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TMI Blog2012 (7) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... gaon sewri reclamation aforesaid at such rent, for such period and upon such terms and conditions as may seen expedient. 2. To afford to the members of the club all the usual privileges, advantages, conveniences and accommodation of a club. 3. To promote all forms of athletic sports and pastimes. 4. To buy, repair, make, supply, sell and deal in all kinds of apparatus and appliances used in connection with sports, and all kinds of pravisions and refreshments required for use by the members of the club or other persons for the time being entitled to use the club buildings or premises of the club. 5. To promote and hold either alone or jointly with any other associations, club or person, sports meeting, competitions and matches and to give, or contribute towards prizes, medals and awards and to promote give or support dinners, balls, concerts and other entertainments. 6. To establish, promote, or assist in establishing or promoting, and to subscribe to or become a member of any other association or club whose objects are similar, or in part similar to the objects of the Club, or the establishment or promotion of which may be beneficial to the club. Provided that no subscription ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 3. Activities & Events Income Rs. 18.52 Lacs. 4. Amenities Income Rs. 143.75 Lacs. 5. Other Income Rs. 242.20 Lacs The learned DIT(E) also drew attention of the assessee towards newly inserted proviso to section 2(15), applicable from assessment year 2009-10 and required the assessee as to why under the said proviso the assessee's activities should not be treated as in the nature of trade, commerce, business etc. 4. In response, the assessee submitted that it is not hit by proviso since the Club is not carrying out any activities in the nature of trade, commerce, business or any activities of rendering any service in relation to trade, commerce or business for a cess or a fee or any other consideration. Its main object is to provide facilities relating to Golf and to afford to the members of the club all the usual privilege, advantages and convenience associated with the game of Golf. It is also authorized to carry out activities which are incidental and auxiliary to promote the said game. All the receipts as have been pointed out in the show cause notice revolves around the said promotion of golf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look into genuineness of the activities and objects of the trust. All the aspects which has been highlighted in the impugned order is the subject matter of assessment which has to be seen and examined by the AO in the course of assessment. In support of his contention, he has relied upon the following decisions : i) Shri Shanmukhananda Fine Arts & Sangeetha Sabha vs. DIT(E) (2011) 48 SOT 91 (Mum). ii) CIT vs. Surya Educational & Charitable Trust (2011) 203 Taxman 53 (P&H). iii) Institute of Chartered Accountants of India and another vs. DIT (E) 245 CTR (Del) 541. 7. On the other hand, the learned CIT-DR submitted that for the purpose of granting registration and for cancelling the registration, one has to see the definition of "charity" as defined in section 2(15). Once the definition of "Charitable purposes" has been amended with effect from 01-04-2009, then the activities and genuineness of the trust has to be seen from the angle of new definition as has been brought in the statute. He further submitted that there is a clear cut finding by the DIT(E) about the nature of receipts which were clearly in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust or institution once registration has been granted u/s. 12AA(1). It becomes fait accompli, unless twin conditions provided under sub section (3) of section 12AA are satisfied. The only reason for cancellation in this case is that in view of the amended provisions of section 2(15) read with proviso with effect from 01-04-2009 the assessee cannot be held to be carrying out activities of charitable purposes. 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. Registration granted u/s. 12AA(1) cannot be subjected to cancellation u/s. 12AA(3) to re-examine or review the objects. 9. For better appreciation of the issue involved, let us examine the relevant provision of section 2(15) read with proviso which has been brought on the statute by Finance Act, 2008 with effect from 01-04-2009, which reads as under : "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 interest) and the advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(15) of the Act has to be examined and considered. Earlier orders under section 10(23C)(iv) are not relevant and are inconsequential, as they have not examined the scope and ambit of the first proviso. The proviso applies only if an institution is engaged in advancement of any other object of general public utility and postulates that such an institute is not "charitable" if it is involved in carrying on 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. The second part, "any activity of rendering any service in relation to any trade, commerce or business" obviously intends to expand the scope of the proviso to include services, which are rendered in relation to any trade, commerce or business. The proviso further stipulates that the activity must be for a cess or fee or any other consideration. The last part states that the proviso will apply even if the cess or fee or any other consideration is applied for a charitable activity/purpose. The proviso has to be given full effect to. Thus, even if cess, fee or consideration is used or utilized for charitable purposes, the proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adventure or concern in the nature of trade commerce or manufacture. The intention of the legislature is to make the definition extensive as the term "inclusive" has been used. The legislature has deliberately departed from giving a definite import to the term "business" but made reference to several other general terms like "trade", "commerce", "manufacture" and "adventure or concern in the nature of trade, commerce and manufacture." x x x x 29. It may be, however, pointed out that the term "profit motive" is not only the sole or relevant consideration that has to be kept in mind. It is one of the aspects. Normally intention to earn profit is required. Emphasis, however, it does appear, has shifted and the concept and principle of "economic activity" has gained acceptability. The definition of the term "business " may also vary when we are examining taxability under Sales-tax, Excise Duty, Value Added Tax, etc. because these are not taxes on income but the taxable even occurs because of the "economic activity" involved. Even if a person/an organization is carrying on trading on the principle of "no loss no profit", it may be liable to pay taxes or comply with the statute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cia stipulated in Lord Fisher's case (supra) are also relevant. Each case, therefore, has to be examined on its own facts." 10. Thus, the test of business, trade or commerce has to be viewed from the angle that the activity of the trust has continued on business principle and pursued with reasonable continuity. If the principle and ratio laid down by the Hon'ble High Court is applied in the instant case, it would be seen that none of its 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 are incidental or ancillary towards fulfillment 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 trust were done on sound and recognized business principle or have been pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such case, there must be a complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2(15)". From the above, it is clear that even in terms of proviso to section 2(15), which has been clarified by the Board that in such cases where principle of mutuality are applicable, registration cannot be cancelled simply by relying on the proviso to section 2(15). No where it has been brought on the record that the activities of the assessee are not governed by "principles of mutuality ..... X X X X Extracts X X X X X X X X Extracts X X X X
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