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M/s. Hyderabad Cricket Association Hyderabad Versus Commissioner of Income Tax (Exemptions) Hyderabad

2016 (10) TMI 537 - ITAT HYDERABAD

Registration u/s section 12AA denied - non charitable activities - CIT (E) has invoked the proviso to section 2(15) of the I.T. Act only on the ground that the assessee is collecting sums under the heads of corporate fees, in-stadia advertisement, sale of corporate boxes etc - Held that:- To be eligible for exemption u/s 11 of the Act, the assessee has to be carrying on charitable activities and has to prove that it has applied its income for charitable purposes and there is no limitation that t .....

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Commerce, reported in (1964 (10) TMI 19 - SUPREME Court ) to hold that if the primary or dominant purpose of the Trust or Institution is charitable, another object which by itself may not be charitable, but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the Trust or Institution from being a valid charity. - DIT has no jurisdiction to cancel registration of a charitable institution on the ground that it is carrying on commercial activities which a .....

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the assessee were also carried on by the Tamil Nadu Cricket Association and the above judgment is clearly applicable to the facts of the case before us. Therefore, on this ground, registration could not have been invoked u/s 12AA(3) of the Act. - As regards the other grounds i.e. holding of a cricket match for women in violation of the object No.(xxviii), we find that the main object of the assessee is to promote the game of cricket and particularly for men only as there is a separate crick .....

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of such a match while computing the exempt income u/s 11 of the I.T. Act. - Further, as regards the expenditure which is not supported by bills and vouchers also, we are of the opinion that it can only lead to disallowance and not for withdrawal of registration u/s 12AA(3) of the Act. In view of the above, we set aside the order of the DIT (E) and assessee’s appeal is accordingly allowed. Since we have already set aside withdrawal of the registration u/s 12AA(3) of the Act, we see no reason .....

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by an order u/s 12AA(3) of the Act dated 13.03.2015. Assessee has filed the revised grounds of appeal which are as under: l. The learned Director General of Income Tax (Exemptions) erred on facts and in law in failing to note that the Sponsorship amounts collected for the development of the Cricket Stadium in Hyderabad is as per Object No. 2(xxiv) contained in the Memorandum of Rules, that the Activity is inextricably linked to the promotion and development of the Game of Cricket, is not of comm .....

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t bearing to the development and promotion of the game, and thus represents intrinsic, incidental activities for the promotion and development of the game of Cricket. 3. The learned Director of Income Tax (Exemptions) erred on facts and in law in failing to note that the club facilities sought to be provided at the cricket stadium is primarily for the physical development and well being of the cricketers and the cricketing fraternity and represents a facility to further its object of developing .....

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r Appellant is not in violation of its objects failing to note that in such matters a liberal interpretation needs to be imparted, in keeping with judicial pronouncements. 6. The learned Director of Income Tax (Exemptions) erred in law and in fact in failing to note that registration had been granted to your Appellant with effect from 20.01.1997 u/s 12A of the I T.Act, and thus in such cases cancellation as per Section 12AA(3) of the Act can only take effect from 01.06.2010, i.e prospectively, a .....

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e assessee on 21.10.2011, it was found that the assessee was carrying on activities which are not charitable in nature. It was observed that the assessee was deriving income from various commercial sources including receipts from league fees, sale of tickets of ODI & IPL matches, advertisement charges, franchise fee, subsidy and sponsorship money from various companies. In view of the above, AO was of the opinion that the assessee has lost its character as a charitable society in view of the .....

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of the DIT (E) directing him to communicate to the assessee all the issues raised in his order and to give a reasonable opportunity to the assessee to explain on those issues and after considering the assessee s submissions to decide the issue in accordance with law. Pursuant to the same, the DIT (E) reconsidered the issue. He was of the opinion that the assessee has been carrying on the activities of the commercial nature such as (i) running of Club (ii) issue in corporate sponsorship (ii) sale .....

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ivities not according to its objects and further that it is carrying on commercial activities and therefore, is not eligible for registration u/s 12AA of the Act. He accordingly u/s 12AA(3) of the Act withdrew the registration granted u/s 12A(a) of the Act against which the assessee is in appeal before us. 5. The learned Counsel for the assessee submitted that the object of the assessee society was to promote the game of cricket in India. In support of this contention, he has placed a copy of th .....

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y other ground for playing the game of cricket and for other purposes of the Association and to provide pavilions, stadium, dressing and refreshment rooms and amenities in connection therewith as may be necessary. To construct on the land belonging to the Association buildings of any kind for residential, commercial, sporting or other uses to repair, alter, pull down or demolish the same . 6. He has also drawn our attention to clause 8 of Article 3 of the Memorandum of the assessee s society to .....

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ke on lease or otherwise acquire any ground and to layout such ground or any other ground for playing the game of cricket and for other purposes of the Association and to provide pavilions, stadium, dressing and refreshment rooms and amenities in connection therewith as may be necessary. To construct on the land belonging to the Association buildings of any kind for residential, commercial, sporting or other uses to repair, alter, pull down or demolish the same 1(2)(xxv) To start or sponsor and/ .....

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ecreation and entertainment to its Members and for such other category or categories of Members, on such terms and conditions of Admission, as may be decided, framed and provided for in the Bye-laws of the Club by the Committee. 1(3)(vi) To employ clerks, Managers, Coaches, Umpires, Scorers, Groundsmen, Peons, Servants and Workmen and to pay them in return for services rendered to the Association Salaries, Wages, Gratuities, Pensions, honoraria, compensations, bonuses and/or provident fund and t .....

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ssessee has strictly applied its income for the objects which are charitable in nature, the registration granted earlier u/s 12A(a) of the Act cannot be revoked/withdrawn u/s 12AA(3) of the Act. 7. As regards sponsorship amount collected for the matches of cricket in stadiums in Hyderabad, the learned Counsel for the assessee submitted that the acceptance of sponsorship for developing the cricket stadium is an integral part of the main object of development of cricket and is in accordance with R .....

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he case of M/s. Project Management Institute Pearl City vs. DIT in ITA No.217 of 2012 and ITA No.1915/Hyd/2011 and also the decision of the Hon'ble Madras High Court in the case of Tamil Nadu Cricket Association vs. DIT reported in 360 ITR 633. 8. As regards the lease of the corporate boxes by the assessee for a fixed term, the contention of the assessee was that the fact that the term has been fixed for 15 years and there is no transfer of ownership clearly reflects that there is no real es .....

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326 (b) Saurashtra Cricket Association vs. CIT reported in (2014) 148 ITD 58. (c) DDIT vs. All India Football Federation reported in 2015) 43 ITR (Trib.) 656 Delhi (d) DIT (E) Karnataka Badminton Association, reported in (2015) 378 ITR 700 (Kar.) (e) Tamil Nadu Cricket Association vs. DIT (E) reported in (2014) 360 ITR 633. 9. As regards the DIT (E) contention that the assessee is providing club facility which is not in accordance with the objects of the assessee society, it is stated that the c .....

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ost can only lead to disallowance of the same while granting exemption of the assessed income u/s 11 of the Act. In support of his contention, he placed reliance upon the decision of the Tribunal at Chandigarh in the case of Maharshi Markendeshwar Education Trust vs.CIT in ITA 277/CHD/2008. 11. As regards the assessees conducting of Women s Cricket Tournament, though one of the object of the assessee Trust is to conduct cricket matches only for men, it was submitted that the conducting of the cr .....

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reliance upon the following decisions: (a) Nimmagadda Foundation vs. DIT (E) reported in (2014) 36 ITR (Trib) 268 Hyderabad (b) Commissioner Of Income-Tax vs. Trustees Of Dr. Divekar Charity reported in (1977) 110 ITR 227 (Bom.) (c) CIT vs. Sri Jaganathan Jew reported in (1977) 107 ITR 9 (S.C) (d) A Sanyasi Rao & Anr. Vs. Govt. of A.P. affirmed by the Hon'ble Supreme Court in 1996 (219 ITR 330). 12. As regards the cancellation of registration w.e.f. 01.10.2004, it is submitted that, the .....

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reported in (2015) 38 ITR (Trib.) 326 (Del.) (iv) Prithvi Raj Memorial Trust and Research Foundation vs. DIT (E) reported in (2014) 31 ITR (Trib.) 196 Mumbai. (v) DIT(E) vs. Mool Chand Khairati Ram Trust reported in (2011) 339 ITR 622 (Del.) (vi) Kapur Educational Society vs. CIT reported in (2010) 135 TTJ 250(Luck.) (vii) Oxford Academy for Career Development vs. CCIT reported in (2009) 315 ITR 382 (All.) (viii) Ajit Educational Trust vs. CIT reported in (2010) 46 DTR (80) 482 (Ahd.) (ix) DIT( .....

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ly brought out the facts and circumstances of the case and the commercial activities carried out by the assessee which clearly are not in accordance with the objects of the assessee society and therefore, submitted that the cancellation is justified. 14. Having regard to the rival contentions and the material on record, we find that the assessee is affiliated to the BCCI and is conducting cricket matches in Hyderabad by sale of tickets and is also receiving contributions as well as getting reven .....

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y in the advancement of any object of general public utility , whereas by insertion of the proviso, advancement of any object of general public utility shall not be a charitable purpose, if such activity, included carrying on trade or business or commerce provided its turnover crosses the prescribed limit. Thus, it can be seen that even if the assessee carries on commercial activities for the advancement of any other object of general public utility and its turnover is less than the prescribed l .....

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to be carrying on charitable activities and has to prove that it has applied its income for charitable purposes and there is no limitation that the assessee shall not make any profit out of its activities. U/s 11, the thrust is on application of income. The definition of charitable activity has not undergone a change except for raising the limit of turnover by which the income from commercial activities would become taxable. In the case of Tamil Nadu Cricket Association, the Hon'ble Madras .....

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tion of the Hon'ble Madras High Court order is reproduced hereunder for ready reference: 6. After Considering the genuineness of these objects, as early as 2003 ,the assessee was granted registration as a Trust under Section 12AA of the Income Tax Act, 1961 (hereinafter called as the "Act"). However, on 19.07.2011. a notice was issued by the Director of Income Tax (Exemptions) under Section 12AA(3) of the Act that the statement of income and expenditure revealed that the assessee d .....

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nces, notice was issued proposing to withdraw the registration granted to the assessee under Section 12AA of the Income Tax Act, 1961. 7. Immediately, on the receipt of the notice, the assessee replied that the receipts were not in the nature of trade or commerce or business, since, the income of the assessee included interest income earned from Fixed Deposits with Banks; subsidy from BCCI was a voluntary grant from the parent body for promotion and development of the game of cricket in Tamil Na .....

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ale of tickets in conducting matches organised by BCCI. Pointing out that the Association was not running any canteen or restaurant, the assessee submitted that as far as fee for providing services to IPL is concerned, the entire income from the sale of tickets belonged to the franchisee, and therefore, there was no service rendered or charges made by the assessee. 8. Referring to the satisfaction recorded as to the genuineness of the objects of the association under the provision contained in S .....

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The Director of Income Tax (Exemptions) viewed that though BCCI confirmed the payment to the assessee on IPL matches as grant of subsidy , the same was not in the nature of grant. It was also pointed out that most of the advertisements through TV telecasting are received by the BCCI, it being the apex body, thus the so called subsidy given by the BCCI is nothing but some sort of sharing of the advertisement income on account of holding of international test matches and ODI matches, due to which .....

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pondent/Director of Income Tax (Exemptions) viewed that even if the activities were carried on in accordance with the arrangement with the other party, the activities being not charitable, it was hit by Section 12AA(3) of the Income Tax Act, 1961; thus it was held that the activities were not carried on in accordance with the objects of the trust; the activities not being charitable, the same could not be held to be genuine and the institution was not a charitable institution. Reading genuinenes .....

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nded before the Income Tax Appellate Tribunal that since its inception and the date of granting of the registration under the Act, the objects of the Association ever remained same and it has not undergone any change to question its genuineness. The assessee contended that the view of the Director of Income Tax (Exemptions) that the assessee was not carrying on charitable activity as per Section 2(15) of the Act is erroneous in law; in any event, all that Section 12AA(3) of the Act prescribes fo .....

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and this is in the nature of grant/subsidy from BCCI which had been confined by BCCI. 14. The Income Tax Appellate Tribunal pointed out that the physical play of cricket game was not the sole point which would decide as to whether the assessee association was carrying on its activities as stated in the memorandum of association or the activities were genuine or not. The Tribunal pointed out that the activities were genuine; however the matches conducted did not go to the extent of "advancem .....

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assessee's case was fully covered by the proviso, the proceedings taken under Section 12AA(3) were justified. Thus the Tribunal viewed that the provisions under Section 12 AA (3) could not be read in disregard of Section 2(15) first proviso. It further held that after the insertion of first proviso to Section 2(15) of the Income Tax Act, 1961, effective from 1st April, 2009, every activity on the advancement of the general public utility to be called as for "charitable purpose" has .....

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or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Considering the said amendment and looking at the activities of the assessee, the Income Tax Appellate Tribunal held that the conduct of the matches by cricket associations could be nothing but in the nature of commercial ventures and the assessee was sel .....

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ound of the nature of activity undertaken, the entire activity of commercial nature were oriented towards earning hyper profits and these activities contributed 86.5% of the receipts of the assessee in the Financial Year 2008-09. In this background, the Income Tax Appellate Tribunal referred to the decision reported in the case of Bangalore Race Club v. CIT [1970] 77 ITR 435 (Mys.) which related to the case of horse racing and held the same could not be held to be of public utility or interest. .....

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nch-A rendered in the case of Gujarat Cricket Association v. DIT (Exemption) [2013] 33 taxmann.com 387 (Ahd. - Trib.) as well as other decision of the Nagpur Bench rendered in the case of M/s. Vidarbha Cricket Association v. CIT IT Appeal No.3 (Nag.) of 2010, dated 30.05.2011, which were against the similar rejection order passed and reversed by the Income Tax Appellate Tribunal and held that these orders had considered only the physical aspect of the cricket game promoted by the assessee; howev .....

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ax Appellate Tribunal upheld the rejection order passed under Section 12AA of the Income Tax Act. The Income Tax Appellate Tribunal further viewed that there was no conflict between the first proviso to Section 2(15) of the Act and the conditions laid down under Section 12AA(3) of the Act for cancelling the registration; thus, when the assessee's case is hit by Section 2(15) of the Act, consequential action is automatic to pass an order under Section 12AA(3) of the Income Tax Act, 1961. It f .....

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12AA of the Income Tax Act, 1961. Aggrieved by the same, the present appeal has been preferred by the assessee. 16. Learned Senior counsel appearing for the assessee took us through the various objects of the Association and pointed out to the clear distinct words used in Section 12AA(1) and 12AA(3) of the Act as well as the first proviso to Section 2(15) of the Act and pointed out that the grant of registration originally as early as 2003 clearly pointed out the satisfaction of the authorities .....

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s and materials as prescribed under Section 12AA(3) of the Act, the question of cancellation of registration, per se, does not arise. 17. Learned Senior Counsel appearing for the appellant further pointed out that the appellant was granted registration under Section 12AA of the Act only on the Commissioner satisfying himself on the objects of the trust and the genuineness of the activities. The nature of activity carried on by the assessee continues to be the same without any change till this da .....

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o Section 2(15) of the Income Tax Act, 1961, learned Senior counsel appearing for the assessee submitted that as is evident from the reading of the circular, the question of rejection of registration under Section 12AA(3) would arise only in those cases where an entity uses this status of charitable institution with a charitable object of general public utility as a mask or a device to hide the true purpose and that object is nothing other than trade, commerce or business or the rendering of any .....

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Section 12AA(1) of the Act, the cancellation of the registration under Section 12AA of the Income Tax Act, 1961 is without any substance. He further pointed out that when in a similar assessee's case viz., Gujarat Cricket Association (supra) in the case of Vidarbha Cricket Association v. Commissioner of Income Tax-I, Nagpur the Income Tax Appellate Tribunal Ahmedabad Bench-A dated 31.01.2012 and in I.T.A.No.3/Nag/10 dated 30.05.2011 of the Nagpur Bench, respectively on the very same allegati .....

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ional Institute of Aeronautical Engg. Educational Society [2009] 315 ITR 428/184 Taxman 264 (Uttaranchal) and submitted that they stand on a different line, they being the decisions rendered on the rejection of the application for registration. He also referred to the decision of this Court reported in the case of Sarvodaya Ilakkiya Pannai (supra), wherein, under similar circumstances, this Court had held that when a trust is registered with definite objects to carry on its activities and under .....

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rted in Sarvodaya Ilakkiya Pannai (supra), learned Senior Counsel appearing for the assessee submitted that the Income Tax Appellate Tribunal committed serious error in upholding the rejection order passed by the Director of Income Tax (Exemptions). 20. Countering the claim made by the learned Senior Counsel appearing for the assessee, learned Standing counsel appearing for the Revenue, however, submitted that the condition for continuance of the registration depends on the satisfaction of the c .....

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ue finds that the activities of the trust are not genuine and that the advancement of the object of the general public utility is not in terms of the objects of the trust and that the objects are in the nature of carrying on trade, commerce or business, the grant of registration originally given may be cancelled; thus, rightly, the registration was cancelled, hence, no exception could be taken to the order of the Income Tax Appellate Tribunal. 21. Heard learned Senior counsel appearing for the a .....

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t the time of grant of registration as under: " 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility." 23. Section 2(15) was amended under Finance Act,2008, with effect form 1.4.2009 by substituting the following provision which reads s under: '2. Definitions. .... (15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (in .....

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fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity;)' 24. Section 2(15) as it stood prior to 1983 defined 'charitable purpose' to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The phrase "not involving the carrying on of any activity for profit" was omitted from the .....

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of 'charitable purpose', considering the fact that taking advantage of the phrase 'advancement of any other object of general public utility', number of entities operating on commercial lines claimed exemption on their income either under Section 20(23c) or under Section 11 of the Act. Thus, to limit the scope of this expression, Section was amended in the year 2008 that the advancement of any other object of general public utility shall not be a charitable purpose, if the object .....

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mary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity: vide CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) (referred to in the decision reported in Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1/[1979] 2 Taxman 501 (SC). Thus if the dominant object or th .....

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lation to any trade, commerce or business, for a cess or fee or any other consideration. 25. Proviso to Section 2(15) of the Income Tax Act states that if the objects involve the carrying on any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, the status of the institution will not be one for 'charitable purpose'. 26. The Central Board of D .....

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g of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business." 27. Thus, the anxiety of the Parliament in introducing the proviso to Section 2(15) of the Act is only to check those institution, which attempt to gain exemption under the cloak of a trust. 28. Section 11 of the Act states that income from property held for religious or charitable purposes sha .....

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formation from the trust or institution in order to satisfy himself about the genuineness of activities of the trust or institution. The Section further empowers the Commissioner to make such enquiry as he deems necessary in this regard. Once the Commissioner is satisfied himself about the objects of the trust or institution and the genuineness of the activities of the trust, he has to pass an order in writing registering the trust or institution; if he is not so satisfied, he has to pass an ord .....

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use (b) of sub-section (1) and subsequently the 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 passed unless such trust or institution has been given a reasonable opportunity of being heard." 31. .....

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ance 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 passed unless such trust or institution has been given a reasonable opportunity of being heard." 32. Thus in contrast to Section 12AA(1)(b) of the Income Tax Act, 1961, where the grant of registration requires satisfaction about the objects of the trust as well as genuineness .....

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r a good ground for cancellation. Thus, in every case, grant of registration as well as cancellation of registration rests on the satisfaction of the Commissioner on findings given on the parameters given in Section 12AA(1) and 12AA(3) of the Act, as the case may be. 33. Registration of the trust under the Act, confers certain benefits from taxation under the provisions of the Act. The conditions under which the income of the trust would be exempted under the provisions of the Act are clearly la .....

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ot fall strictly with the objects of the trust, would not go for cancellation of registration under Section 12AA of the Act on the sole ground that the assessee is in receipt of income which does not qualify for exemption straight away by itself. All that ultimately would arise in such cases is the question of considering whether Section 11 of the Act would at all apply to exempt these income from liability. These are matters of assessment and has nothing to do with the genuineness of the activi .....

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on under Section 11 of the Act. 36. In the decision reported in Sinhagad Technical Education Society v.CIT [2012] 343 ITR 23/206 Taxman 314/19 taxmann.com 136 (Bom.) the Bombay High Court held as follows: "As a result of the amendment, which has been brought about by the Finance Act of 2010, Sub-section (3) of Section 12AA has been amended specifically to empower the Commissioner to cancel a registration obtained under Section 12A as it stood prior to its amendment by the Finance (No.2) Act .....

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out in accordance with the objects of the trust or institution, as the case may be, was vested with the power to pass an order in writing cancelling the registration of such trust or institution. By the Finance Act of 2010, sub-section (3) was amended so as to empower the Commissioner to cancel the registration of a trust or an institution which has obtained registration at any time under Section 12A (as it stood before its amendment by the Finance (No.2) Act, 1996). As a result of the amendment .....

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ection 12A prior to 2010 would not make the amendment retrospective in operation. The amendment does not take away any vested right nor does it create new obligations in respect of past actions." 37. As already pointed out earlier, the question as to whether the particular income of trust is eligible for exemption under Section 12 of the Act is a matter of assessment and this Court had pointed out in the decision reported in the case of Sarvodaya Ilakkiya Pannai (supra), as under: "In .....

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lf. In the event the Commissioner satisfies himself that the trust is entitled to registration keeping in mind the objects, shall grant registration in writing in terms of Section 12AA(1)(b)(i) of the Income Tax Act, 1961. In the event the Commissioner is not satisfied, he shall refuse such registration in terms of Section 12AA(1)(b)(ii) of the Income Tax Act, 1961. Once such a satisfaction is arrived at by the Commissioner to grant, such registration cannot be cancelled by following the very sa .....

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institution are not genuine or not being carried out in accordance with the objects of the trust or the institution as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution." 38. After the grant of registration, if the Commissioner is satisfied subsequently that the activities of the institution are not genuine or they are not carried on in accordance with the trust/ institution, he could pass an order in writing cancelling the registra .....

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that the cancellation made in the case of assessee therein was not on the ground that the activities were not genuine, but the activities of the trust in publication and sale and spread of Sarvodaya Literature and Gandhian Ideologies was not the objects of the trust. This Court pointed out that the cancellation was made not on the ground that the activities of the trust were not genuine but the activities of the trust were not in accordance with the objects of the trust; when the trust was regis .....

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om such transaction would be assessed for tax and also whether the trust would be entitled to exemption under section 11 are entirely the matters left to the assessing officer to decide as to whether it should be assessed or exempted." 42. In the light of the law declared by this Court in the above said decision, we do not find that the scope of Section 12AA(3) of the Act is of any doubt for a fresh look. It is relevant herein to point out that in two other assessee's case, the Income T .....

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enuineness of the trust, or as to the activities of the trust not being in accordance with the objects of the trust, the question of cancellation under Section 12AA of the Act does not arise. We further hold that at the time of grant of registration on 28.3.2003, the same was made taking into consideration the objects of the institution fitting in with the definition of 'charitable purpose' defined under Section 2(15) of the Act and the substitution of the Section itself came only 2008, .....

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x Act. 44. Learned Standing counsel appearing for the Revenue placed heavy reliance on the proviso to Section 12AA(3) of the Act and submitted that when the assessee has income received from conduct of the matches, which are commercial in nature, as had been found by the Income Tax Appellate Tribunal, the objects of the trust ceased to be charitable. He submitted that going by the definition of Section 2(15) of the Act, rightly, the Commissioner assumed jurisdiction under Section 12AA(3) of the .....

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upon the assessee to state whether the association is genuine or not. He further submitted that on looking at the activities of the association, the Commissioner had rightly come to the conclusion that the assessee's registration was liable to be withdrawn. 45. We do not accept the submission of learned Standing counsel appearing for the Revenue. As rightly observed by learned Senior counsel appearing for the assessee, the Revenue granted registration under Section 12AA of the Act satisfying .....

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titution could be held as one for advancement of any other object of general public utility. Thus, if a particular activity of the institution appeared to be commercial in character, and it is not dominant, then it is for the Assessing Officer to consider the effect of Section 11 of the Act in the matter of granting exemption on particular head of receipt. The mere fact that the said income does not fit in with Section 11 of the Act would not, by itself, herein lead to the conclusion that the re .....

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ralal Bhagwati v. CIT [2000] 246 ITR 188 the Gujarat High court considered the said phrase in the context of Section 12AA registration and held that registration of the charitable trust under Section 12AA of the Act is not an idle or empty formality; the Commissioner of Income-tax has to examine the objects of the trust as well as an empirical study of the past activities of the applicant; the Commissioner of Income-tax has to examine that it is really a charitable trust or institution eligible .....

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necessary that the public at large must get the benefit; the criteria here is the objects of general public utility. Thus, the Gujarat High Court held that in order to be charitable, the purpose must be directed to the benefit of the community or a section of the community; the expression "object of general public utility", however, is not restricted to the objects beneficial to the whole of mankind; an object beneficial to a section of the public is an object of general public utilit .....

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out that the Revenue did not challenge this case and it attained finality. 48. It is no doubt true that the decision reported in the case of Surat City Gymkhana (supra) was in the context of Section 10(23) of the Income Tax Act, 1961, nevertheless, the fact remains that the understanding of the scope of the expression "general public utility" would nevertheless is of relevance herein. Admittedly when the assessee was granted registration, the Revenue recorded its satisfaction that the .....

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ust' under Section 12AA of the Act. Consequently, we reject the prayer of the Revenue that Section 12AA(1) of the Income Tax Act, 1961 must be read along with Section 12AA(3) of the Income Tax Act, 1961 before considering the cancellation. 49. As far as the unreported decision of this Court in Gowri Ashram (supra) is concerned, on which heavy reliance was placed by the Revenue, the said decision relates to the rejection of the registration at the threshold of the application filed for regist .....

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application for registration, this Court observed that it was open for the assessee Society to renew its application as and when it expanded the objects of the Society and were approved by the competent Court. The rejection order passed by the Revenue was on the ground that the objects of the trust were not charitable in character. This decision also has no relevance to the case on hand. 51. As already noted in the preceding paragraphs, considering the provision under Section 12AA(3) of the Act .....

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e not held by it. Thus, as regards the question as to whether the particular income qualified under Section 11 of the Act or not is not the same as activity being genuine or not. In the circumstances, we do not agree with the view of the Income Tax Appellate Tribunal that the order passed by the Director of Income Tax (Exemptions) was in accordance with the provisions of the Income Tax Act, 1961. He viewed that the conduct of test matches and ODI are in the nature of commerce or business. Though .....

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by BCCI for the conduct of IPL and their commercial receipts arising for IPL transactions. Therefore, the nature of receipt was important than the name of account under which it was accounted. Thus he viewed that the objects and activities would no longer come within the definition of Section 2(15) of the Act after the amendment come in effect from 01.04.2009. 52. As rightly pointed out by the assessee, the Revenue does not question the objects of the Association as not genuine or are in accord .....

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tickets are highly priced; here, the assessee has shifted the activities of general public utility to commercial activity for generating revenue; the public merely participate to view costly matches; hence the conditions of Section 12AA(3) were satisfied. The Income Tax Appellate Tribunal agreed with the Director of Income Tax (Exemptions) that the expression 'subsidy from BCCI' was a misleading nomenclature and it was a share from the revenue collected by BCCI from the sale of telecast .....

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s conducted are not in accordance with the objects of the Association. Thus, it rejected the assessee's case and held that both the conditions under Section 12AA(3) of the Act stood attracted. 55. As seen from the observation of the Income Tax Appellate Tribunal, although generally it accepted the case of the assessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipt apparently led the Income Tax Appellate Tribunal and the Revenue to come to .....

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rpose', as it stood in 2003. The Revenue does not deny as a matter of fact that the objects remain as it was in 2003 and there is no change in its content to call the assessee's object as not genuine. There are no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility. 56. The assessee is a member of Board of Control for Cricket in India (BCCI), which in turn is a member of ICC(International Cricket Council). BCCI allo .....

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d it distributes 70% of the revenue to the member cricket association. Thus the assessee is also the recipient of the revenue. Thus, for invoking Section 12AA read with Section 2(15) of the Act, Revenue has to show that the activities are not fitting with the objects of the Association and that the dominant activities are in the nature of trade, commerce and business. We do not think that by the volume of receipt one can draw the inference that the activity is commercial. The Income Tax Appellat .....

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ibunal rested its decision on consideration which are not relevant for considering the test specified under Section 12AA(3) to impose commercial character to the activity of the Association. In the circumstances, we agree with the assessee that the Revenue has not made out any ground to cancel the registration under Section 12AA(3) of the Act . 15. Thus, it can be seen that the alleged commercial activities carried on by the assessee were also carried on by the Tamil Nadu Cricket Association and .....

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, if such income is applied for charitable purpose and such institution is registered under section l2AA of the Act. 2. Section 2(l5) of the Act provides definition of "charitable purpose". It includes "advancement of any other object of general public utility" provided it does not involve carrying on of any activity in the nature of trade, commerce or business etc. for financial consideration, The 2nd proviso to said section, introduced w.e.f. 01-04-2009 vide Finance Act 201 .....

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es. However, if the aggregate value of these receipts exceeds the specified cut-off, the activity would no longer be considered as charitable and the income of the trust/institution 'would not be eligible for tax exemption in that year. Thus an entity, pursuing advancement of object of general public utility, could be treated as a charitable institution in one year and not a charitable institution in the other year depending on the- aggregate value of receipts from commercial activities. The .....

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ing cancellation of registration already granted to the trust or institution. Hence, section 13 of the-Act has been amended vide Finance Act, 2012 by inserting a new sub-section (8) therein to provide that such organization would not get benefit of tax exemption in the particular year in which its receipts from commercial activities exceed the threshold whether or not the registration granted is cancelled. This amendment has taken effect retrospectively from 1"1 April. 2009 and accordingly .....

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exemption would be denied to the institution in that year and cancellation of registration would not be mandatory unless such cancellation becomes necessary on the grounds] prescribed under the Act. 5. With the introduction of Chapter XII-EB in the Act vide Finance Act. 2016, prescribing special provisions relating to tax on accreted income of certain trusts and institutions, cancellation of registration granted u/s 12AA may lead to a charitable institution getting hit by sub-section (3) of sec .....

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y in accordance with section 12AA(3) and 12AA(4} after carefully examining the applicability of these provisions. 6. The above may be brought to the notice of all concerned. Sd/ Deepshikha Sharma Director to the Govt. of India 17. The Hon'ble Bombay High Court in the case of DIT (E) vs. Khar Gymkhana vide decision dated 6th June, 2016 in IT Appeal No.2349 of 2013 has also held that the DIT has no jurisdiction to cancel registration of a charitable institution on the ground that it is carryin .....

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