TMI Blog2012 (8) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... ve effect is bad and illegal. However, department can any time review the function, in fact the CIT can review the grant of registration at any time because the words used in the provision are, "and subsequently the Commissioner is satisfied", which means that registration can be reviewed at any given point of time. Nevertheless, registration cannot be cancelled retrospectively. Cancellation of registration granted to MCA, shall not date back to the date of signing of the Concessionaire Agreement, i.e. 12.12.2005, but shall be effective from 01.06.2010. i.e. the date when the amendment was inserted in the provision - Decided partly in favor of assessee. - IT APPEAL NO. 1700 (MUM.) OF 2011 - - - Dated:- 8-8-2012 - R.S. SYAL, VIVEK VARMA, JJ. ORDER Vivek Varma, Judicial Member The instant appeal arises from the order of DIT (exemption), Mumbai, dated 31-12-2010, wherein the DIT (Exmp). has cancelled the registration u/s 12A of the I.T. Act, 1961. 2. The basic facts emanating from the impugned order and material placed before us are that - (1) The Appellant, Mumbai Cricket Association (Association) is registered under 7 Societies Registration Act 1860 and Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for more than one decade. Therefore, despite the intention to do so it was only in the year 2005, that the Association was able to put together a scheme whereby such a centre would be facilitated. For this purpose the Association entered into an agreement with M/s Shirke Infrastructure (Concessionaire) for development of World Class Indoor Cricket Academy on a plot situated at Bandra Kurla Complex. (6) As per the concession agreement, the concessionaire was to construct the Indoor Cricket Academy (ICA) and Facilities therein at its own cost. ICA was to be handed over immediately upon completion of its construction for exclusive use, administration and maintenance by the Association. The Academy is equipped with the best sporting facilities and trained professionals. With ultra modern setup to practice under, the MCA adds a scientific touch to the game of Cricket. The Academy is created with the finest equipment and training facilities, indoor nets equipped with video cameras to facilitate coaching, viewing gallery for coaches etc. (7) In order to enable the Concessionaire to recoup its cost the Association granted him a 'concession' to operate / run certain facilities (kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rary Minitheatre Lawn Tennis Courts Thus the simple look at the above facilities clearly points out that the total area a located for cricket is less than the total area for non-cricket activity. 5. The activity of running four restaurants with bar, banquets hall cannot be termed as activity incidental to cricket. Though, assessee has argued that the said activities are being run by Shrike Infrastructure. However assessee has conceived and executed the plan. The assessee had thought of starting these activities. M/s. Shrike Infrastructure is mere a contractor for few years. Actually the ownership Of the entire premises is that of the assessee. Thus the assessee has thought of carrying out business activity by entering into agreement referred above. The activity cannot be said to be said to be incidental to the cricket activity. 6. It is also observed that as per the said agreement the assessee was to receive 50% of associate fee for 3000 members. The associate fee is around 10 to 15 lacs per member. By no stretch of imagination it can be said that collecting such kind of substantial associate fee can be said to be non-business activity This activity is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off the trust/institution. Since the violation in terms of making commercial activities rather than pursuing charitable activities dates back to the period earlier to assessment year 2008-09 for which the AO has referred the matter to the undersigned the registration u/s. 12A stands cancelled from the date on which the assessee has committed violation and the AO is required to take necessary action accordingly. 8. As has been discussed in the earlier para the activity of the assessee are business activity and cannot be in any way be said to incidental to the objects being pursued by the assessee. Thus, the activities are against the objects of the trust. 9. It is also further observed that the land at Bandra-Kurla Complex was allotted by MMRDA to MCA strictly for non-commercial activity. It was mainly allotted for the activity of cricket. However by planning, executing the activity of MCA Recreation Centre, the MCA has violated the terms of the agreement vide which MMRDA had allotted the land. Thus by violating the terms of the agreement, MCA has acted against public policy. As per the agreement of the MMRDA, the sub-lease was not permitted however by entering into concessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advertisement charges, meaning thereby that all costs and advantage shall be borne and enjoyed by SI for the period, till the ICA Facilities shall remain with them. The AR, further pointed out that the coordinate Bench in the assessee's own case for assessment years 1989-90 to 1991-92 had allowed the exemptions u/s 10(23) on a finding that, "The quantum of these receipts also does not justify the same being considered as in the nature of organised business activity. In our considered view, the hiring out of the vacant space cannot be treated as a business activity. Similarly, as regards advertisement income and film shooting charges, the relevant amounts were only . The quantum and nature of these receipts can also hardly justify being considered as receipts from a business for that purpose". The AR pointed out that, overall, MCA had inherent power within itself "To sell, improve, manage, develop, lease, mortgage, dispose of or otherwise deal with all or any part of the property of the Association whether movable or immovable". The AR further pointed out that in order to maintain a distinct personality, no activities of ICA Facilities have been shown in the books of MCA, whereas th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nations from its users and a Contractor who was carrying out decoration for such users etc. The Department took a view that the said activities cannot be said to be incidental to the assessee's objects of control, supervision, regulation and encouragement in India of game of cricket, However, In an appeal, Hon'ble Mumbai Tribunal considering the purpose of collection observed that such activity constitutes integral part of the bonafide activities of the Association and also opined that when an organization is a non profit seeking venture and a public organization, seeking optimal utilization of its resource per se does not change its character to a business organization. (5) Nonetheless, the paucity of funds continued for more than one decade. Therefore, despite the intention to do so it was only in the year 2005, that the Association was able to put together a scheme whereby such a centre would be facilitated. For this purpose the Association entered into an agreement with M/S Shirke Infrastructure (Concessionaire) for development of World Class Indoor Cricket Academy on a plot situated at Bandra Kurla Complex. (6) As per the concession agreement, the concessionaire was to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific Research Centre v. Lakshman Prasad Others, reported in 229 ITR (All), wherein it was held, (head notes), "Exemption u/s 10(21)-Retrospective withdrawal-Various scientific research activities being carried on by the petitioner getting due approval by prescribed authority-Association can be approved even though no actual research work has started-It is in process of establishing infrastructure for scientific research yet approval can be granted-For grant of approval no condition can be imposed-Having once granted the approval, prescribed authority becomes fuctus officio and revocation of approval with retrospective effect is illegal and unsustainable. The AO also referred to the case of CIT v. General Magnets Ltd, reported in 256 ITR 471 (Cal), wherein Hon'ble Calcutta High Court held, "withdrawal of approval u/s 35CCA with retrospective effect is bad .". 8. The AR, thus concluded that in the instant case, when the two projects, i.e. ICA and ICA Facilities are demarcated and no added or adverse advantage has been acquired by the assessee on the date of signing of the agreement, which went or could have gone against the objects and other recitals of the Association ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes means making available by the concessionaire of the ICA facilities for usage by Associates against payment of Associateship fees and user charges in terms of this concession Agreement. According to clause 1.1.44, Managing Committee shall mean managing committee framed, for supervision, management and operations of the ICA Facilities and is different from the committee of MCA framed under the rules framed by the MCA as per their meeting held on 31-12-2002 and he noted that functions and constitution of the Managing Committee had been recited in clause 20.1 of the Concessionaire Agreement. 10. The DR pointed out that as a consequence of this Agreement, SI was allowed to induct 7000 members, for membership of ICA (which included ICA Facilities). He pointed out, that out of this 7000 Associate Members, 6000 associates shall be at the discretion of concessionaire (SI) and 1000 shall be recommended by the Concessioning Authority (MCA) and even out of these 1000 associates, only 300 were earmarked for former test players, former umpires and persons of stature, and 700 shall be affiliated clubs. Therefore, out of total prospective enrolments of 7000 memberships, only 300 were un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registration could not have been cancelled from the date of signing of the concession agreement and hence the impugned order, dated, 31.12.2010, should be cancelled. 13. We have heard both the parties at length, and we find that none of the facts, as mentioned/narrated during the course of hearing from either side, had been disputed, therefore, the issue is entirely based on the interpretation of facts. At this stage, we are required to interpret the clauses in two agreements which have been discussed before us extensively, first one being lease agreement dated 05-03-2004 entered into between MMRDA and MCA. 14. MCA required land for construction and development of world class Indoor Cricket Academy, which could house and cater not only to the cricket fraternity but also provide facilities for development of other sports like Badminton, Squash and other sports and shall be for the benefit of sports students all over Maharashtra and also past and present cricketers, umpires, donors and associates. 15. This land was made available by MMRDA to MCA, wherein MMRDA allotted the land measuring 52,157 sq. mtrs., with conditions, including the condition for usage, which stipu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blishment, with permanent structure that had been developed for the purpose of creating a club, wherein the club membership itself would be hefty amounts (in fact DIT mentions the club membership amounts are to the tune of Rs. 15 lacs), for the creation/admission of its members (associates). 19. We also find from the reading of the Agreement between MCA SI that the reigns of the Managing Committee of ICA Facilities shall always remain with MCA, which is given as under: a. The Concessionaire and the Concessioning Authority shall together form a Managing Committee within a period of 90 days from the Commencement Date for the supervision, management and administration of the ICA Facilities and such Managing Committee shall consist of all the office bearers of the Concessioning Authority and 4 members to be nominated by the Concessionaire. b. Functions of the Managing Committee shall be restricted only to the managing and supervising the day-to-day affairs of the ICA Facilities, recommendation of Associates and formulation of the Facilities Area Rules. c. Members of the Managing Committee shall by voting elect one amongst themselves as the Chairman of the Managi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue, was examined by Hon'ble Calcutta High Court in the case of CIT v. General Magnets Ltd , reported in 256 ITR 471 (Cal), wherein it was held that withdrawal of approval u/s 35CCA with retrospective effect is bad. 22. We are in total agreement with the crux arrived at, in all these cases, that where an approval had been given, its withdrawal with retrospective effect is bad and illegal. We are also in agreement with the arguments of the AR that sub section (3) was introduced in the statute books only with effect from 01.06.2010, i.e. its function shall only be prospective and it cannot be applied retrospectively. Till this point of view, we are in agreement with the arguments of the AR. However, the contentions of the AR, that once registration is granted, it cannot be reviewed, we would not be able to support this contention, because, we do not see any bar in the review of functions of an Association, which according to us, the department can do at any time, in fact the CIT can review the grant of registration at any time because the words used in the provision are, "and subsequently the Commissioner is satisfied", which means that registration can be reviewed at any g ..... 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