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TMI Blog2012 (10) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... , the registration as granted could not survive. Reliance is placed on the decision in the case of Allahabad Agricultural Institute v. Union of India [2007] 291 ITR 116/163 Taxman 67 (All.). Vide the said decision, the order of assessment, treating the assessee as an unregistered trust, denying it the benefit u/ss. 11 and 12 of the Act, was held valid by the hon'ble court. The language of the statutory provision/s, it was explained, clearly showed that it applied where the objects of the trust or institution remain the same. When the said objects, which formed the basis of the grant of registration, stand altered, the very foundation of the registration stands removed, so that it could not survive. The fact of the amendment or the whole-sale changes in the objects had come to the notice of the Revenue in the instant case, while scrutinizing the assessee's case for the assessment year 2008-09. Though, therefore, the withdrawal of registration ought to be w.e.f. assessment year 2000-01, i.e., in view of the first amendment to the objects having been made in the year 1999, the same was made effective by the ld. CIT from the assessment year 2005-06 in view of the time limitation attend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urses, etc. 3. Detailed arguments were advanced by both the sides during hearing, with each also supplying the same in the written format. 4. We have heard the parties, and perused the material on record. Having delineated the respective cases by both the parties, we proceed to discuss the same issue-wise; the assessee having in fact organized its arguments in the written format on that basis. 4.1 The first issue is with regard to the power of the ld. CIT as the competent authority in invoking section 12AA(3) of the Act. Firstly, the scope of the power has been extended by amendment vide Finance Act, 2010 w.e.f. 01-06-2010 to include the withdrawal of the registration u/s. 12A, where obtained prior to its amendment by Finance (No.2) Act, 1996, as in the instant case; the assessee having been granted registration u/s. 12A vide certificate dated 02-09-1988. The power of withdrawal having been exercised by the ld. CIT vide the impugned order on 27-12-2010 - the date of the order, i.e., after 01-06-2010, the same cannot, therefore, be assailed on that score. Also, even as pointed out by the ld. DR during hearing, section 293C stands co-opted on the statute-book by the Finance (No.2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its registration u/s. 12A, which forms part of the relevant application (in Form 10A) itself. Could the assessee say that the said undertaking is superfluous or to no effect or that the same is inconsistent with the intent and purpose of the registration or of the Act? If so, an assessee could alter its object/s, even substantially or materially, changing its character, and still claim the benefit under the Act, effectively defeating its provisions. The argument that a change in its objects could not be disapproved of by the Revenue, or that the law is inadequate or unarticulated in dealing with such a situation, being not specifically provided for, suggesting it to be dysfunctional in this regard, cannot be countenanced, even as unambiguously clarified by the hon'ble high court in the case of Allahabad Agricultural Institute (supra), which was rendered de hors section 12AA(3) as well as section 293C of the Act. The action of the ld. CIT, therefore, cannot be impugned on this score as well, and he as the competent authority is well within his rights to take cognizance of the change/s in the object clause/s, being violative of the implicit condition for continuation of registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those changes, having not been examined by the ld. CIT specifically. To put it more explicitly, we find the stand of both the parties as untenable. The assessee assails the impugned order on the ground of legal competence, which we have found, discussing the same in its different facets in detail, as being legally firm. The Revenue, on the other hand, banks on the very fact of the wholesale changes in its objects/object clause/s - from 12 (twelve) at the time of its registration u/s. 12AA in 1998 to 26 (twenty six) in 2005 - as by itself resulting in withdrawal of the registration, relying on the very fact of the change/s, so that it was incumbent for it to do so, as well as the magnitude of the change/s, inferring it to be material. However, the very fact that the law postulates the communication of any change or alteration thereto, itself implies that it envisages the same (alteration) subsequent to the registration and, further, contemplates its consideration by the Revenue, of course, in light of the extant law. The ld. DR has, per his written submissions, sought to suggest of some clauses as amounting to a substantial change/s, which issue we are per se disinclined to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In fact, no prejudice is caused to the assessee thereby, as a timely communication, which the assessee was obliged to effect, would also have been to the same result, so that the same (retrospective effect), in fact, operates to prevent a prejudice to the Revenue. Of course, the assessee's case, if any, on this aspect of the matter would also need to be addressed. If, on the other hand, it (the Revenue) comes to the conclusion that there is no substantial or material change/s, and the assessee-society continues to be a public charitable institution, set up, existing and operating for the promotion of the sport of cricket, or other charitable object(s), it shall - by order - drop the said proceedings, duly taking on record the amended terms and rules. And that shall be the end of the matter. Toward this, the ld. AR during hearing advanced an argument that nothing untoward has been found by the Revenue, as is apparent from the fact that the assessee was allowed the benefit of sections 11 and 12 in the assessment for the assessment years 2005-06 to 2007-08, i.e., post amendment. We can hardly agree. That would amount to putting the cart before the horse; the assessments having been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt units/affiliates, or in policy matters, it's constitution also, including the terms and rules thereof, i.e., in addition to that of the assessee, would need to be examined, besides the basis of the assessee claiming dependence; it being ostensibly an independent organization. Even its claim of 'affiliation' would be required to be considered within the framework of the assessee's constitution and the rules. We highlight this aspect, which stood also argued by both the sides, as the relationship with BCCI is not academic but integral to the assessee's functioning. 'Subsidies' for substantial amounts stand received from BCCI, which are claimed to be not in the nature of income, but in the nature of grants/gracious payments by it. Under what arrangement, commercial or otherwise, the same stand received or paid (by BCCI) - which would also enable an understanding of its nature, i.e., a subsidy/assistance/financial support or share/allocation, etc.; what is the basis for determining its quantum, etc. are issues that would require being examined, considering that the same constitute the bulk of the resources or the revenue streams of the assessee. Does the assessee have a complete con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s. 12A of the Act by the Revenue, i.e., of the assessee's activities being commercial, so that it would stand to loose its status as a charitable trust/institution. The assessee claims to be a no profit organization, working on no profit, no loss basis. The claims are clearly contradictory, even as we find no reference to any such object clause/s in the assessee's memorandum. What is, therefore, the basis of the assessee's claim? The law contemplates earning of income (profits), which only is then to be applied for charitable purposes, entitling it to exemption from tax, and what is proscribed thereby, as explained by the higher courts, is to operate in a manner so as to maximize profit, and not profit-making which is incidental to the operations (also refer para 4.5). The ld. CIT has dwelled on the assessee's financials for the purpose; the assessee reporting huge surplus from year to year. The Revenue, however, has found nothing amiss in that, and accepted the assessee's claim of it being a charitable institution, assessing it as such up to the assessment year 2007-08 in the status of AOP (copies of the assessment orders u/s. 143(3) for the assessment year 2005-06 to 2007-08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. No doubt, an exception is laid down by providing a threshold limit for the gross receipts, so that the amendment (by way of proviso to section 2(15)) would not apply where the same is not exceeded, but the same is far below that obtaining in the instant case and, in any case, would definitely operate, i.e., where so. The assessee, on the other hand, claims that an examination of its activities for the purpose of ascertaining if the same involve or are in the nature of trade, commerce or business, is outside the purview of the section 12AA(3), which is limited in its scope to an examination if its activities are genuine and carried out in accordance with its objects, so that where it so no withdrawal u/s. 12AA(3) could be effected. No adverse finding in terms of the said section has been issued by the Revenue, so that invocation of section 12AA(3) on this ground for the said years is not sustainable in law. Reliance stands placed for the purpose in the case of Rajasthan Housing Board v. CIT [2012] 21 taxmann.com 77/51 SOT 383 (Jaipur ITAT) and Gujarat Cricket Association v. DIT (Exemption) (in ITA No 93/Ahd/2011 dated 31-01-2012 /copies enclosed). In our view, the Revenue's acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclude the assessee's case for being considered as a charitable institution. The same is a matter of fact and, thus, is necessarily to be determined on the basis of the finding/s of fact; the law being abundantly clear, and toward which we may cite some decisions elucidating the law, as in the case Addl. CIT v. Surat Art Silk Cloth Maufacturer's Association [1980] 121 ITR 1/[1979] 2 Taxman 501 (SC); Aditanar Educational Institution v. (Addl.) CIT [1997] 224 ITR 310/90 Taxman 528 (SC); and Municipal Corporation of Delhi v. Children Book Trust [1992] 63 Taxman 385 (SC) reproducing - howsoever briefly - for the purpose, from the last two; the first two having been rather cited by the assessee per its written submissions; Children Book Trust (supra): 'In other words, what we want to stress is, when a society or body is making systematic profit, even though that profit is utilized only for charitable purposes, yet it cannot be said that it could claim exemption. If, merely qualitative test is applied to section, even schools which are run on commercial basis making profit would go out of the purview of taxation and demand exemption.' Aditanar Educational Institution (supra): '....T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the same is rented out for a charge, how is it claimed for being used for providing boarding and lodging facilities to the cricketers? Even assuming that a saving is made for the same, whether the same extends only to the period when matches are hosted or to other periods as well, as the cricket calendar may include several events apart from the hosting of the international matches. Also, the building being rented out, though claimed to house several facilities for training and coaching, including library, it would be of relevance as to how access thereto, including management of those facilities, is facilitated or provided for under the arrangement, as this only would qualify it as or enable its user as a cricket academy, set up and functioning as such. Finally, are the charges for boarding and lodging services provided to the players, officials, guests, etc., which only would, among others, enable the tenant to generate revenue, at par with what those services would cost, or not? We pose these questions, as answers thereto would enable ascertaining the nature and the purpose of the business relationship entered into therewith, as well as the nature of the user of the said pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, i.e., on the basis of the foregoing, conclude by setting side the impugned order, and directing a fresh consideration of the assessee's case for registration u/s.12A of the Act in view of the extensive amendments effected by it to its memorandum, bye laws, etc. in accordance with law. The law itself contemplates such a course when it prescribes the communication to the Revenue of any alteration/s carried out, post registration, by the assessee. If the amendments, if reported timely to the Revenue, would have resulted in the extension or continuation of its registration, there is no question of it being denied to the assessee solely for the reason of delayed communication. Of course, the onus, prima facie, would be on the assessee to show that its objects and rules, despite revision, are still charitable, so that it remains entitled for a continuation of its registration; the same being essentially an exemption provision, so that it is for the assessee to exhibit its entitlement thereto. Per contra, the onus to show otherwise would be on the Revenue; the assessee claiming no substantial change, which though raises the question - as indeed stands raised by the Revenue, as to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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