TMI Blog2015 (12) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... s is not the end, further conditions and checks are provided under section 13 of the Act also, which provides for 'section 11 not to apply in certain cases'. Provisions of this section are also under the jurisdiction of the Assessing Officer to be carried on during the assessment proceedings. In fact, the whole exemption for the year is forfeited in case of violation of any of the conditions provided in section 13. In such a scenario, we do not understand why the Commissioner of Income Tax is bothering himself to carry out such a cumbersome exercise in order to cancel the registration. The assessee being granted exemption under section 11 of the Act throughout and the way the assessee is carrying out the activities for the promotion of golf are the same from the beginning. This brings us to a point, where we can infer that it was the introduction of proviso to section 2(15) of the Act, perhaps, which was at the back of the mind of the learned Commissioner of Income Tax at the point of initiation of these cancellation proceeding. However, that otherwise also, cannot be the basis for cancellation. The learned Commissioner of Income Tax has also relied upon the judgment CIT Vs. Que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it under section 12A of the Act be rejected. 3. In reply to the said show cause, the assessee made detailed submissions time to time before the learned Commissioner of Income Tax. However, rejecting all the contentions of the assessee, the learned Commissioner of Income Tax vide his order dated 6.3.2013 held that the activities of the assessee club are not genuine and are not being carried out in accordance with the objects of the trust or institution in terms of section 12AA(3) of the Act. In this way, he cancelled the registration granted to the assessee trust under section 12A of the Act. 4. Aggrieved by the said order, the assessee has come up in appeal before us. 5. During the course of hearing, the learned counsel for the assessee pointed out that on an earlier occasion, similar show cause under section 12AA(3) of the Act proposing to cancel the registration granted to the assessee under section 12A of the Act was issued dated 20.3.2012. Our attention was also invited to an order of the learned CIT (Appeals) dated 29.3.2012, whereby the said show cause notice under section 12AA(3) of the Act was dropped by the learned Commissioner of Income Tax . The contention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 12A of the Act. We have very carefully perused the order of the learned Commissioner of Income Tax running into 23 pages, which starts with stating the fact that the registration to the assessee club was granted under section 12A of the Act by the Commissioner of Income Tax, Chandigarh vide order dated 19.12.2000 subject to fulfillment of certain conditions. The learned Commissioner of Income Tax has mentioned eight conditions thereafter. Next he has mentioned the provisions of section 2(15) of the Act together with the proviso therein and stated that due to the insertion of the said proviso to section 2(15) of the Act, advancement of any other object of general public utility would no longer be a charitable purpose if it involved carrying on of any activity in nature of trade, commerce or business. Thereafter the learned Commissioner of Income Tax referred to the fact that on an earlier occasion also, a show cause notice under section 12AA(3) of the Act was issued to the assessee, which was later on dropped by the Commissioner of Income Tax, Chandigarh vide his order dated 29.3.2012. After that the Commissioner of Income Tax analyzed the facts and figures of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of trade and commerce cannot be claimed as exempt, even if it is utilized for charitable purposes. In this view, in the said paragraph of his order, the learned Commissioner of Income Tax held that the activities of the assessee are not genuine and are not being carried out in accordance with the objects of the trust or institution in terms of section 12AA(3) of the Act and so the registration granted under section 12A to the assessee was cancelled. 9. It is a fact on record that the assessee club was formed for the purpose of providing facilities for development of golf. It was provided registration under section 12A of the Act as on 19.12.2000. A show cause under section 12AA(3) of the Act dated 20.3.2012 proposing to cancel the registration is annexed at page 80 of the Paper Book, whereby we see that the proposal was mainly made on the basis of amendment to section 2(15) of the Act brought out by the Finance Act, 2008. Further, similar analysis of the income received and application of income in various years have been given by the learned Commissioner of Income Tax in this show cause also, which is also there in the impugned order. The said show cause notice was dropp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een held that the basis for cancellation of registration under section 12AA(3) of the Act can never be the proviso to section 2(15) of the Act as the applicability of proviso to section 2(15) of the Act can be taken care of only by the Assessing Officer during the assessment proceedings of various assessment years. Therefore, this premises applied by the learned Commissioner of Income Tax for cancellation of registration is also not tenable. 12. Section 12AA(3) of the Act reads as under : Procedure for registration Section 12AA [(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)]] and subsequently the [Principal Commissioner or] Commissioner is satisfied that the 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: Provided that no order under this sub-section shall be pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use under section 12AA(3) of the Act by the Commissioner of Income Tax. The assessment order, Commissioner of Income Tax (Appeals) orders and the orders of the I.T.A.T. for various assessment years are part of the Paper Book filed by the assessee and in all the years the activities of the assessee club are held to be charitable in nature. Therefore, we cannot question the nature of the activities of the club not being charitable. 15. Though in the present case, the learned Commissioner of Income Tax has concluded in the last paragraph of his order that the activities of the assessee are not genuine and are not being carried out in accordance with the objects of the trust. The said conclusion is based on the analysis made by the learned Commissioner of Income Tax, which we had referred to in this order hereinabove. We now proceed to cull out from the reasons given by the learned Commissioner of Income Tax on the merits of the case, whether the conclusion so drawn by him is correct or not. 16. From the perusal of the said allegations made by the learned Commissioner of Income Tax, we see that the learned Commissioner of Income Tax is heavily weighed down by the fact that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are recognized as being charitable consistently in all the years as is evident from various orders filed by the assessee in its Paper Book and the receipts which are the bone of contention for the Commissioner of Income Tax are actually intrinsically related and interconnected with the charitable activities of the club. Managing the bar and restaurant cannot be said to be activities for which the club could not have indulged into. The accounts of the assessee club being maintained in a casual manner, which is one of the observations of the Commissioner of Income Tax cannot be the basis for cancellation. It is not the prerogative of the Commissioner of Income Tax to compare the data of two years as has been done by him as these are the matters which are to be looked in by the Assessing Officer at the assessment stage. In view of these, we do not find that the conclusion drawn by the learned Commissioner of Income Tax on the basis of these observations that the assessee is not carrying on the activities as per the objects or activities of the assessee are not genuine, is correct. 18. Section 12A of the Act pertains to the 'conditions for applicability of section 11 12', ..... X X X X Extracts X X X X X X X X Extracts X X X X
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