TMI Blog2012 (10) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... are unable to see as to how the same (the changes or the revision of its objects and the rules/regulations) has a bearing on its registration or entitles the Revenue to revisit the same, i.e., considering that it has accepted the assessee's functioning as a charitable entity up to the AY 2007-08. Neither the continuation of registration nor its withdrawal is automatic, and there is or can be no presumption with regard to either. The assessee was bound, notwithstanding the genuineness of the reasons motivating or leading to the changes, i.e., assuming so, to have reported them to the Revenue, in absence of which its claim for continuation of registration cannot hold. The said changes having come to the notice of the Revenue now, i.e., during the course of the assessment proceedings for the AY 2008-09, it is obliged and empowered under law to take cognizance of the same. It shall follow the same procedure, as it would have, had the assessee voluntarily reported those changes in time. And, again, there can be no presumption for consequential cancellation/withdrawal of registration. If on basis of examination of facts, explanations and objections, CIT comes to the conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 attending the initiation of proceedings u/s. 148 of the Act. The second limb of the Revenue's case is that the assessee is engaged in commercial activities. It is an accepted judicial proposition that where profit making is the pre-dominant object of the activity/s, it cannot be regarded as charitable, and would stand to loose exemption on that ground. It is not a question of one balancing his activities so as to generate no surplus or match exactly the revenues with costs, but of consideration being charged at market rate (s), in view whereof the same is tainted with commerciality. In fact, a systematic activity for profit falls within the definition of 'business', with the promotion of the sport of cricket, an object of public general util ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce (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) Act, 2009 w.e.f. 01-10-2009. The same specifically provides for power of withdrawal by, inter alia , an income tax authority, where no specific power for withdrawing approval, as for withdrawal of registration u/s. 12A granted prior to the 1996 amendment, has been conferred by the Act. As such, though of no moment in the facts of the present case; the power of withdrawal having been exercised only after 01-06-2010, there is merit in the argument that such power has been conferred by the statute w.e.f. 01-10-2009. The assessee's challenge on this score, thus, fails. 4.2 Secondly, it is contended that the amendment to its objects would be of no consequence as neither is there any provision in law for intimating the same no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntenanced, 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 registration. Section 293C only articulates this inherent power. In fact, in our view, the unreported change(s) in the object clause/s falls within the ambit of section 12AA(3) of the Act as well. This is as an examination there-under as to whether the activities are carried out by the trust/institution in accordance with its objects, only means or refers to the objects as registered. As such, any activity in pursuance to the revised objects would stand to be considered as not in accordance with the objects of the trust, attracting, consequentially, the proceedings for withdrawal of registration u/s. 12AA(3). 4.3 The third argument in this regard is that, even so, the amendments are not substantial or material, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 in the absence of such an exercise by the competent authority - whose order is under challenge before us, i.e., on a clause-wise basis. When fresh arguments, even though based on facts or material on record, and in support of the case as made out by or before the Revenue, are directly taken before us, unless the same is a purely legal argument, it results in denial of opportunity to the other party in presenting its case or meeting the case against it, before the authorities below, whose action is under review by us as the second appellate authority. In our view, neither the continuation of registration nor its withdrawal is automatic, and there is or can be no presumption with regard to either. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, 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 made without an examination of the changes in the terms and rules of the assessee and their impact on its case of being an entity eligible for registration u/s. 12A of the Act as a public charitable institution. Secondly, it is trite that presence of even one object in its memorandum, irrespective of whether any activity in pursuance thereto has actually been carried out or not, is sufficient to dislodge the assessee's claim for, or denying it the benefit of, registration. Whether any activity has been carried out there-under, which may as well be in future, is not relevant, and what is relevant is that the same can possibly be; being authorized by its charter/constitution/memorandum, etc., read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 control over the revenue generated from different avenues of income, as, say, on hosting a match at the Sawai Man Singh Stadium, i.e., a property held by it under trust, or not? The Revenue has, post hearing (on 19-06-2012), submitted a copy of the decision by the tribunal in the case of Board of Control for Cricket in India (BCCI) v. ITO [2012] 136 ITD 301/22 taxmann.com 29 (Mum.) - both to the tribunal and the assessee, reference to which decision was made by the ld. DR during hearing, claiming it be in the Revenue's support. Both the assessee and the Revenue have since (i.e., after 19-06-2012) submitted their respective stands vis-a-vis the said decision by the Tribunal vide their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 on record). How could the Revenue, then, now claim of the assessee being run on commercial lines, with profit being the predominant object and, thus, not being a charitable institution, entitled for registration as such u/s. 12A? We are therefore unable to appreciate the Revenue's said stand, unless, of course, the assessee's working has to do with or is related to the amended objects and/or rules. Though the principle of res judicata is not applicable to the proceedings under the Act, it must be appreciated that the Revenue has taken a consistent stand in the matter, as it appears, for the preceding years. That is, unless the functioning of the assessee, which is stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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 action in considering the same as a relevant ground in-so-far as registration for the years subsequent to the assessment year 2008-09 is concerned, cannot be impugned. Without doubt, where the terms of s. 12AA(3) are not met, no action for cancellation or withdrawal of registration there-under will hold, and which we find to be the sum and substance of the cited decisions. However, even as sought to be clarified by us hereinbefore, this is not a case of withdrawal of registration under or at least involving a strict application of section 12AA(3), but of a review of the assessee's entitlement to registration u/s. 12A or its continuation consequent to the amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ): ' .The decisive or acid test is whether on an overall view of the matter, the object is to make profit. In evaluating or appraising the above, one should also bear in mind the distinction between the corpus, the objects and powers of the concerned entity.' Whether the institution is being run for profit, i.e., on commercial lines, or the same is only incidental to its operations undertaken pursuing its objects, is purely a matter of fact. In the instant case, we have found that no such inference has been drawn by the Revenue at least up to assessment year 2007-08, so that the onus for drawing an adverse inference, at least up to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 property, i.e., purely as an investment yielding income (to be applied for its purposes), or a part of an arrangement to operate it as a cricket academy. Needless to add, none of these primary and essential facts; the question being essentially one of fact, are brought on record by either side. 4.7 The assessee has also challenged the direction by the ld. CIT to the AO for examining if there is any gain to the Revenue in withdrawing the registration w.e.f. AY 2000-01; the first amendment/s to its objects having been carried out by the assessee in the year 1999. In our view, this direction is to no effect; the AO, even if he fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enied 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 its purpose. This is as no presumption, either way, could hold. Further, the law having been amended prospectively, i.e., w.e.f. 01-04-2009, restricting the scope of charitable purpose, where the same is in relation to the advancement of an object of general public utility, as in the instant case, the Revenue would be well within its powers to examine the issue of continuation of the assessee's registration u/s. 12A for the assessment year commencing on or after 01-04-2009 with reference to the amended law. The ld. CIT shall adjudicate per a speaking order; his order being appealable. Needless to add, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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