereafter in Para 106 107, the Hon ble Court held as under [PBP 114 {47}]:- 106. Rajasthan Polo Club and Rambagh Golf have acquired for itself, international fame and recognition, in relation to polo game and golf game. Few such clubs in the world can rival its reputation and standing. The present polo ground has come in for appreciation by high dignitaries like General K.S. Thimayya; the first President of the Union, Late Dr.Rajendra Prasad; Prince Phillips of Buckingham Palace of U.K. and prominent polo players. It is known to everybody that important and prestigious poloevents of international and national level have been regularly taking place at the present polo-ground under the aegis of the Rajasthan Polo club. There can be no doubt or dispute that the games of polo and golf have immensely contributed toward making Jaipur an important tourist attraction and the role of the Rajasthan Polo Club and Rambagh Golf Course cannot be over-emphasized.The role of both the clubs in serving public interest and making significant contribution to the cause of tourism in Rajastha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us objections of CIT in withdrawing the registration u/s 12AA. The assesse has also provided a table giving the percentage of expenditure in the game of golf with reference to its receipts for FY 2004-05 to 2010-11 according to which such expenditure ranges from 78.46% to 96%. In AY 2006-07, AO while passing the order u/s 143(3) has granted the benefit of registration u/s 12A to the assessee (PB 50-52). In respect of the objection of CIT that the club is receiving huge receipts from the activity of sale of liquor and in lieu of receipt of fees/ subscription from the members, services is provided to them with regard to playing of game, providing of food, liquor, etc., the same are only incidental to the promotion of game of golf. In any case this aspect can be examined in course of assessment proceedings. Similar activities carried out by various golf clubs in India including the sale of liquor have been granted registration u/s 12A/ 12AA The orders of ld. CIT for cancelling such registration u/s 12AA(3) in such cases have been disapproved by the Hon ble ITAT/ High Court as referred by ld. A/R supra. The facts findings of these cases have been provided by ld. A/R in written submis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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