TMI Blog2018 (1) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is allowed. - ITA No. 335/CTK/2017, ITA No. 210/CTK/2016 - - - Dated:- 26-12-2017 - Shri N. S. Saini, AM And Shri Pavan Kumar Gadale, JM Assessee by : Shri S.K.Tulsiyan D. Das, AR Revenue by : Shri Saad Kidwai, CITDR ORDER Per Shri N. S. Saini, AM ITA No.335/CTK/2017 (AY : 1997-1998) is filed by the assessee against the order of CIT(E), Hyderabad, dated 26.05.2017 and ITA No.210/CTK/2016 (AY : 2011-2012) is filed by the assessee against the order of CIT(A), Cuttack, dated 19.02.2016. ITA No.335/CTK/2017 (AY : 1997-1998) : 2. The centripetal issue involved in this appeal of the assessee is that the CIT(E) erred in refusing to grant registration u/s.12AA of the Income Tax Act, 1961 to the assessee-association. 3. Succinct facts of the case are that the assessee is an association registered under the Society Registration Act, 1860 on 08.03.1961 with Registration No.346/44 of 1960-61. The assessee association filed an application in Form No.10A on 31.03.2003 seeking registration u/s.12A of the Act before the CIT, Cuttack Charge Cuttack. However, the CIT, Cuttack Charge, Cuttack has neither granted the registration nor rejected the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard, jurisdiction over the case was assigned to CIT(E), Hyderabad. Accordingly, as per the directions Tribunal, the assessee association was given opportunity and was required to appear for hearing before the CIT(E), Hyderabad on 14.12.2015 vide office letter dated 26.11.2015. Accordingly, Shri Diganta Das, Advocate of the assessee association appeared for hearing on 14.12.2015 and requested for adjournment of hearing and the case was reposted to 07.01,2016. Shri S.K.Tulsiyan, Advocate assessee association appeared for hearing on 07.01.2016 and filed written submissions and represented the case. He was required to file the letter from Board of Control for Cricket in India (BCCI), confirming that the Telecast Rights are given as donation to Orissa Cricket Association. The assessee Association filed letter dated 14.03,2016, stating that the Association filed petition u/s. 254(2) of the IT Act, 1961 before the Tribunal to recall its earlier order in ITA No.232/CTK/2010 dated 27.06.2014 in the light of the Hon‟ble Supreme Court Judgment in the case of CIT, Kanpur Ors vs. Society for the Promotion of Education Allahabad, Civil Appeal No.1478 of 2016, SLP (C) No. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public utility. However, as seen from the written submissions filed by the assessee and the information available on record, the CIT(E) found that Survey operations u/s.133A of the Income Tax Act, 1961 was conducted in the premises of M/s Orissa Cricket Association on 28.03.2006 along with search and seizure operation u/s.132 of the Act, 1961 in the residential premises of the Honorary Secretary of M/s Orissa Cricket Association and incriminating documents, books of accounts were found and impounded and Tax demands were raised for the block period from AYs.2000-01 to 2006-07 and the same was confirmed by the CIT(A). The incriminating documents and books of accounts found during the search and seizure operations have brought out the fact that the functioning of M/s Orissa Cricket Association during these periods were so managed as to confer certain financial benefits/gains to the executives who were managing the affairs of the association, in violation of the objects of the association and the provisions of section 13 of the Act. Though these provisions have to be examined by the AO during the assessment, the information available on record, which clearly evidenced the violations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 dated 27.06.2014 also commented in para 5.10 that, it is not the case of the assessee that it is running a normal schooling for sports. Therefore, we hold that the assessee‟s activities do not fall within the term education‟. The CIT(E), therefore, held that in view of the foregoing, though the objects of the association are appearing to be for advancement of any other object of general public utility, which is charitable in nature, the activities carried out and the management of funds of the association are not serving the cause of charity discussed in the preceding part of this order. The funds of the association were diverted for personal benefit of the executives of the association in violation of provisions of Section 13(1)(c) of the Act. The undersigned cannot ignore the violations of law the assessee indulged in and cannot grant registration on the basis of only the aims and objects, written in Memorandum of the Association. The CIT(E) observed that the he was satisfied that the activities of the association are not genuine and charitable based on facts of the case. Therefore, he rejected the application dated 31.03.2003 filed by the assessee in Form No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s 2000-2001 to 2006-2007 (copies of the said Assessment Orders are enclosed at pages 41 to 59 of the paper book) was framed vide Assessment Orders dated 31112/2007 assessing the income as per the Audited Income Expenditure Accounts in the absence of registration u/s 12AA or grant of exemption u/s 10(23) of the Income Tax Act, 1961. It is here however being mentioned that no undisclosed income or asset was found during the course of the survey/search action. Being aggrieved by the Assessment Orders passed by the Ld. AO u/s 153C/143(3) of the Income Tax Act, 1961 the appellant filed appeal before the Ld. CIT(A) who being the first Appellate Authority, confirmed the Assessment Orders passed by the Ld. AO. Being aggrieved by the Ld. CIT(A)'s Order, the appellant filed a second appeal before the Hon'ble ITAT, Cuttack. The appellant pleaded before the Hon'ble ITAT that its Application filed u/s 12A of the Income Tax Act, 1961 was still pending before the Ld. CIT, Cuttack for consideration which was not disposed off by his goodself till that date for reasons best known to him and until such Application was disposed off, the findings of the Assessing Officer/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose as laid out in section 2(15) of the Act as it stood on 2003, being the year of the Application u/s 12A of the Act. It was submitted that profit motive was nowhere the object of the Charitable Association. All the receipts received by it in the form of subsidy, cricket ticket sales, rents etc, were all utilized for purposes of the activities so that the dominant motive of charity could be advanced. It was explained that all' receipts of the appellant were spent for advancing the objects of the appellant association which were charitable in nature. Pursuant to such submission of the appellant, the Ld. CIT, Cuttack passed Order u/s 12AA(1)(b) of the Income Tax Act, 1961 on 22/0312010 (copy enclosed at pages 88 to 127 of the paper book) refusing the grant of registration to the appellant u/s 12AA of the Income Tax Act, 1961. Pursuant to the said Order of the Ld. CIT, appeal was filed by the appellant before the Hon'ble ITAT, Cuttack and detailed Submission dated 08/0312011 (copy of the written submission of the appellant enclosed at pages 128 to 174 of the paper book) was filed before the Bench reiterating the submissions made before the Ld. CIT, Cuttack. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble ITAT has observed that the Ld. CIT has not denied that the assessee was engaged in advancement of any other objects of public utility. (para 5.3, page 33 of the Order). The Ld. CIT had held that since the Assessee was providing certain services to the general public to view the match in his premises by charging fees and also commercial exploitation of its premises by advertisement, broadcasting rights etc, they stood hit by the proviso to section 2(15) of the Act. The Hon 'ble IT AT has held that the CIT has to look into the definition of charitable purpose as on the date when the application was made for registration by the Assessee for deciding whether the Assessee's objects are charitable or not and if the Assessee's object are in consonance with sec 2(15) of the Act as it stood on that date. (page 36 of order) The Hon'ble ITAT has through paras 5.5 to 5.9 of its order discussed the provisions of section 2(15) as it existed prior to the amendment and the rationale behind such amendment. The Hon'ble ITAT in view of all the discussions, has held that the amendment to section 2(15) of the Act is not retrospective in operation and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P(C) 12347 of 2005 which held that In our view the period of six months as provided in sub-section (2) of Section 12AA is not mandatory passed its Order on 27/06/2014 vide ITA No. 232/CTK/2010 had set aside the appellant's case to the CIT for fresh adjudication. However since the said decision of the Orissa High Court stood reversed by the Hon'ble Supreme Court of India's decision in the case of Commissioner of Income Tax, Kanpur Ors. vs. Society For The Promotion Of Education, Allahabad dated 16/02/2016 reported in [2016] 382 ITR 6 (SC) wherein it has been held that once an application u/s 12A of the Income Tax Act, 1961 for registration of a trust has been made before the CIT as per Rule 17A and the same is not disposed off within six months of making the application, then the registration shall be deemed to have been granted to the trust u/s 12AA of the Income Tax Act, 1961, therefore the appellant stood registered u/s 12AA of the Income Tax Act, 1961 since its application for registration filed on 31/03/2003 (w.e.f 01/04/1997) had not been disposed off within six months of filing the application i.e. by 30th September, 2003. Upon hearing the appellant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. SUBMISSION: At the outset the appellant would like to submit that the Hon'ble ITAT, Cuttack while setting aside the appellant's case to the Ld. CIT vide Order dated 04/07/2014 in ITA No. 334/CTK/2011 had rejected the appellant's submissions that it stood deemed to be registered u/s 12AA of the Income Tax Act, 1961 in view of its application filed in Form No.10A for grant of registration not being disposed off within six months of filing the application. The said rejection was made by the Hon'ble ITAT, Cuttack in influence of the Hon'ble Orissa High Court's decision in the case of Srikhetra, A.C. Bhakti Vedanta Swami Charitable Trust vs. ACIT, WP(C) 12347 of 2005 which held that the statutory period of six months as prescribed by section 12AA(2) of the Income Tax Act, 1961 for passing orders either refusing/granting registration to applicants filing application uls 12A of the Act, within six months of filing an application, is not mandatory. However subsequently, the Hon'ble Supreme Court of India in the case of Commissioner of Income Tax, Kanpur Ors. vs, Society For The Promotion Of Education, Allahabad dated 16/02/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied pass an order in writing refusing to register the trust or institution. and a copy of such order shall be sent to the applicant: Provided . Provided that no order of being heard. A clear reading of the foregoing provision suggests that the procedure to grant registration to a trust or institution U/S 12AA of the Income Tax Act, 1961 is that the Commissioner of Income Tax on receipt of application for registration u/s 12A of the Act has to call for documents or information from the trust/institution to verify the genuineness of the activities of the trust/institution and he has to satisfy himself about the objects of the trust/institution. Further Rule 17 A of the Income Tax Rules, 1962 lays down how an application for registration of Charitable or Religious Trust is to be made. Rule 17 A of the Income-Tax Rules, 1962, provides as under: 17 A. An ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opies enclosed at pages 296 to 472 of the paper book). In the above context it is firstly submitted that the Ld. CIT(E) has not doubted that the appellant's objects are charitable in nature for the purpose of grant of registration u/s 12AA of the Income Tax Act, 1961. However the Ld. CIT(E) has doubted the activities of the appellant as not being in the nature of charitable activities as per the objects of the Association but only being of commercial nature like generating income by selling tickets and letting out the infrastructure facilities of the cricket stadium. In this connection the appellant would firstly like to submit that it was duly notified by the Central Government in the official gazette having regard to the fact that it has, as its objects the control, supervision, regulation or encouragement of the game of cricket in India. For such Notification post amendment vide Finance Act, 1992 w.e.f. 01/04/1992, the appellant was required to make an Application for identification as a sports Body for its income qualifying exemption u/s 10(23) of the Act. The Central Government before notifying the Association under this clause called for documents including Audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cricket in and throughout the State of Orissa. e. To advance and safeguard the interest of game of cricket in accordance with the Law and Regulations of the MC.C. f To hold and maintain the laws of Cricket and Rules and Regulations of the Board of Control for Cricket in India. g. To promote, encourage and improve the game of Cricket in the State of Orissa. h. To procure from the government of Orissa, the Orissa Council of Sports and other institutions and/or persons, facilities as may be necessary for the achievement of its objects. i. To arrange and regulate 'Representative Matches' in Orissa and outside, by teams representing the Association and to select teams to represent the Association and State of Orissa and to provide incentive in cash/kind to players, Coaches, Managers and Teams for their excellence or for arrangement of competitions etc. j- To encourage the formation of Clubs, Organisations and District Cricket Association for the control of the game of Cricket in such territory as is or may be assigned to them by the Association. k. To foster the spirit of sportsmanship amongst students and members of affiliated organizations. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in general and cricket in particular. Further it's objects aimed at spreading the ideals of cricket and all that it stands for throughout the length and breadth of its area by arranging schools for coaching, lectures, tournaments and run international matches between India and other leading foreign countries so as to develop mutual goodwill and better understanding between India and other countries. The above being the objectives of the appellant which have been held to be charitable, following are the Activities carried out by the appellant in pursuance of its objectives: Conducting of cricket matches in the nature of league and knock out tournaments. Conducting cricket tournaments in the nature of district, national and international level tournaments Conducting Junior Inter State Tournament - under 22 years, under 25 years, under 27 years, under 17 years, under 15 years, under 16 years, under 19 years and under 14 years. The appellant also provides grants to District Level Associations, Institutions and Clubs, for up keeping turf wickets for conducting matches. Conducting of particular Tournaments like the Ranji Trophy, Duleep Trophy, Deodh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities as per section 2(15) of the Income Tax Act, 1961 in light of the above Circular. Thus the appellant's objectives on having been accepted to be charitable by the Ld. CIT(E) as per section 2(15) of the Income Tax Act, 1961 and its activities being in consonance with its charitable objectives alongwith the Board vide Notification dated 25/11/1991 granting exemption to the appellant u/s 10(23) of the Income Tax Act, 1961 after conducting necessary enquiries regarding the appellant's activities and finding them to be in conformity with section 10(23) of the Income Tax Act, 1961, the appellant's registration u/s 12AA of the Income Tax Act, 1961 on a valid Application made u/s 12A should have been automatic. However the Ld. CIT(E) has refused registration to the appellant u/s 12AA of the Income Tax Act, 1961 vide his order dated 26.05.2017 even after the appellant's objectives are held to be charitable and requirements for grant of registration u/s 12AA of the Income Tax Act, 1961 stood satisfied in the appellant's case, on the basis of various allegations. Herein the appellant would like to place reliance on the following judicial pronounceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, he must obtain registration under section 12A. The application for registration under section 12A has to be made in Form No.10A prescribed by rule 17 A before expiry of one year from the date of the creation of the trust or the establishment of the institution, whichever is later. It has to be made by the person in receipt of the income of the trust. It is evident that at this stage, the Commissioner is not to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of section 12A read with rule 17 A and whether Form 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not At this stage, it is not proper to examine the application of income. The Hon'ble ITAT, Kolkata in the case of Maa Kamakhya Narmadeshwar Educational Charitable Trust vs. CIT(E), ITA Nos. 355 356/Kol/2017 held the following: We have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has relied on the decision of Hon 'ble Delhi High Court in the case Director of Income tax vs Foundati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary in this behalf; and (b) After satisfying himself about the objects of the trust or institution genuineness of its activities, he - (i) shall pass an order in writing registering the trust or institution; (ii) Shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant: Provided that no order under sub-clause (U) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day. (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) of section 12A. 10. Facially, the above provision would suggest that there are no restrictions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him. However the Ld. CIT(E) refused to grant registration to the appellant u/s 12AA of the Income Tax Act, 1961 on the basis of various allegations as discussed hereunder: 1. Incriminating documents and books of accounts were impounded during the search and seizure operation conducted in the residential premises of the appellant's Honorary Secretary and tax demand for the block period [A.Y.s 2000-01 to 2006-07] were raised by the AO which were subsequently confirmed by the CIT(A) and such incriminating documents and books of accounts impounded during the search and seizure operations have brought out the fact that the functioning of the appellant were conducted in a manner so as to confer certain financial benefits/gains to the executives managing the affairs of the appellant, in violation of section 13(1)( c) of the Income Tax Act, 1961. The above being one of the alleged premises of the Ld. CIT(E) for refusing the grant of registration to the appellant u/s 12AA of the Income Tax Act, 1961 it is being submitted that section 13(l)(c) of the Income Tax Act, 1961 can be invoked only at the stage of assessment and not at the stage of granting registration. In fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of general public utility and to serve a charitable purpose, it is sufficient if the intention is to benefit a section of the public as distinguished from a specified individual. This decision of Hon 'ble Apex Court followed subsequently by Hon 'ble Allahabad High Court in the case of Surji Devi Kunji Lal Jaipuria Charitable Trust (supra) and in the case of Pt. Ram Shanker Misra Trust (supra) to hold that the expenditure incurred by a trust for the benefit of one community is an expenditure incurred on a public charitable object still holds the field notwithstanding the provisions contained in section 13(1)(b) since the definition of the term charitable purpose given in section 2(15) continues to remain the same. The provisions of section 13(1) are thus not directly relevant in this regard. On the other hand, the said section begins with the words Nothing contained in section 11 or section 12 shall operate so as to exclude, from the total income of the previous year, of the person .... which clearly envisages operation of section 11 or section 12 before the provisions of section 13 can be applied or invoked in a given case. It also shows that the said provisions c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons given above, we are of the view that the action of the learned D.I (Exemption) in refusing to grant registration to the assessee trust on the ground of violation of the provisions of section 13(1)(b) was not justified especially when he had not doubted either the genuineness of the activities of the assessee-trust or the nature of its object being charitable. In that view of the matter, we set aside his impugned order and direct that registration applied for by the assessee-trust under section 12A be granted to it. The above judicial pronouncement thus clearly explains the law with regard to grant of registration u/s 12AA of the Income Tax Act, 1961 and the application of section 13(1) of the Income Tax Act, 1961 in connection to it. In view of the above the Ld. CIT(E) denying to grant registration to the appellant u/s 12AA of the Income Tax Act, 1961 alleging violation of section 13(1) of the Income Tax Act, 1961 is bad in law and cannot be a basis for refusal of registration Thus the Ld. CIT(E) having refused the grant of registration to the appellant u/s 12AA of the Income Tax Act, 1961 alleging violation of section 13(1)(c) of the Income Tax Act, 1961 (e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 is not required to be looked into. Section 11 and section 13 of the Act can be looked into only at the time of assessment, as already explained above in this submission and as directed by the Hon'ble ITAT, Cuttack vide ITA No. 232/CTK/2010 in para 5.10 at pages 42 and 43 of its Order dated 26/07/2014 enclosed at page 281 of the paper book. Therefore, whether the receipts from BCCI were rightfully considered as a part of 'corpus funds' or not by the appellant as per section l1(l)(d) of the Income Tax Act, 1961 is a subject matter of assessment of a trust registered under the Income Tax Act, 1961. Thus the Ld. CIT(E) having refused the grant of registration to the appellant u/s 12AA of the Income Tax Act, 1961 alleging violation of section 11(1)(d) of the Income Tax Act, 1961 has acted in violation of the law and sheer disregard of the Hon'ble ITAT, Cuttack's direction and hence the impugned action of the Ld. CIT(E) is bad in law and cannot be a basis for denying registration to the appellant u/s 12AA of the Income Tax Act, 1961. However when a point regarding the same has been raised, without prejudice to the above, the appellant would l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssociation, except generating income by selling tickets and by letting out the infrastructure facilities of the cricket stadium, which is of commercial nature. In this respect the appellant would like to submit that it has been carrying out its activities (as detailed out in pages 14 and 15 of this submission above) which are in consonance with its objectives as enshrined in clause 3 of its MOA and further evidencing the same has also enclosed the Activity reports at pages 473 to 573 of the paper book. Therefore the Ld. CIT(E) s allegation that no charitable activities were untaken by the appellant is factually incorrect and hence cannot be relied upon. Thereafter with regard to the Ld. CIT(E)'s allegation regarding the appellant generating income by selling tickets and letting out the infrastructure facilities, it is being submitted before Your Honours' that tickets for matches are sold by it only when international cricket matches are conducted at the Barabati stadium and not for any other cricket matches conducted of National, district, school or college levels. Further International cricket matches are usually conducted once a year or at the most twice whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as objects ancilliary to the primary/dominant objective of developing, and promoting the growth of cricket in the state of Orissa. With regard to the Ld. CIT(E).'s allegation regarding the appellant generating income by letting out infrastructure facilities, it would like to submit that for the F.Y.s 2002-2003 to 2008-2009, in addition to receipt of proceeds from sale of tickets of cricket matches, the appellant also received service charges for hiring out the cricket ground premises for advertisement. Further the appellant's receipts from hiring out the cricket ground premises for advertisement are utilized for the development and growth of cricket in the state of Orissa and for fulfilling the other objectives of the appellant. Thus fee charged by the appellant for hiring out the cricket ground premises for advertisement is incidental to the fulfillment of its primary/predominant objective since apart from the funds received by it from BCCI for some specific purposes, there is no other source of fund for the appellant with the help of which it can execute its objectives for which it has been established. Further with regard to the appellant selling tickets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant. In light of the above, the appellant would like to submit that it had charged an amount of ₹ 70 lakhs for providing its stadium to the organizers of the IPL for conducting one of the matches there. The fee charged was for fulfilling the appellant's objectives of developing and promoting cricket in the state of Orissa. It was incidental to the attainment of the appellant's objects and as authorized by its MOA and the Rules (as mentioned above). Thus, with the help of these ancilliary activities of selling tickets and earning from letting out of infrastructure facilities, the appellant accumulates funds to accomplish the predominant objective of developing, promoting and encouraging the growth of cricket in the state of Orissa. In addition to the above the appellant would like to submit that with regard to sale of tickets of the IPL matches, it had nothing to do with the amount charged for the tickets since that was within the control and ambit of the organisers of the IPL match and the appellant was merely providing its stadium for conducting the IPL match there, in return of a fee which would facilitate in accomplishing its objects. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying on of any trade, commerce or business; the TV subsidy was given to all State Associations and was part of the scheme of BCCL being a voluntary donation, there was no commercial character attached to these. receipts; so too, the donations and contributions and the sale 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. The Hon'ble Madras High Court on consideration of the facts of the assessee's case and the law in this regard, held the following: 55. 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 allots test matches with visiting foreign team and one day international matches to various member cricket association which organise the matches in their stadia. The franchisees conduct matches in the Stadia belonging to the State Cricket Association. The State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith similar issues wherein the following has been held: 36. The core activity of the assessee is undisputedly, charitable in nature. Hence it is not the case of the Revenue that the assessee is carrying on trade, commerce or business under the garb of the activity being general public utility. As regards the various receipts of the assessee, we find that in the case of Tamil Nadu Cricket Association, the receipts were from: 1. Subscription 2. Renting for hiring cricket ground rooms and premises 3. Fee for providing services for IPL 4. Income from advertisement 5. Subsidy from BCCI # 6. Sale of tickets for conducting the matches and 7. Restaurant and catering income. Such receipts of money by the Tamil Nadu Cricket Association were not considered by the Hon 'ble Madras High Court, as activities in the nature of trade, commerce or business . There is no contrary decision cited by the Revenue. Thus none of the above streams of income, when received by the assessee would constitute business activity for the assessee. 37. Thus respectfully following the decision of Hon 'ble Madras High Court in the case of Tamil Nadu Cricket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitutional Bench, by a majority of 4 to 1, in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association reported in [1980] 121 ITR 1 (SC) held that the condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit- making was not the real object. The theory of dominant or primary object of the trust had, therefore, been treated to be the determining factor, even in regard to the fourth head of charity, viz., the advancement of any other object of general public utility, so as to make the carrying on of the business activity merely ancillary or incidental to the main object. Following are the relevant extracts: It is obvious that the exclusionary clause was added with a view to overcoming the decision of the Privy Council in the Tribune's case [l939] 7 ITR 415 (PC), where it was held that the object of supplying the community with an organ of educated public opinion by publication of a newspaper was an object of general public utility and hence charitable in character even though the activity of publication of the newspaper was carried on commercial lines with the object of earning profit. The publication of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by the respondent from the activities, such as holding the Indian Trade Fair and sponsoring the Conference of the Afro-Asian Organisation, were for the advancement of the dominant object and purpose of the Federation, viz., promotion, protection and development of trade, commerce and industry in India, and were exempt from tax under s. 11(1)(a) read with s. 2(15). The said appeal raised the much vexed question as to whether the words not involving the carrying on of any activity for profit in the definition of charitable purpose contained in s. 2(15) of the Act, governed the word advancement and not the words object of general public utility . Following are the relevant extracts of the said judgment: Unfortunately, for the revenue, the court has, in a five-judges Bench, by a majority of 4 to 1, in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980} 121 ITR 1 (SC) reversed these two decisions in Loka Shikshana Trust case [1975] 101 ITR 234 (SC) and the Indian Chamber of Commerce case [1975] 101 ITR 796 (SC). The court has approved of the observations of Beg J. in his separate but concurring judgment in the Loka Shikshana Trust case that (p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above discussion, we are of the considered view that in the given facts and detailed reading of the various judicial decisions through the years, interpreting the definition of charitable purpose as laid out in section 2(15) of the Act and also the definition of business in relation to the said section amply reveals' that the theory of dominant purpose has always, all through the years, been upheld to be the determining factor laying down whether the institution is charitable in nature or not. Where the main object of the institution was charitable in nature, then the activities carried out towards the achievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non-members, were all held to be charitable in nature. The hon'ble apex court in the Indian Chamber of Commerce v. ITO earliest case of Andhra Chamber of Commerce [l965] 55 ITR 722 (SC) had clearly laid out the principle that if the primary purpose o} an institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 on 3110312Q03, there existed no limitation regarding any activity resulting into profit. If the simple criterion of the object falling with the four limbs of the definition was fulfilled then the appellant stood covered within the ambit of the section 2(15) of the Act and was eligible for Registration u/s 12AA of the Income Tax Act, 1961 which is the case of the appellant before us. Thus the appellant stood in all correctness eligible for the Registration u/s 12AA of the Income Tax Act, 1961 and the act of the Ld. CIT(E) in rejecting the said Application is absolutely illegal and contrary to law. 4. That the Hon'ble ITAT, Cuttack Bench, Cuttack vide Order in ITA No. 232/CTK/2010 dated 27/06/2014, also commented in para 5.10 that It is not the case of the Assessee that it is running a normal schooling for sports. Therefore, we hold that the Assessee's activities do not fall within the term 'education '. In this regard the assessee would like to submit that the Hon'ble ITAT, Cuttack by observing the above has nowhere stated that the appellant's activities are not charitable. It has only been stated that the appellant's activities do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee society are of general public utility and consequently, charitable in nature, however, he refused to grant registration mainly on the ground that the funds of the assessee society were diverted for personal benefit of the executives of the society in violation of provisions of Section 13(1)(c) of the Income Tax Act, 1961. Further the CIT(A) also observed that in the financial statements the assessee has reflected receipts from Board of Control for Cricket in India (BCCI) as corpus fund instead of treating it as revenue income. Further, the CIT(E) also observed that as the assessee has distributed the funds received from the BCCI to other organizations in the state of Orissa and merely acted as a nodal agency and has not undertaken any charitable activity as per the objects of the association, except, generating income by selling tickets and by letting out the infrastructure facilities of the cricket stadium, which is of commercial nature. We find that the objects of the assessee society are directed towards promotion of State Cricket. The assessee is an affiliated member of BCCI, thus, it is not in dispute that the objects of the assessee society falls under the category o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under section 12AA(3) of the Act. 56. As regards the observation of the Income-tax Appellate Tribunal that IPL matches and Celebrity cricket matches are also being held by the association and, hence, it is an entertainment industry, we need not go into these aspects for the order of the Director of Income-tax (Exemptions) casts no doubt on the genuineness of the objects of the trust. Hence, it is for the Assessing Officer to take note of all facts, while considering the same under section 11 of the Income-tax Act, 1961. We disapprove the approach of the Tribunal in this regard. In the above said circumstances, we set aside the order of the Income-tax Appellate Tribunal. Further, the CIT(E) was also not correct in observing that the income and expenditure amount of the assessee reveals that no expenditure was incurred by it towards its attaining of object and the assessee acted only as nodal agency on behalf of the BCCI. A perusal of the income and expenditure account of the assessee placed at page 458 459 of the paper book shows that the assessee has also incurred expenditure under the head floodlight operation, ground preparation, repairing maintenance building, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these situations contemplated in Section 13can arise only and only if registration Under Section 12A is granted to the said person. If the same is not granted and the person is refused the registration Under Section 12A, he would not be entitled to claim any benefit available Under Section 11 or 12 and there will be no occasion to the Assessing Officer to invoke or apply Section 13 in his case. This position would not only be contrary to the scheme of the Act as laid down in Sections 11, 12, 12A, 12AA and 13but the same may also cause prejudice/hardship to the persons in certain cases. For instance, the objects for which the assessee trust in the present case is established, as indicated in object Clauses 3(1) 3(2), no doubt are for the benefits of a particular community, viz., Vaish. Nevertheless, as per object Clause 3(4), it was also established to run schools, colleges, hospitals etc. for the benefit of public at large. In this situation, if the registration applied for Under Section 12A is not granted to it for violation of provisions of Section 13(1)(b) and it is ultimately found that the assessee trust actually accomplished the objects as indicated in Clause 3(4) only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the person in receipt of the income of the trust. At that stage, the Commissioner is not required to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of section 12A read with rule 17A of the Income-tax Rules, 1962, and whether Form No. 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not.. In view of the above, we find that, as in the instant case, it is admitted in the impugned order that the objects of the assessee society are charitable in nature and in absence of pointing out any specific activities of the assessee society which were not genuine, in our considered view, rejection of application for registration u/s.12AA of the Act on the ground of diversion of funds for the benefit of executives of the association in violation of provisions of Section 13(1)(c) of the Act is not justified. The violation of provisions of Section 13(1)(c) of the Act is a matter which is to be looked into by the Assessing Officer while making assessment after grant of registration u/s.12AA of the Act and the Assessing Officer has to act as per the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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